The only way to build a set of insurance requirements that are comprehensive and affordable is to start with a cost target, an advisory panel told the Department of Health and Human Services in a highly anticipated report on what benefits should be considered “essential” for new health insurance plans.
Instead of laying out a detailed list of benefits, the Institute of Medicine panel gave the government a framework for developing its own list. The panel suggested a process for public comment and review and recommended a deadline: May 2012.
The Institute was tasked with making recommendations for how HHS should define the required “essential health benefits” that every health plan carried on a state exchange must offer by 2014. It appointed an independent board of medical experts and health care economists to do it.
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The guidelines requirement was designed by legislators to ensure that all health plans were reasonably comprehensive—but they must also be affordable to individuals who must buy insurance without help from an employer.
Designing the package is a tough balancing act, because the more benefits that are guaranteed, the more expensive the insurance programs are likely to be. Insurers and disease groups have been waiting expectantly for this report, hoping that it would provide some guidance on whether various elements would be in or out.
The IOM panel decided not to go that route.
"I think everyone on the commiittee and the IOM, we were told not to go down any specific pathway," said Dr. John Santa, a committee member and the Director of the Consumer Reports Health Rating Center. "We could have used specific examples. And many of us, myself included, decided we just can’t go down there. Because if you even start to pick out an example of something, you could bias future discussions."
But though the report did not list a lot of specifics, it repeatedly emphasized that affordability be a foremost concern as regulators work to develop the final package. Instead of looking to a package of benefits and then considering cost, the panel recommended that regulators work from a budget based on the average cost of health insurance plans on the current market.
Services that are covered should fit into such a price range, the panel urged. Otherwise, a bloated package could become unappealing to the estimated 68 million people on the individual and small-group markets that the legislation intended to cover, and expensive for the federal government, which must subsidize individual premiums if they exceed certain income benchmarks.
“Health benefits are a resource, and no resource is unlimited,” wrote John Ball, the panel’s chairman, in the report’s preface.
Jonathan Gruber, a health care economist at MIT who helped design a similar package of benefits for the state of Massachusetts, said that this budgeting approach will be key to keeping the benefit package in check. Gruber was not on the panel, but reviewed the paper for the IOM and thought the overall approach was wise.
“I think the job would be fundamentally impossible without a target,” he said in a telephone interview. “It goes from impossible to merely incredibly hard by adding this target.”
The emphasis on affordability was also welcome to the insurance industry, which had been concerned that too-expansive packages would be difficult to deliver at reasonable prices.
"With this thoughtful report, the IOM is urging policymakers to strike a balance between the affordability of coverage and the comprehensiveness of coverage," said Karen Ignagni, the president and CEO of America's Health Insurance Plans, in an emailed statement. "We agree that this balance is critical to ensuring that individuals, working families and small employers can afford health insurance."
The health care reform law spells out 10 broad categories of benefits that must be included. That list includes categories that are currently not standard in all insurance plans, like maternity care, mental health, habilitation, and pediatric dentistry. Those additions may mean that certain elements of typical insurance plans may not make it into the essential benefit package.
To decide what benefits to include, the panel encouraged regulators to select benefits that are medical in nature and that have been established to be effective using research. Treatments that have not been shown to work should not be considered essential, the report argues. And services that are primarily educational should not be included.
Regulators should consider an extensive and robust period of public comment and input, the report recommends, given the many patients who will care about the outcome.
The guidelines must also be constantly updated, the panel said, to reflect changing medical knowledge and insurance market trends. The paper suggested that the package be reviewed annually, beginning in 2016.
The panel also suggested that HHS be flexible and willing to grant waivers from the benefit requirements to states if they have developed a different set of benefits that are consistent with the language of the law but reflect local social priorities.