HARRISON INSTITUTE FOR PUBLIC LAW GEORGETOWN LAW
Issue Brief: State Implementation of Essential Health Benefit Requirements
I. Introduction
This brief summarizes how states are implementing five issues related to the requirement to
provide essential health benefits (EHB) under the Affordable Care Act (ACA). The five issues include
how states are:
(1) providing guidance regarding an insurer’s obligation to offer benefits that are
“substantially equal” to a state’s benchmark plan,
(2) restricting the ability of insurers to substitute benefits within an EHB category,
(3) defining or providing guidance regarding what benefits must be provided under
habilitative services,
(4) requiring insurers to provide any additional health benefits beyond the ten EHB
categories after December 31, 2011 (and if applicable, the payment mechanism), and
(5) imposing requirements on the coverage of pharmaceutical benefits that rise above the
federal standard.
In addition to the findings, this brief presents some initial policy implications arising from how states are
acting with regard to these five issues.
II. Issues 1 & 2: Substantially Equal & Benefit Substitution
Federal regulations require health plans to provide benefits that are “substantially equal” to the
benchmark plan selected in their state, but do not provide a definition of “substantially equal.”1
Five states provide defined guidance, meaning that there is no interpretive flexibility regarding
the definition of “substantially equal.”2 For example, California defines “substantially equal” to mean
that plans must provide the same benefits as the state’s benchmark plan.
Fifteen states, including the District of Columbia, provide limited guidance, meaning that insurers
have more interpretive flexibility regarding the definition of “substantially equal.”3 For example, West
Virginia’s guidance states that the benchmark is a “starting point” for insurers, but that “some deviation”
is allowed “pursuant to the goal of flexibility embedded in the term.”4 West Virginia cites altering the
number of treatments or visits as an example. Although West Virginia’s guidance states that the
1
This includes covered benefits, limitations on coverage, and prescription drug benefits. 45 CFR § 156.115(a)(1)(i-iii).
California, Maryland, New York, Oregon and Vermont.
3 Delaware, D.C., Hawaii, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Nevada, Ohio, Rhode Island, Washington,
West Virginia, and Wisconsin.
4 State of West Virginia Office of the Insurance Commissioner, West Virginia Informational Letter No. 186, March 2013, pg. 2,
http://bewv.wvinsurance.gov/HealthReformResources/WVMarketplaceInformation/StateInformation.aspx (note: this letter
came about because WV specifically asked HHS about the definition of "substantially equal. ").
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Insurance Commissioner would determine whether a deviation is “substantially equal,” insurers are
interpreting how much to deviate from the benchmark.
Four states interpret substantially equal to mean actuarially equivalent, requiring that all plans
within the state be actuarially equivalent to the chosen benchmark plan.5 No provision was noted for
twenty-seven states.
Federal regulations allow insurers to substitute benefits as long as they are actuarially equivalent,
made within the same EHB category, and not prescription drug benefits.6 States, however, can prohibit
insurers from substituting benefits. Our survey found that eleven states prohibit substitution.7 Some of
these states, like Indiana, prohibit benefit substitution indefinitely. Others, like Maryland and the District
of Columbia, prohibit substitution for a period of time (e.g., through 2014) and state they may revisit this
issue in the future. With the remaining states, twenty states explicitly affirm the ability to substitute
benefits with most of these states mirroring the federal regulations. No provision was noted with twenty
states.
Issue 1 & 2 Policy Implications
How states approach the issues of “substantially equal” and benefit substitution regulate the
amount of flexibility that insurers have to deviate from a state’s benchmark plan. One purpose of
requiring a benchmark plan is to provide consumers with a consistent level of coverage across plans in the
individual and small group markets. This consistency allows consumers to make “apples to apples”
comparisons.8 States that provide defined guidance or prohibit substitution, in effect, limit the variation
of plans within their state, creating more uniform benefits across plans consistent with the benchmark
plan. By prohibiting insurer flexibility, consumers would not have to weigh the value of different
benefits and thus may have a better understanding of what is available to make informed decisions.
Defined guidance or prohibiting substitutions could also reduce cherry picking by limiting the
ability of insurers to structure plan benefits to attract healthier individuals (i.e., benefit design). For
example, in a state allowing substitutions, insurers could substitute costly benefits required by sicker
consumers for benefits that are less costly and favored by younger or healthier consumers.
