By Sara Rosenbaum

Background

The Affordable Care Act (ACA) requires that all health insurance issuers offering products in the individual and small-group markets, including both the state Exchange market^[1] as well as the non-Exchange market,^[2] provide coverage of certain “essential health benefits.” An earlier Implementation Brief explored the concept of “essential health benefits.” This Brief summarizes a new U.S. Department of Labor (DOL) report on benefits covered in a “typical” employer plan and identifies key implementation issues for the federal Department of Health and Human Services (HHS).

Changes Made by the Affordable Care Act

As explained in an earlier implementation brief, the ACA directs the Secretary of HHS to define the term “essential health benefits” while also delineating certain benefit classes^[3] and cost-sharing standards^[4] that will guide her implementation policy.^[5] At the same time, the ACA also instructs the Secretary to “ensure that the scope of the essential health benefits . . . is equal to the scope of benefits provided under a typical employer plan.”^[6] In addition, the ACA directs the Secretary of Labor to conduct a survey of employer-sponsored coverage to determine the benefits typically covered by employers and to report survey results to the HHS Secretary.

Implementation

Agency and Key Dates

On April 15, 2011, the DOL Bureau of Labor Statistics (BLS) issued Selected Medical Benefits: A Report from the Department of Labor to the Department of Health and Human Services,^[7] which is based on an annual survey of approximately 3,900 employers as part of the National Compensation Survey (NCS). The documents analyzed by the BLS are not the master plan documents held by Employee Retirement Income Security Act (ERISA) health plan sponsors, which describe coverage in detail. Instead, the report relies on “summary plan descriptions” (SPDs). SPDs, which under ERISA must be provided to employees and their families, are exactly what the name implies: broad summaries of coverage. BLS notes that it also relied on short summaries and comparison charts that according to the agency, “may [be] much less comprehensive” than SPDs.

Thus, the BLS report focuses on very broad benefit design questions and lacks the type of coverage detail that would be needed for an in-depth analysis of the scope of coverage. Nonetheless, the report offers valuable information regarding the enormous variation among employer-sponsored plans. BLS relies on several survey years and draws in many instances from previously published reports, with data chiefly drawn from 2008 and 2009.

Major findings are as follows:

• In 2009, 79% of employees were covered through a “fee-for-service” plan (typically a preferred provider organization (PPO)) while 21% were enrolled in health maintenance organization (HMO) plans.
• That year, PPO plans had a $500 median annual per person deductible, applicable to all covered services. Some plans varied the deductible depending on whether care was received in-network or out-of-network. The median coinsurance for which members were responsible once coverage began stood at 20% for in-network services and 40% for out-of-network care; the median out-of-pocket maximum stood at $1,900 that year. Certain services, such as hospital benefits, could carry their own specific copayment requirements that differed from the more generally applicable coinsurance standards. Median HMO copayments were slightly lower (e.g., $15 per visit) than those found in PPO plans ($20 per visit).
• Certain broad classes of services were covered under virtually all employer-sponsored plans. Hospital room and board, inpatient and outpatient surgery, and physician office visits were universally covered. Other services, such as home health care, showed greater variation. For example, about 73% of plan participants were covered for home health services while 99% were covered for hospital services.^[8] Also, 80% of plan participants had coverage for adult physical exams, 77% for well-baby care, and 56% for adult immunizations. Specific copayments and service limits were also highly variable and tied to specific services.
• Outpatient prescription drugs were generally available, with 79% of participants having access to ongoing maintenance drugs through a mail order program. Prescription drug copayments averaged $10.00 for generic drugs and $25.00 for brand name drugs.
• Where dental care was available, coverage was subject to separate cost-sharing requirements, with separate deductibles and an annual maximum dollar amount for all benefits. The median annual maximum in 2009 was $1,500.00.
• Where vision care was available, such coverage “nearly always” included eye exams and glasses, while 88% covered contact lenses.
• Inpatient mental health care was covered by 99% of all plans, while outpatient mental health care was covered by 85% of plans. Inpatient substance abuse detoxification was covered by 98% of plans, while inpatient substance abuse rehabilitation was covered by 78% of plans. Similarly, 78% of plans covered outpatient substance abuse rehabilitation.
• BLS also sampled 12 discrete benefits, finding high variation in whether the services were specifically covered, specifically excluded, or not mentioned.^[9] The 12 sampled benefits were emergency room visits (covered 90% of the time), ambulance services (covered about 80% of the time), diabetes care management (approximately 30% coverage), kidney dialysis (typically not covered), physical therapy (70% coverage), durable medical equipment (slightly less than 70% coverage, with prosthetics covered slightly less than half the time), maternity care covered about 65% of the time), infertility treatment and sterilization (covered less than 30% of the time), gynecological exams (covered about 60% of the time), and organ transplants (covered about 45% of the time). BLS also found that these services also were subject to their own highly variable and specific limitations and exclusions, and further, that coinsurance and copayment requirements varied widely, depending on the plan.
• Silence was a frequent response. For example, plan documents were silent more than 40% of the time where gynecological exams were concerned, although 99% covered physician services, which conceivably might include a physician visit for a gynecological exam. Specific exclusions were present only for infertility services and sterilization.

