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Small Group Health Plans Must Cover Essential Health Benefits

The Affordable Care Act (ACA) requires insurers to provide coverage for a package of Essential Health Benefits (EHB) in 10 benefit categories, effective the first plan year on or after Jan. 1, 2014.

The requirement applies to all fully insured health plans offered in the Small Group and Individual markets, and includes all product types, whether HMO, PPO, POS or high-deductible HRA/HSA. In addition, the requirement affects plans both in and outside the Health Insurance Marketplaces (Exchanges) being established in states for 2014.

The mandate to cover EHB does not apply to fully insured Large Group, self-funded or grandfathered health plans. 

The 10 designated benefit categories of essential health benefits are:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Laboratory services
  • Maternity and newborn care
  • Mental health and substance abuse services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Preventive and wellness services, and chronic disease management
  • Pediatric services, including oral and vision care

Of the designated EHB categories, the only ones that have not been traditionally covered in insured plans are Pediatric Dental and Vision services. Habilitative services are generally provided at parity with Rehabilitative services.

In terms of the prescription drug benefit, a health plan must cover the greater of one drug in every category or class, or the same number of drugs in each category and class as the EHB benchmark plan.

The Department of Health and Human Services (HHS) issued guidance that gave states the responsibility for adopting state-specific EHB plans (“state benchmark plans”), on which insurers must base their 2014 product offerings. Fully insured products will not have to exactly match the state benchmark plans and can differ as long as covered benefits remain “substantially equal” and actuarially equivalent to the state EHB package in those states that allow substitution.

Beginning Jan. 1, 2014, plan coverage requirements for all small groups will be identified by four “metallic” benefit coverage levels: Bronze, Silver, Gold and Platinum. These designations indicate the relative value of the covered benefits, from Bronze (lowest) to Platinum (highest). Each metallic level includes choices of benefits, plan types and price. If an existing small group plan does not provide the required value, a plan change will be required.

Self-funded and Large Group fully insured plans are not required to offer all the EHBs, but if they happen to cover benefit designated  as an EHB , then the plan must remove annual and lifetime dollar limits from that benefit. The prohibition against annual and lifetime dollar limits applies to both grandfathered and non-grandfathered plans.  However, non-dollar limits on benefits are still permitted for all plans, including plans subject to the EHB mandate.

Large Group fully insured plans will follow the benchmark EHB package for their situs state to determine which benefits are subject to the removal of dollar limits. Self-funded customers will have the choice of selecting any state benchmark EHB plan to serve as the guide for which benefits must have dollar limits removed. Depending on funding type, grandfathered plans will follow the same guidelines.

The pricing impact of the EHB requirements will vary by state, and will be reflected in the 2014 product portfolios currently under development by the carriers.

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