Affordable Care Act Delivers New Minimum Standards for Health Insurance Coverage

Starting in 2014, most health insurance coverage provided by small employers or purchased by individuals must:

 1)    Cover a strong, comprehensive set of benefits (the “Essential Health Benefits” package)

AND

 2)    Provide good “Value” by limiting the amount consumers must pay out-of-pocket.

(Although these standards will not directly apply to larger employers, in some cases, their employees will nevertheless gain access to coverage that meets these standards through the Health Insurance Exchange.)   

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The most powerful provisions of the Affordable Care Act (ACA) take effect January 2014. These changes will help millions of Floridians get and keep health coverage in the next few years alone. Just as importantly, that coverage must be good coverage. New proposed rules released by the U.S. Department of Health and Human Services in late 2012 set specific, minimum standards for “good coverage.”

Which plans must meet these minimum standards?

The minimum standards will apply to all plans sold in Florida’s individual or small group markets that are not exempt. Currently, the small group market serves businesses with up to 50 employees. By 2017, these standards must apply to businesses with up to 100 employees. (Exempt plans include “grandfathered” plans that were already in place in 2010, plans offered by larger employers, and self-insured small business plans.)

However, these standards may indirectly affect larger employers also, because employees of those companies that do not provide coverage at a level related to the new minimum standards will be eligible to buy coverage in the Health Insurance Exchange using premium tax credits.

When is coverage good enough?  

In order to be considered coverage under the ACA, a health plan must pass two separate but connected tests: 1) it must have a strong benefit package, and 2) it must have limited cost-sharing (out-of-pocket costs, including deductibles, copays, coinsurance, etc.)

Evaluating whether coverage is good enough requires evaluation of both benefits and cost-sharing. A plan might include an amazing benefit package, but if access to those benefits is out of reach because of high deductible and co-pay requirements, it’s not good coverage. On the other hand, if a plan pays most of the cost of the services it covers, but the benefits don’t provide needed care, that isn’t good coverage either.

The new rules protect consumers by setting a minimum standard (“low bar”) for both benefit packages and cost-sharing requirements. These standards won’t limit consumers’ real choices; plans can certainly exceed those minimum standards. What these standards will do is help consumers avoid inadequate plans that don’t cover enough or unaffordable out-of-pocket costs.

What are these new minimum standards?  

  • The minimum standard for benefits is the Essential Health Benefits package.
  • The minimum standard for cost-sharing is that the plan must pay 60% of the cost of health care (based on the Essential Health Benefits package used by a typical enrollee). 

ESSENTIAL HEALTH BENEFITS

What types of benefits must be included in the Essential Health Benefits package?

The ACA lists ten general categories of benefits that must be included in the EHB package. These include:

Ambulatory Care

Emergency Care

Hospitalization

Maternity Care

Mental Health and

Substance Abuse Treatment

Prescription Drugs

Rehabilitative and Habilitative Services

Laboratory Services

Preventive Services and Chronic Disease Management

Children’s Dental and Vision Care

In addition, the Essential Health Benefits package: 1) may not include annual limits on the dollar amount of coverage for any EHB benefit, 2) must meet the federal standard for parity for mental health and substance abuse services, and 3) must cover all preventive services with no out-of-pocket costs.

The ACA also requires that the Essential Health Benefits package takes into account diverse segments of the population, but in a way that does not discriminate based on age, disability, expected end of life, medical dependency, quality of life, gender identify, or sexual orientation.

How does the set of specific benefits included in the Essential Health Benefits package be finalized?

Under the federal process, each state could select a plan from among 10 existing state-specific options to serve as a starting point for forming its EHB package. Florida did not select any plan or participate in the process in any way. As a result, Florida Blue’s (formerly Blue Cross Blue Shield of Florida) BlueOptions plan (i.e., the small group plan with the largest enrollment in Florida) became that starting point by default. From there, that benefits package was supplemented by federal officials to meet all of the Affordable Care Act requirements. That supplemented version of BlueOptions is now considered Florida’s proposed EHB package.

What are the main differences between BlueOptions and the proposed Essential Health Benefits package?

For one,Florida’s proposed EHB package does not include three types of required benefits: children’s dental services, children’s vision services, and “habilitative services.” (Habilitative services that help a person learn, keep, or improve skills and functional abilities that they have never had, as contrasted with rehabilitative services that help regain lost skills or functioning.) The proposed EHB package calls for children’s dental and vision benefits to match those provided under the Federal Employees’ Dental and Vision Insurance Plan. The decision about habilitative services is left to the state, though the state could leave the decision up to individual insurance companies.

