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From Health Law Daily, August 16, 2013

Despite tight deadlines and technical glitches, few changes made in insurance plans shifting to the essential health benefits standard

By Kathryn S. Beard, JD

The Urban Institute released a report about state implementation of the essential health benefits (EHB) standard under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). The report focused on the experiences of health insurance regulators from state departments of insurance (DOIs) and insurance industry representatives in five states: Alabama, Colorado, New Mexico, Oregon, and Virginia. Colorado, New Mexico, and Oregon are implementing state-based exchanges; Alabama and Virginia are implementing federally facilitated exchanges, though Virginia will be conducting plan management. All but Alabama will provide oversight for plans outside the exchange; CMS will provide oversight on federal law for Alabama plans outside the exchange while Alabama will provide oversight on state law only.

Problems and concerns. Insurers in all five study states reported tight deadlines for submitting their products to state regulators for review. CMS published its final EHB regulation in February 2013; some critical details were not released until April. CMS has issued additional instructions, including some which completely reversed prior understanding of CMS policy. Insurers had to file their plans for review in a matter of weeks and without clear regulatory guidelines. The short turnaround time resulted in technical problems and numerous problems with filings. There are concerns about whether state DOIs and CMS will have time to complete their reviews of insurance plans before open enrollment begins on October 1, 2013. Some insurance industry representatives have expressed concerns about interactions with CMS officials, citing lack of experience and understanding of state markets.

Minimal changes needed. Despite initial concerns and technical problems, regulators in most study states found that shifting to the EHB standard has not been a big issue and will not be a major driver of premium increases. Most insurance industry representatives reported minimal changes to their products to meet the EHB standard, expecting that many policyholders will not experience a large change in coverage; however, in Virginia, individuals will have a significantly expanded set of benefits due to the state’s historic lack of maternity and prescription drug coverage. All five study states are allowing insurers to substitute benefits, but insurers are not filing plans with benefit substitutes for 2014. Many insurance providers determined that the costs of implementing substitutes was not worth any potential gain. For the first year of the exchanges and EHB standard, competition is expected to primarily occur around product pricing instead of benefit design, though insurers may begin implementing substitutions in the future as the PPACA requirements become clear.

Continuing ambiguity. PPACA requires insurance plans to not discriminate against less healthy people, but both insurers and state regulators indicate they have little experience assessing plan discrimination. CMS has not yet made a standard for discrimination, which makes the review process challenging. Some states have published guidance based on a CMS software tool that will identify plan benefit design outliers and flag them for further review. No DOIs in the five study states has notified an insurer of a discriminatory benefit design; it will be important for regulators to monitor policyholders’ experiences, particularly among policyholders with significant health care needs. PPACA’s requirement for plans to cover habilitative services is also causing problems for regulators and insurers. CMS has not defined habilitative services, and traditional insurance plans have not included habilitative services as a defined term, though some plans do offer them under a different name. DOIs in Colorado, Oregon, and Virginia provided insurers with a published definition of habilitative services that must be included in contracts for EHB plans, while New Mexico and Alabama plans will be reviewed for compliance under CMS regulations.

Standardization. Oregon’s legislature is requiring that insurers market standardized benefit designs. California, Connecticut, Massachusetts, New York, and Vermont also require insurers to offer standardized plans on the exchange, to facilitate consumers’ ability to make “apples-to-apples” comparisons among health plans. Other states are considering requiring standardization in the future, and will be closely watching the experiences in Oregon and the other standardized states to see the impact on consumer decision-making and plan choice.

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