Essential Benefits Digging Out a Definition!

We have had a number of questions concerning the definition of "essential benefits."  So, here we go, let's see if we can dig out an "official definition."

The broad definition in the law is:

(1) IN GENERAL.—Subject to paragraph (2), the Secretary shall define the essential health benefits, except that such benefits shall include at least the following general categories and the items and services covered within the categories:

• (A) Ambulatory patient services.
• (B) Emergency services.
• (C) Hospitalization.
• (D) Maternity and newborn care.
• (E) Mental health and substance use disorder services, including behavioral health treatment.
• (F) Prescription drugs.
• (G) Rehabilitative and habilitative services and devices.
• (H) Laboratory services.
• (I) Preventive and wellness services and chronic disease management.
• (J) Pediatric services, including oral and vision care

But - as we know from taking this health care reform trip together - the devil’s particularly in the details – all these expense categories are contained in nearly all group plans, but there are many exclusions and limitations that aren’t addressed in the law. The law allows such limitations to be incorporated into the definition via a 5-step process:

1. The Secretary of DOL surveys employer-sponsored coverage to determine the benefits typically covered by employers and reports the survey results to the Secretary of HHS.
2. The HHS Secretary will then prepare a draft which benefits are essential.
3. The Chief Actuary of CMS must certify that the selected benefits equals the scope of those provided under a typical employer plan (a rather circular process that’s meant to keep things honest).
4. The HHS Secretary will then provide an opportunity for public comment on the definitions (a process that could last many months or be shortened considerably by the methods the Secretary has used for comments regarding the dependents to age 26 regulations [3 months] or grandfathering [2 months]).
5. The final definition is implemented. Periodic reviews of those definitions are mandated.

I see two broad results of this process:

• Employer healthcare benefits will be largely commoditized (a la group life and disability products).
• Protracted scrambling by special interest groups to get their services/products certified by the government as “essential” even though they may increase costs – think airbags for cars.

Many plans are facing a renewal that hinges on the definition of essential benefits. The regulators have ruled that plans that implement their own definition “in good faith” prior to the release of the final regulations will not be subject to sanctions.