In addition, the proposed EHB package includes coverage for prescription drugs in well over 100 categories. In many cases, BlueOptions covers several medications in each category, but a few categories were supplemented to ensure that at least one drug in each category is covered. Procedures are to be put in place that ensure access to necessary medications that are not included on the plan’s drug list.

How can I review the full list of benefits in Florida’s proposed Essential Health Benefits package?

Florida’s proposed EHB package is posted at: http://cciio.cms.gov/resources/EHBBenchmark/proposed-ehb-benchmark-plan-florida.pdf

Once Florida’s Essential Health Benefits is finalized, will affected plans be required to provide all of the benefits in the package?

Sort of. Insurance companies will be allowed to make some changes and substitutions. Specifically, they can vary the level of benefits within the same major category. For example, they cannot, increase the level of benefits in one category to justify reducing the level of benefits in another category.`

Florida law includes a number of “mandates” or requirements for insurance coverage. Are these mandates part of Florida’s Essential Health Benefits package?

We don’t fully know the answer yet, but we can guess that the general answer will be “yes”. What we do know is that Florida is allowed** to continue the mandates it had in place before 2012, at no additional cost to the state (for now). However, Florida did not actually propose an EHB package, but it seems safe to assume that federal officials will include them as part of Florida’s final package.

** – Florida law includes several different types of mandates related to health insurance, but only those related to the provision of services may be included in the Essential Health Benefits package. Other types of state mandates, such as those related to required providers or cost-sharing, are not part of this discussion.

COST-SHARING (Out-of-Pocket Costs)

What else do I need to understand besides benefits in order to understand how good a plan is?

A plan is defined by the benefits it covers and its cost-sharing requirements. How much cost-sharing a plan requires is measured by its Value. The Value of a plan is the percentage of the cost of the services that a typical enrollee would use (the ones in the Essential Health Benefits package) that the insurance company (rather than the enrollee) will pay for. The higher a plan’s Value, the better the coverage.

In the individual and small group markets (including the Exchange), the benefits covered by any plan must include the Essential Health Benefits package, and the Value of that plan must be at least 60%.

Example: If a plan has a Value of 70%, then a typical plan enrollee could expect 70% of the health care services they use paid for by the plan, with the rest (30%) paid out-of-pocket (but see subsidies below).

All of the plans sold in the Exchange (called Qualified Health Plans) must include the same Essential Health Benefits package as a minimum standard. However, there will be four different “metal” levels of coverage offered, where each level has a different Value: bronze (60%), silver (70%), gold (80%), and platinum (90%).  Obviously, the premiums for a gold plan will be higher than for a silver plan, etc.

The amount of tax credits available in the Exchange to make premiums affordable for Floridians between 100 and 400 percent of the poverty level will be based on a silver plan (i.e., Value of 70%). 

Is a plan’s Value the only thing that affects how much an enrollee must pay out of pocket?

No. No matter what the Value of a plan and its cost-sharing requirements are, there is a limit on total out-of pocket costs. The out-of-pocket cost limits are $6,250 for an individual and $12,500 for a family (this amount would be periodically adjusted for inflation).

Within that maximum out-of-pocket amount, is there a maximum deductible? 

A deductible is a particularly important type of cost-sharing, because that amount that must be fully paid by the enrollee for medical expenses before the insurer starts pays anything. For 2013, the maximum deductible would be $2,000 for an individual and $4,000 for a family. These amounts are again subject to adjustment for limitation. That deductible amount counts toward the limit on total out-of-pocket cost limit. 

What about lower-income people that can’t even afford these maximums?  

Maximum out-of-pocket costs must be even lower for lower-income enrollees. Those with incomes below 250% of the poverty level ($47,000 for a family of three in 2012) will be eligible for subsidies that will reduce out-of-pocket limits in any plan purchased through the Exchange. (In other words, for that specific individual or family, these subsidies increase the plan’s Value.)

Starting with a silver plan (70% Value) purchased through the Exchange, the cost-sharing subsidies would increase a plan’s Value on a sliding scale to as much as 94%.

Is a plan provided through a job required to meet these same cost-sharing standards?  

For plan provided through a small employer (50 or fewer employees) that was not obtained through the Exchange, the answer is “sort of”. These plans still must pass a 60% “Minimum Value” test, but it will be somewhat easier to pass than to prove that a plan sold in the Exchange has at least 60% Value, because it will be calculated somewhat differently.