However, consumers may have greater coverage options in states that provide flexibility to
insurers by leaving “substantially equal” undefined or permitting substitutions. For example, insurers
could alter the number of visits and still maintain that its benefits are substantially equal to the benchmark.
This ability to alter visits may benefit some consumers who require more services for certain treatments,
for example, more rehabilitative services for stroke patients. Flexibility also allows insurers to tailor their
benefit packages to the populations they are covering.
Whether or not there is a correlation between how a state regulates an insurer’s ability to deviate
from the benchmark plan and consumer protection or satisfaction is currently unclear. However, once
5
Arkansas, Colorado, New Hampshire, and Utah.
45 CFR § 156.115(b)(i-iii).
7 California, Connecticut, D.C., Indiana, Maryland, Michigan, Nebraska, New York, Oregon, Vermont, and Washington. Note
that New York prohibits substitutions under standard plans, but allows substitutions under non-standard plans in two EHB
categories: preventative/chronic disease management and habilitative/rehabilitative services.
8 Studies have found that consumers benefit from the standardization of benefits. See Sabrina Corlette, et al., The Massachusetts
and Utah Health Insurance Exchanges: Lessons Learned, Georgetown University Health Policy Institute, March 2011; Joan
Alker and Jack Hoadley, Waving Cautionary Flags: Initial Reactions from Doctors and Patients to Florida's Medicaid
Changes, Georgetown University Health Policy Institute, May 2007.
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consumers begin to use their health plans, states may have a better understanding of how these insurer
regulations impact consumers.
III. Issue 3: Habilitative Services
Federal regulations do not provide a definition for habilitative services but require health plans to
include coverage of habilitative services as an EHB.9 States have the option to provide a definition either
through guidance or its benchmark plan. If a state chooses not to formulate any definition, then federal
requirements allow individual insurers to either (1) provide parity with rehabilitative coverage, or (2)
determine its own definition or scope of coverage and report this information to the Department of Health
and Human Services (HHS).10
Fourteen states provide their own definition of habilitative services.11 Most of these states, like
Colorado and the District of Columbia, use broad language in their definitions with similar descriptions
like “services that help a person keep, learn, or improve skills and functioning for daily living.” 12
Twenty-one states have benchmark plans that cover habilitative services. For many of these states, like
Georgia, their benchmark plans cover habilitative services in parity with rehabilitation. States with this
parity definition often impose a shared quantitative limit and also restrict the types of services to physical,
occupational, and speech therapy. Nine states use one of the federal options, with six states requiring
coverage in parity with rehabilitative services and the remaining three states permitting issuers to
determine their definitions. No provision was noted for seven states.
Issue 3 Policy Implications
In states providing their own broad definitions of habilitative services, like California or
Michigan, consumers may have greater flexibility to pursue coverage for therapies that may not be
traditionally considered habilitation. This approach may be more responsive to evolving standards of care
and ensure that there is flexibility to cover new or untraditional therapies. However, while broad
definitions can apply an expansive approach to coverage, this definition may cause confusion among
consumers because of the uncertainty of what is covered. Insurers may also potentially deny therapies on
a case-by-case basis without explicit language providing coverage. Some states try to provide flexibility
and certainty of coverage by using broad language, but also explicitly list covered conditions like autism.
For example, the District of Columbia uses this approach.
Where states define habilitative services in parity with rehabilitative services, consumers can
easily understand the kind of therapies covered through association with rehabilitative terms (e.g., speech,
occupational, and physical therapy). In addition, the vast majority of state benchmark plans already cover
these services. On the other hand, limits on care arise when tying habilitation and rehabilitation together.
First, insurers can provide less habilitative coverage in favor of fuller rehabilitative benefits. Thus, a
parity definition can limit access to habilitative therapies for consumers who require them more than
rehabilitation. Second, many benchmark plans impose quantitative limits on the combined total of
habilitative and rehabilitative treatments, usually twenty or thirty visits per year. Such a limit can pose a
serious problem for consumers with conditions that require more intensive therapy sessions. Last,
insurers that limit the scope, amount, and duration of habilitative services to rehabilitation services fail to
9
45 CFR § 156.110(f).
45 CFR § 156.115(a)(5).
11 Arkansas, California, Colorado, District of Columbia, Florida, Idaho, Maryland, Michigan, Ohio, Oregon, Virginia,
Washington, West Virginia, and Wisconsin.
