HHS Clarifies That Self-Insured Plans Are Excluded From "Essential Health Benefits" Requirement

ERISA Preemption and State Laws, Federal Health Care Reform

In an effort to “give consumers, states, employers and issuers timely information as they work toward establishing Exchanges and making decisions for 2014,” HHS issued guidance today outlining the approach the agency will pursue in issuing regulations defining “essential health benefits,” while also clarifying that self-insured employer plans do not have to include such benefits.  Under PPACA, HHS is required to issue regulations identifying the essential benefits that must be provided by plans offering coverage through the state exchanges.  While the final regulations governing essential health benefits will be set forth later in rulemaking, HHS’s guidance would provide the states the flexibility to choose a “benchmark plan.”  The “benefits and services included in the benchmark health insurance plan selected by the state” would be the essential health benefits package.  States would have the option of selecting one of the following benchmark plans:

• One of the three largest small group plans in the state (i.e., by enrollment);

• One of the three largest state employee health plans; 

• One of the three largest federal employee health plan options; and

• The largest HMO plan offered in the state’s commercial market.

If states do not choose a benchmark plan, the default benchmark “will be the small group plan with the largest enrollment in the state."  Many states have been on the fence about whether to set up an exchange, waiting in part to see how costly the Administration’s essential benefits package would be.  This relatively flexible approach may entice some states to begin setting up exchanges, while others may wait to see the actual regulatory proposal along with more complete information regarding federal fallback exchanges.  The proposal clarified a key issue for many large employers in stating that “self-insured group health plans, health insurance coverage offered in the large group market, and grandfathered health plans are not required to cover the essential benefits.”  HR Policy will file comments on the bulletin before the January 31, 2012.