Today, on January 31, open enrollment for 2017 plans through the Health Insurance Marketplace will end. As changes to the Affordable Care Act (ACA) are debated, it’s worth considering what those policies cover. Congress and the White House have set their sights on reducing the ACA’s “economic burden,” with one senator today suggesting that this could mean stripping down the law’s required health care benefits. This could be done either legislatively by striking benefit categories from what is now offered, or administratively by returning decisions about benefit designs to insurance companies. This piece explains what the ACA’s “essential health benefits” are and how they promote competition, portability of health insurance, and nationwide consumer protections in anticipation of efforts to change them.
Individual Market Health Insurance Benefits Before the ACA
Before the ACA, there were virtually no nationwide rules on what health insurance plans had to cover. Some states set standards, but a government report found that among enrollees in the individual (i.e., “non-group”) market in 2011:
- 62 percent lacked maternity coverage;
- 34 percent lacked coverage for substance use disorder treatment;
- 18 percent lacked coverage for mental health services; and
- 9 percent lacked prescription drug coverage.
Sometimes these exclusions were based on an individual’s pre-existing condition. For instance, a woman with a family history of breast cancer could have breast cancer treatment excluded from her coverage. In other instances, health insurers categorically excluded services such as maternity care because it’s expensive or behavioral health care that attracts expensive enrollees. In the pre-ACA days, this was a permissible way to keep costs down and and profits high. And while Americans could save a few dollars every month in premiums due to fewer benefits, they risked insurmountable medical bills if an illness or injury struck. One actuary estimated that individuals had a one-in-ten chance of incurring $30,000 in medical bills in a given year.
Research confirms that individual-market insurance tended to cover less health care at a higher cost before the ACA. For example, a 2009 study found that 72 percent of individual-market enrollees paid more than 5 percent of their income on health care compared to 44 percent of enrollees in employer coverage. The same survey found that individuals’ confidence in being able to afford health care was nearly half as high among individual-market enrollees versus employer-based coverage enrollees (23 versus 39 percent). These differences occurred even though people with pre-existing conditions were often denied individual-market coverage altogether.
How the ACA Strengthened Coverage
Among other provisions, the ACA ended the days when insurance companies wrote the rules for what services are covered. It instituted key protections called essential health benefits for people with individual and small-group market health plans. This means that when consumers purchase health insurance, they can be confident that their plan covers services in ten benefit categories. In implementing this policy, the Obama Administration was advised by a non-partisan Institute of Medicine panel and followed a state-specific approach: states choose standards from an array of options, including existing health insurance plans in their small and large employer market. States and issuers can substitute services within categories, such as different levels of coverage for physical versus occupational therapy. And regulatory guidance provides answers to questions on how to implement these standards—encouraging medical management and innovation while ensuring core protections no matter what health plan Americans purchase.
The ten categories of services, as described on HealthCare.gov, are:
- Outpatient care—the kind you get without being admitted to a hospital such as a doctor’s visit for the flu;
- Trips to the emergency room—the average cost of which can exceed the average month’s rent;
- Treatment in the hospital for inpatient care which, for an average three-day stay, can cost $30,000;
- Care before and after a baby is born—because without insurance, a C-section can cost $50,000;
- Mental health and substance use disorder services—which include behavioral health treatment, counseling, and psychotherapy—for which cost can be as much of a barrier as stigma;
- Your prescription drugs—as nearly half of all Americans took a prescription drugs in the last thirty days;
- Services and devices to help injured individuals recover, as well as those with disabilities or chronic conditions. This includes physical and occupational therapy, speech-language pathology, and psychiatric rehabilitation;
- Lab tests which, as reporters have found, can have widely varying costs even for simple blood tests;
- Preventive services including counseling, cancer screenings, and vaccines to keep individuals healthy and care for managing chronic diseases; and
- Pediatric services including dental care and vision care for children.
Generally, these services were covered by employer-based health plans prior to the ACA according to a government review. In fact, employer plans tend to include additional benefit categories such as adult dental and vision care. Some states require coverage beyond those in essential health benefits. Examples include required coverage of acupuncture, in-vitro fertilization, and hearing aids. As such, private insurance governed by the essential health benefit “mandates” tend to be less generous than what American employers typically provide. These are not “Cadillac”plans. They’re simply health benefits Americans expect and deserve.
These are not “Cadillac”plans. They’re simply health benefits Americans expect and deserve.
Why Benefit Standards Matter
Maintaining essential health benefits helps achieve three commonly shared goals. It:
- Encourages competition based on price and quality: The ACA’s set of essential health benefits helps limit the ability of health insurers to use benefit design to avoid “bad risks.” Instead, insurers offering health plans through the Health Insurance Marketplace compete on their value: quality of care, extra services like care coordination, and lower premiums for the same set of benefits. California, for example, reported that consumers chose a broader array of insurance companies after implementation of the ACA in part because of its standardization of benefits.
- Allows for portability: Last year, the House Republicans issued a “Better Way” white paper that, among other policies, promoted the concept of a metaphorical “backpack” or portability of health insurance. Allowing individuals to switch plans, move, or have a source of coverage when starting up a small business is already guaranteed under the ACA because every plan covers basic health benefits. A recent study found that one in five Marketplace enrollees was self-employed or a small business owner. Yet, without minimum benefit standards, moving or switching plans risks losing life-saving health benefits, as eloquently explained in a recent New York Times op-ed by a person with Parkinson’s disease.
- Provides real insurance for consumers: Health insurance is confusing enough as is. Rolling back benefit standards and allowing insurers make coverage decisions would add to that confusion. And it would put millions of Americans at risk for having a health insurance card but remaining under-insured. Essential health benefits guarantee to the parent of a child with a developmental disability that his therapy will be covered; to a woman that she will not have to pay for each of her prenatal care visits; and to a daughter with a father with dementia that his mental health care will be covered.
President Trump’s theory that “lines around states, artificial lines” create problems may be right when it comes to health benefits. All Americans, no matter where they live, deserve the security of knowing health insurance will be there for them if they get sick, become pregnant, or are fighting a mental illness. Any changes to the ACA should build on this security, rather than return us to the days when having insurance did not mean you had coverage.