12 These states include California, Colorado, District of Columbia, Idaho, Michigan, Oregon, Virginia, West Virginia, and
Wisconsin.
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take into account the unique needs of different diseases. For example, plans may only offer rehabilitative
services in a clinical setting, meaning habilitative services are similarly limited. An autistic child,
however, can often require therapy in a school setting or a comprehensive day program.
IV. Issue 4: Additional Health Benefits
Under federal regulations, states can continue to pass mandates for benefits in individual and
small group plans, in addition to EHB after 2011. States, however, are responsible for the cost of such
additional health benefits. 13 No state has passed mandates requiring health plans to provide health
benefits beyond the ten EHB categories after December 31, 2011. Some states, however, have passed
benefit mandates that fall within an EHB category such as coverage for the treatment of autism spectrum
disorders (4 states);14 cancer clinical trials (3 states);15 inherited enzymatic disorder (1 state);16 and parity
coverage for orally administered anti-cancer medications (7 states).17 Two states also passed mandates
requiring coverage of an EHB category: emergency services (Rhode Island) and maternity care (West
Virginia). Since all states that recently passed benefits fall within an EHB category, no state is required to
defray the cost of the additional health benefit.
Issue 4 Policy Implications
States often enact health benefit mandates to provide their residents with appropriate coverage
and access to services. States also mandate health benefits to guarantee coverage of current standards of
care. For example, many states passed mandates requiring the coverage of autism spectrum disorders as
early intervention became a standard treatment. Requiring states to pay for additional health mandates
can discourage states from ensuring that coverage reflects current standards of care. For example, our
research found that mandates to cover cochlear implants were popular in the decade prior to 2011, but
have not been passed in other states after 2011.
States, however, have a considerable role in defining which services are available under an EHB
category and can potentially obviate the financial responsibility to pay for additional health benefits in
excess of EHB. For example, Washington considers cochlear implants to fall within the rehabilitative
services category.18 States that manage their own exchanges may also have an advantage since federal
requirements require the exchange itself to identify what state-required benefits are in excess of EHB.19
V. Issue 5: Pharmaceutical Benefits
Federal regulations require health plans to cover prescription drugs as an EHB category. Health
plans can either cover one drug in every U.S. Pharmacopeia (USP) category and class or cover the same
number of prescription drugs in each category and class as a state’s benchmark plan.20 Most states do not
impose additional requirements regarding the coverage of pharmaceutical benefits. Two states, however,
provide guidance on this EHB category, but it is unclear whether this guidance imposes additional
requirements. Virginia states that drugs must be "be chemically distinct" to be counted separately "in the
13
45 C.F.R. § 155.170 (a).
Alabama, Alaska, Michigan, and Vermont.
15 Montana, Rhode Island, and Washington.
16 Wyoming.
17 Louisiana, Maryland, Massachusetts, Nebraska, Rhode Island, Utah and Virginia.
18 WAC 284-43-878 (West 2013).
19 45 C.F.R. § 156.122.
20 Id.
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number of drugs offered in a category or class" (e.g., brand versus generic drugs and different dosing
sizes are not chemically distinct). 21 Virginia’s guidance may be interpreted as narrowing the federal
standard because health plans would be able to cover fewer prescription drugs than the benchmark plan.
For example, if the benchmark plan includes coverage for both a brand name and a generic drug, Virginia
would not consider those drugs to be “chemically distinct” and would only require coverage of one of
those drugs.
Wisconsin’s guidance is similar to the federal regulations in that it requires health plans to cover a
drug in every USP class, but also match the number of drugs covered in each class under the benchmark
plan.22 It is unclear whether Wisconsin’s guidance is affirmatively reinterpreting the federal regulations
or misinterpreting the federal standard.
Issue 5 Policy Implications
States took the least action regarding this issue with the majority of states not addressing this
EHB category. Perhaps due to the many competing requirements that states must implement, states have
not acted because federal regulations are fairly clear as to what is required. States may also be waiting to
respond to this standard until consumers experience and react to the cost and quality of their prescription
drug coverage.
