Administration gives states leeway on health rules

Announcing a preliminary guideline on the benefits insurers must offer under the new health care law, the Obama administration surprised some health care advocates on Friday by remaining vague on details, choosing instead to let states largely set their own benchmarks.

Expectations had been that the Department of Health and Human Services (HHS) would release a list of specific benefits insurers must cover, but the agency said it’s leaving that up to states, allowing them to select an existing plan on which to base the essential benefits.

“The proposal reflects our commitment to giving states the flexibility they need as they set up their state-based exchanges,” said HHS Secretary Kathleen Sebelius. “Coverage that works in Florida may not work in Nebraska.”

Insurance plans must offer minimum coverage beginning in 2014, when health exchanges are supposed to be up and running in each state under the Affordable Care Act. Industry stakeholders have been anxiously awaiting a determination by HHS of which benefits will be deemed essential, but officials told reporters on Friday that states can expect to play a significant role in the process.

Outlining a basic structure for how states should go about determining essential benefits in the individual and small-group markets, they said states can choose a benchmark plan from among the three largest small group, state employee or federal employee plans, or use the largest HMO plan offered in the state’s commercial market.

The benefits and services covered by the benchmark plan would become the essential benefits package.

While plans in all states must cover 10 different categories of care mandated in the Affordable Care Act—like prescription drugs, maternity care and preventative services—they could modify coverage within a benefit category as long as they don’t reduce the value.

The Friday announcement came in advance of a final regulation HHS officials say they will release in the near future.

Patent advocacy groups were skeptical of the approach, expressing fear that it could undermine patient protection by leaving too much up to the states. Carl Schmid, deputy executive director for the AIDS Institute, called the announcement “clever,” but said it leaves a lot to be defined.

“It’s not what we expected,” Mr. Schmid said. “We were looking for more federal determination, a statement of benefits, and that’s kind of what we thought the law required them to do.”

HHS officials also refrained from discussing how the essential benefits would impact what patients pay for deductibles, co-pays and co-insurance, or the actuarial value of plans, saying they’ll weigh in on cost-sharing in the near future.

An independent panel advising HHS on essential benefits highlighted the issue of cost in October, telling the agency it should take cost into consideration when determining essential benefits. The recommendation ventured into potentially explosive territory by raising the question of whether the government should base health coverage for millions of patients on how much services cost.

Where HHS lands on that question is the key concern for a group of major trade organizations advocating for affordable and flexible essential benefits. Neil Trautwein, chairman of the Essential Health Benefits Coalition and vice president at the National Retail Federation, said “the devil is in the details.”

“HHS should continue to work to develop a rule that balances state-selected and reasonably comprehensive benefits with affordability for employers and individuals,” Mr. Troutwein said. “A final rule that does otherwise will make health coverage more expensive for employers and individuals to purchase and make jobs more difficult for employers to create.”