United Hospital Fund Report Informs Important State Decision on "Essential Health Benefits"
New York Decision Will Affect Over Two Million Individuals and Small Group Members
A key federal deadline looms for New York State related to its implementation of the federal health care reform law: By the third quarter of 2012, the state must make a pivotal decision about the “benchmark option” that will shape individual and small group health insurance policies. This decision determines the “essential health benefits” that will be required for all individual and small group policies beginning in 2014—which is the subject of a new report from the United Hospital Fund.
The U.S. Department of Health and Human Services has provided states with a menu of benchmark options based on popular state insurance products in four categories and requiring states to choose one; the categories include popular state small group plans, coverage for state employees, coverage for federal employees, and coverage from the state’s largest HMO. But, as the report notes, “New York does not have the option of approaching this decision from the perspective of an à la carte menu, choosing, for example, a wellness benefit from a Federal Employee Health Benefits Program plan, the hospital benefit from the Empire Plan, and the outpatient benefit from a large group HMO. It must choose one option, and live with whatever supplements or benefit adjustments are required.”
The report Defining Essential Health Benefits: Federal Guidance and New York Options examines the pros and cons of each of the options available to New York’s policymakers and highlights areas where additional federal guidance would be helpful. Among the issues it presents:
- Under the complex federal guidance, if the benchmark option chosen by New York does not cover all current individual and small group mandates, then the state will have to assume the cost of those benefits.
- One of the benchmark options (Federal Employee Health Benefits Program) would exclude most elective abortions from coverage—a policy that runs counter to New York’s long tradition of making a full range of reproductive services available for women.
- The ten potential benchmark options examined represent a mix of plans covering small and large employer groups. Choosing one of the large group plans might provide a higher level of mental health and substance abuse services coverage, depending on future federal guidance, since small group plans are exempt from state and federal mental health parity requirements.
- One option for New York policymakers is choosing the Empire Plan, which currently provides coverage for over one million state workers and retirees. This option offers a comprehensive benefit package that meets or exceeds individual and small group benefit mandates, making it the only benchmark option that does so—but its broader coverage features could result in higher premiums than other benchmark options.
“All the options New York’s policymakers can consider are comprehensive and fall within a fairly narrow range in terms of their actuarial value, but there are important differences,” said Peter Newell, director of the Fund’s Health Insurance Project. “A thorough review of New York's sometimes arcane benefit requirements is long overdue, and the end product will affect individual and small business health insurance purchasers in fundamental ways starting in 2014.”
Defining Essential Health Benefits: Federal Guidance and New York Options was written by Mr. Newell and is available from the Fund’s website.
“While the timeframe for the decision is tight and the issues are complex and challenging, the federal rules on essential health benefits give New York policymakers significant input into crafting the benefit package that will cover some 2.5 million individuals and small group members beginning in 2014,” said Fund President Jim Tallon. “In addition, New York will have a two-year transitional period to prepare for evidence-based decisions on benefits that lie ahead.”
Support for Defining Essential Health Benefits: Federal Guidance and New York Options was provided by the New York State Health Foundation. This report is the fifth in a series focusing on New York’s health benefit exchange and related health reform implementation issues. The first was Building the Infrastructure for a New York Health Benefit Exchange: Key Decisions for State Policymakers, which examined the initial set of governance and organizational choices for states in designing their exchanges. The second was Coordinating Medicaid and the Exchange in New York, which focused on the successful integration of New York’s public insurance programs with subsidized and unsubsidized coverage to be made available through the new health benefit exchange. The third was Two into One: Merging Markets and Exchanges under the Affordable Care Act, with its bipartite focus on combining individual and small business health benefit exchanges and on merging the individual and Small Group markets. The fourth was Passive/Active: Defining the Role for a Health Benefit Exchange in the Interests of New Yorkers, which takes a closer look at the two state exchanges that predate the Affordable Care Act and embody the range of possible approaches. All are also available from the Fund’s website.
About the United Hospital Fund: The United Hospital Fund is a health services research and philanthropic organization whose primary mission is to shape positive change in health care for the people of New York.