VI. Conclusion
States appear to be most active with providing guidance on habilitative services. Only seven
states had no provision noted for this issue. States are also active with providing guidance on the
meaning of “substantially equal,” with twenty-four providing some sort of guidance. Ten states prohibit
substitutions, while twenty states explicitly affirm the federal default to allow insurers to substitute
benefits within an EHB category (excluding prescription drugs). No state passed a health mandate
beyond the EHB, although fifteen states passed a mandate requiring a health benefit within an EHB
category. Lastly, only a handful of states provided some guidance on the coverage of pharmaceutical
benefits, but it is unclear whether these requirements rise above the federal standard.
From these findings, we note three overarching concerns common across the five issues. First is
the variation of how states are addressing the issues of substantially equal, benefit substitution, and
habilitative services. Varying approaches result in a patchwork of different provisions and unequal levels
of guidance across the country. The heterogeneity in these discrete issues is reflective of the broader
implementation of the ACA, particularly in areas where federal regulations give states more discretion. A
second concern is the uncertainty of how states or HHS will enforce EHB requirements. While the ACA
designates states as the first level of enforcement, states appear to be taking an ad hoc approach to
enforcement rather than having a clear, active mechanism of enforcing ACA requirements. The last
concern is the potential difficulty that HHS faces when it reevaluates the EHB requirements in 2016. By
currently allowing states to determine how it will implement aspects of EHB requirements, future changes
to either standardize guidelines or remove state discretion may be difficult and problematic.
21
Virginia State Corporation Commission, Bureau of Insurance, EHB Market Rules, Mar. 5, 2013,
http://www.scc.virginia.gov/boi/co/acafilinginfo/index.aspx.
22 Wisconsin Office of the Insurance Commissioner, Federal Health Care Law Frequently Asked Questions for Insurers, July 29,
2013, pg. 2, http://oci.wi.gov/healthcare_reform.htm.
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Appendix I: Research Methodologies per Issue
I. Issues 1 & 2
1. Visit www.healthcare.gov to determine whether the state exchange is run by the state, the
federal government, or both.
2. Visit http://kff.org/state-health-exchange-profiles/ to read the Kaiser Family Foundation state
marketplace profile.
3. If the state is running its own health insurance marketplace:
a. search marketplace website,
b. search Westlaw for relevant statutory guidance,
c. search state department of insurance,
d. broad Google search.
4. If the federal government is running the state health insurance marketplace:
a. search Westlaw for relevant statutory guidance,
b. search state department of insurance,
c. broad Google search.
II. Issue 3
1. Visit http://www.cms.gov/CCIIO/Resources/Data-resources/ehb.html to get preliminary state
definition of habilitative services.
2. Visit www.healthcare.gov to determine whether the state exchange is run by the state, the
federal government, or both.
3. Visit http://kff.org/state-health-exchange-profiles/ to read the Kaiser Family Foundation state
marketplace profile.
4. If the state’s benchmark plan does not include habilitative services:
a. search state’s marketplace website and state’s department of insurance to determine if
state provided any guidance,
b. search Westlaw to determine if there is relevant statutory guidance.
5. If the state’s benchmark plan includes habilitative services:
a. search for state’s benchmark plan and read relevant section,
b. search state’s marketplace website and state’s department of insurance to determine if
state provided further guidance,
c. search Westlaw to determine if there is relevant statutory guidance.
III. Issues 4 & 5
1. Search state department of insurance and state exchange websites.
2. Visit http://www.cms.gov/CCIIO/Resources/Data-resources/ehb.html.
3. Conduct a comprehensive WestlawNext search of relevant code using
key word searches..
4. Cross-reference findings with other sources, including:
a. National Conference of State Legislatures (http://www.ncsl.org/).
b. Bloomberg BNA databases (http://www.bna.com/).
5. Conduct a general internet search to ascertain whether there had been guidance, news articles,
or any other information regarding recent state drug benefits.
6. Look to state benchmark plan and insurer websites.
Appendix II: Maps of 50-State Findings for Issues 1-3
Issue 1: State Interpretation of “Substantially Equal”
Issue 2: State Benefit Substitution Guidance
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Issue 3: State Guidance for Habilitative Services
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