Most States That Have Chosen Benchmarks Have Selected Largest Small-Employer Plan

Twenty-four states and the District of Columbia have selected the health insurance plan in their state that will serve as the “essential health benefit” (EHB) package sold by all insurers participating in the new health insurance exchange in the individual and small-group markets beginning January 2014, according to a recent Commonwealth Fund study. The study revealed that 19 of the states that selected plans chose existing small-group plans—typically employer-based plans for businesses with fewer than 50 employees. The remaining five states selected HMO or state employee benefit plans. For states that did not select a benchmark plan, the federal government will designate the largest small-group plan in the state as the benchmark, meaning that the majority of states will have the most widely purchased small-group plan in the state as the basis of their essential health benefit. According to the report, selecting existing small-group market plans, which are similar to what many consumers already have, will likely mean a smoother transition into the new marketplaces and an easier adjustment to the new rules.

The report, Implementing the Affordable Care Act: Choosing an Essential Health Benefits Benchmark Plan, reviewed states’ progress in selecting these benchmark plans between Jan. 1, 2012, and Oct. 15, 2012. Designed to improve the adequacy of health coverage, EHB covers ten broad service categories, including ambulatory patient care, hospitalization, maternity and newborn care, and prescription drugs (see Report 541.-1). States can choose benchmark plans to help meet the requirement under the Patient Protection and Affordable Care Act (ACA) that the EHB reflect a typical employer health insurance plan.

“Many consumers who purchased health plans on their own do not have insurance that covers all their health needs,” said Sara Collins, vice president of the Commonwealth Fund. “The new essential health benefit is designed to ensure people have comprehensive plans. But the federal government allowed states considerable flexibility in adopting this new standard to fit their local insurance markets.”

“State officials are now turning to implementation of the essential health benefits requirements,” said Sabrina Corlette, lead author of the report. “Several officials noted that they would likely need to enact state legislation to ensure their departments of insurance will have the authority to enforce these new benefit standards for consumers.”

Moving forward. The Department of Health and Human Services (HHS) will evaluate the benchmark selection process and may choose to revisit it in 2016. If that is the case, the report recommended that the federal government establish minimum standards that states must use when selecting their benchmark plans. Noting that state officials have unanswered questions about implementation of the essential health benefit, the report noted that the HHS should be responsive to and flexible in accommodating states’ needs as the transition progresses.

“We are in the process of a significant shift in how health insurance is packaged and sold across the country, and the essential health benefit is a remarkable change,” said David Blumenthal, president of the Commonwealth Fund. “For the first time, consumers will be guaranteed comprehensive insurance coverage that will enable them to get the health care they need.”

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