What are the “Essential” Health Benefits?

Health insurance reform was a welcomed development for many Americans, but it also raised many questions. One of the most important of these centers on the definition of an “essential health benefit.” The answer to that question is something just about everyone with any sort of a stake in health reform is anxiously waiting for.

The Affordable Care Act defines ten broad categories of essential benefits that all medical insurance providers must cover as essential health benefits. The specifics within those categories are at the discretion of the Department of Health and Human Services. This Friday the Institute of Medicine will make its recommendations, which are expected to have a strong influence on what the HHS ultimately decides are essential benefits.

It would be difficult to overstate how important this will be for the health insurance industry. All plans wanting to sell on the new medical insurance marketplace will be required to offer these benefits. Additionally, the plans will be ranked according to how much of the benefits the insurance company will pay for; 60 percent and the plan is ranked “bronze,” while 90 percent qualifies as “platinum.”

The actual regulations won’t be established by HHS for several more months, but the work is already well underway. Much of it centers on one dilemma that promises to be difficult to resolve: how to make the essential benefits comprehensive enough to be useful, yet also affordable. A sparse benefits package won’t provide the robust coverage envisioned by health reformers. But a package that is too comprehensive will be prohibitively expensive.

Patient groups have tailored their lobbying strategy to match HHS concerns, pragmatically realizing that appeals for policies that include every conceivable coverage option will be wasted energy.

There are also political risks associated with laundry lists of benefits. If a particular benefit is cut from the list, there may not be space to squeeze it back in later. In previous meetings with patient’s rights lobbyists, HHS has suggested allowing plans some flexibility to define their benefits, with affordability being the crucial concern.

The final regulations will likely establish a middle ground, somewhere between the wide-open generality of the ten broad benefit categories and an exhaustively specific list of covered conditions and procedures. Those final rules won’t be ready until May of 2012 at the very earliest, according to sources at HHS. Between now and then, patient groups will have plenty of time to lobby for the best possible outcome in this latest phase of the reform of health insurance.