Late last week, the Obama administration announced that it would allow states to set “essential health benefits,” the package of health insurance benefits that will be provided to millions of Americans under the health insurance exchanges due to begin operation on January 1, 2014.

Instead of providing details on specific services and benefits and levels of co-insurance, Secretary Sebelius said the federal government would respect the states’ role, giving them “the flexibility to design coverage options that meet their unique needs.” States will be allowed to choose a benchmark plan from among the largest small group plans in the state or largest plans for state employees or largest HMO plan in the state or the largest plans for federal employees.

The Affordable Care Act listed 10 categories of services that must be provided by insurance offers in the individual and small-group markets. An Institute of Medicine report issued earlier this year provided Secretary Sebelius with a set of criteria and methods to develop a package of essential health benefits that would cover many health care needs, promote medically effective services, and be affordable to purchasers. These categories are:

1. Ambulatory patient services
2. Emergency services
3. Hospitalization
4. Maternity and newborn care
5. Mental health and substance use disorder services, including behavioral health treatment
6. Prescription drugs
7. Rehabilitative and habilitative services and devices
8. Laboratory services
9. Preventive and wellness services and chronic disease management, and
10. Pediatric services, including oral and vision care

Federal officials said giving the states flexibility prevents disruption of their insurance markets. Steven B. Larsen, deputy administrator of the federal Centers for Medicare and Medicaid Services, said, “The state is always in control of what the essential benefits package is in that state.”

Public comments are due on January 31, 2012.

News Coverage:

• NY Times, December 17, 2011
• Wall Street Journal, December 17, 2011

Resources:

• DHHS Press Release, December 17, 2011
• DHHS Essential Health Benefits Bulletin, 15 pages, December 16, 2011
• Institute of Medicine report, “Essential Health Benefits: Balancing Coverage and Cost,” October 6, 2011