Health Care Reform Today
November 12, 2013
Three Confusing Terms: What’s the Difference?
By Kathy Vaccaro, VP Health Care Reform
Given the scope, reach and complexity of the Patient Protection and Affordable Care Act (PPACA), it’s understandable and not at all surprising that there’s some confusion about the terms used to describe three key PPACA provisions slated to take effect over the next 13 months. They are Essential Health Benefits, Minimum Essential Coverage, and Minimum Value. The question is, what do these terms mean and how do they differ from each other?
While the terms themselves sound a bit alike, each relates to separate and distinct PPACA requirements. Let’s define the terms and briefly outline how they’ll affect individuals and employers in 2014 and 2015 – and beyond.
Essential Health Benefits
Starting in 2014, all non-grandfathered, insured individual and small-group health plans (covering up to 50 people) offered on and off the public health insurance Marketplaces – or "exchanges" as they are commonly known – must cover what the PPACA classifies as Essential Health Benefits. Essential Health Benefits consist of 10 core health benefit categories:
- Ambulatory patient services – doctor visits when you’re sick or injured, or outpatient clinic visits
- Emergency services – visits to the emergency room including ambulance services or treatment at an urgent care center
- Hospitalization – a stay in the hospital including inpatient surgery and recovery
- Maternity and newborn care – for women who need prenatal care or help with pregnancy, complications, delivery, etc.
- Mental health and substance use disorder services, including behavioral health treatment – visits with a doctor or other health care professional, etc.
- Prescription drugs – medicine your doctor provides
- Rehabilitative and habilitative services and devices – physical therapy, speech therapy, artificial limbs and other medical equipment
- Laboratory services – X-Rays, MRIs, blood tests, etc.
- Preventive and wellness services and chronic disease management – screening tests for things like osteoporosis and mammograms, and help living with long-term illnesses like diabetes
- Pediatric services, including oral and vision care – dentist check-ups, routine eye doctor visits, eyeglasses, immunizations and more
By regulation, the Essential Health Benefits applicable to insurance policies sitused in a particular state are determined by reference to a benchmark plan selected by each state.
Remember, only non-grandfathered, insured individual and small-group plans sold on and off the health insurance Marketplace are required to cover Essential Health Benefits. But any plan that includes any Essential Health Benefits – grandfathered or not, regardless of size and whether or not insured – may not apply annual or lifetime dollar limits on them.
I should also note that in 2016, the “small employer” definition will change from 1-50 employees to 1-100 employees. This will especially impact those employers that currently have 51-100 employees. For example, today, an employer with 85 employees is considered a “large employer,” and insurance policies for such an employer are not required to provide all Essential Health Benefits. In 2016, the same employer with 85 employees will be considered a small employer and an insurer providing insurance coverage to this small employer will be required to offer all Essential Health Benefits, which may impact the employer’s premium rates.
Minimum Essential Coverage
The health care law’s much-discussed “individual mandate” kicks in on January 1, 2014. Under the mandate, most Americans will be required to maintain Minimum Essential Coverage or be subject to a tax penalty. While the term, Minimum Essential Coverage, would seem to connote a minimum level of health benefits, it doesn’t. Instead, Minimum Essential Coverage is defined in terms of the source of the coverage. It includes coverage under:
- an employer-sponsored plan,
- a government-sponsored program, such as Medicare or Medicaid,
- a grandfathered health plan,
- a plan in the individual market purchased on or off the public Marketplace, or
- other coverage – such as that offered through state health benefit risk pools – approved by the Department of Health and Human Services (HHS).
Minimum Value refers to requirements outlined in the PPACA’s “employer mandate,” which won’t be enforced until 2015, after having been delayed for a year. The employer mandate will require employers with 50 or more full-time employees or full-time equivalents to offer full-time workers and their dependent children up to age 26 coverage that’s both affordable and provides Minimum Value – or face a possible penalty.
To meet the Minimum Value requirement, a plan must cover at least 60 percent of total allowed costs – i.e., what the plan pays versus what the customers pays due to deductibles, copays and coinsurance.
Keep in mind that while a plan must provide Minimum Value, it must also be “affordable.” HHS considers a plan affordable if the amount an employee is required to contribute to its cost is less than 9.5 percent of the employee’s W-2 wages.
Resources You Can Use
Keeping up with health care reform requirements and mandates – and the sometimes confusing terminology – can be a challenge. But you’re not alone. Cigna has resources to help you stay ahead of the curve. We encourage you to visit and bookmark InformedOnReform.com, our comprehensive website for news and insights on emerging issues and concerns relating to PPACA. In particular, you may want to visit the Essential Health Benefits, Individual Mandate and Employer Mandate sections. The site also includes convenient tools such as our interactive timeline and the consumer-friendly Health Care Reform for YOU, which outlines what reform may mean for an individual based on answers to a few quick questions.
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