Institute of Medicine Issues Essential Health Benefits Recommendations
October 10, 2011
On October 7, 2011, the Institute of Medicine (IOM) publicly issued its highly anticipated “essential health benefits” (EHB) policy principles to the Department of Health and Human Services (HHS). Among the proposals included in the 297-page report, the IOM recommended that the package of “essential health benefits” be based upon a typical small employer plan in today’s market and linked to the national average premium cost of a “silver” level plan in the Exchange.
The report also outlined a process for updating the EHB package in the future and called for preservation of state flexibility.
As a reminder, beginning January 1, 2014, lifetime and annual dollar limits on the dollar amount of essential health benefits are prohibited for all employer plans, including grandfathered, and all new individual insurance policies. However, the prohibition on lifetime and annual dollar limits does not apply to grandfathered individual plans. All other plans, including self-funded plans, must remove annual limits or lifetime maximums on essential health benefits if they are covered.
The IOM’s Committee on Defining and Revising an Essential Health Benefits Package for Qualified Health Plans was charged with developing a process to define and update an HHS-specified benefits package that must be offered to individuals and small groups via state-based Exchanges, the current private market and some specific Medicaid expansion programs. The Committee’s mission did not include establishing an explicit list of included categories or services.
In developing its recommendations, the Committee indicates that it strove to create a balance between affordability and comprehensiveness, while simultaneously taking into account the sometimes competing preferences among stakeholders including health care professionals, consumers and employers.
The briefing emphasized the importance of taking a “grown-up” and transparent approach to ensuring that the PPACA goal of expanding access to coverage and care is not compromised. If too many benefits are deemed “essential,” then insurance will become unaffordable and drive people away. If the EHB are too limited, then health insurance will be inadequate to meet constituents’ needs. Additionally, the Committee addressed the importance of reigning in escalating health care costs without resorting to cost-shifting, and ensuring that people get the medical care they need.
Thus, the committee concluded, the overriding task of HHS in defining the EHB set includes “balancing the comprehensiveness of benefits with their affordability,” and implementing an evidence-based approach that focuses on medically necessary services. The ultimate goal is to safeguard the at-risk individual while also addressing the health needs that are most important and relevant to the public as a whole.
It also notes that while some benefits may be permissibly excluded from the EHB, private insurers may continue to include them, just as they do today.
IOM recommendations synopsis
1. Develop an EHB package that includes the 10 broad benefit categories as guided by a national average premium goal.
- Adjust the package so that the expected national average premium for a “silver” (70%/second-lowest-price) plan is the actuarial equivalent of what an average small employer will pay in premium for a typical plan in 2014
- Allow for public input to fine-tune the initial EHB package
2. By January 2013: establish a framework to monitor and update the EHB implementation that considers changes in relevant matters like health care professional financial incentives, payment rates, and practice organizations.
- Make the data accessible for public use
3. Starting 2015 for implementation in 2016 and annually thereafter: update the EHB package to incorporate costs while also making it more fully evidence-based, specific, and value promoting.
- Allow for public input to fine-tune the updated EHB package
4. Allow states that administer their own exchanges to implement variations of the federal EHB package, as long as modifications are:
- Consistent with the federal package
- Neither significantly more nor less generous
- Subject to public input.
5. Establish a non-partisan National Benefits Advisory Council to oversee the EHB package and make annual recommendations.
6. In collaboration with others, develop a strategy that ensures that the EHB-defined packages remain affordable and sustainable by controlling the growth rate of health care spending across both the public and private sectors so that it aligns with the economy.
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