Key Issues

• What is a “typical” employer plan and how will HHS deal with variations? The BLS survey underscores the challenges involved in ascertaining what is covered under a “typical” plan. First, BLS does not collect the actual documents that comprise the detailed health plan; instead the agency appears to have access only to SPDs, which are often ambiguous and incomplete descriptions of what an employer-sponsored health plan actually covers. Nothing in ERISA bars DOL from requiring employers to file complete plan documents, but this does not appear to be regulatory custom or practice. Second, even were the actual detailed plan documents available, ERISA itself gives plan administrators broad discretion to interpret key terms and provisions. As a matter of law, such broad discretion makes it difficult to ever conclusively define a typical plan, since actual coverage of certain treatments and services may be unknowable until a specific type of claim is presented. Third, the health benefit services market consists of a vast number of companies – some very large and national, some small and regional – that sell health benefit services products to employers, both insurance products and third party administered products for self-insuring employers. Each company may offer different benefits, different coverage designs, and different definitions and concepts. While the individual and small group markets subject to the essential health benefit law can be expected to become more uniform, the BLS survey makes clear that HHS is building on a virtual coverage bazaar in attempting to come up with a comprehensive set of standards. How detailed the HHS standards will be, and how much variation the standards continue to permit, represents the nub of the issue. For example, what one insurer considers being a “gynecological exam” may be very different from what another insurer classifies as an exam. One insurer may cover pap smears; another may not. Will HHS standards continue to permit variability in definitions, scope and depth of coverage, and cost-sharing?
• Will HHS allow plans to be silent on coverage details for federally required benefits? A key finding in the BLS survey is that silence is a common feature of plan documents. Furthermore, as noted, companies vary broadly in how key terms of coverage are defined. How much silence and variability will the HHS rules allow? Will plans be permitted to be silent regarding federal coverage requirements? For example, maternity care is a federal coverage requirement, yet the BLS survey suggests that more than 30% of plans do not mention maternity care. A separate section of the ACA (PPACA §1001) requires the Secretary to develop standards for use by group health plans and issuers in describing coverage, and the law further specifies that standards must include standard definitions for the terms used in health insurance coverage. How will HHS address situations in which variation in a required benefit class is not simply in how a particular term is defined but in fact is a true variation in what is covered (e.g., covering or not covering pap smears as part of a preventive service for women)?
• How will HHS interpret other provisions of the essential health benefits statute that place limits on how much the agency can rely on “typical” employer plans? The essential health benefits statute lists “habilitative” services (i.e., services for individuals with developmental disabilities who need therapeutic care in order to develop functional capacity and health) as a covered benefit class. The BLS survey sheds no light on this service, because virtually no employer plans cover the benefit. Similarly, the statute bars the HHS Secretary from making “coverage decisions” or designing benefits in “ways that discriminate against individuals because of the age, disability, or expected length of life.” The BLS survey does not shed light on whether discrimination is a feature of a typical employer plan design. But analyses of the employer market indicate that in coverage design, discrimination against children and adults with developmental disabilities appears typical.^[10] How will the Secretary’s rules therefore modify the “typical” plan?

Recent Agency Action

The DOL study represents recent agency action. With completion of the DOL study, the next action is expected to be issuance of essential health benefit regulations by HHS.

Authorized Funding Levels

The essential health benefit statute is regulatory in nature. The statute does not carry an express cost estimate, but ultimately how the term is defined by HHS will at some level affect the cost of coverage and the size of federal premium tax credit expenditures, as well as federal and state Medicaid expenditures.