Even as states such as California set the pace on adopting an essential health benefits (EHBs) benchmark plan to meet Affordable Care Act (ACA) requirements, the lack of information on the price of potential add-ons is a mystery, market players tell HPW.

California health plans, for example, do not yet have an actuarial analysis of what the state’s potential inclusion of acupuncture and chiropractic coverage will do to the price of EHBs.

Charles Rosen, president of the California Association of Health Underwriters, says it’s a wait-and-see game right now. “We’re on the inside as one of the stakeholders and we just don’t know,” he tells HPW. The legislature sent Gov. Jerry Brown (D) two companion bills (SB 951 and AB 1453) containing EHBs (with acupuncture and chiropractic services) and the benchmark plan choice, Kaiser Permanente HMO 30, but Brown has not yet signed them.

Starting in 2014, all non-grandfathered plans in the individual and small-group health market, both inside and outside a state health insurance exchange, will need to cover EHBs, which contain 10 essential coverage areas ranging from ambulatory to pediatric patient services (HPW 9/3/12, p. 1). A state can augment its EHBs, but any benchmark must include the 10.

The Kaiser plan, Rosen says, is a “middle of the road” type, which has chiropractic and acupuncture care but only as riders, ironically. “I’m as curious as most on what will be added to it….You’re going to have to have a [premium] price increase, but we don’t know what it will be,” he adds. While the ACA’s extension for young adults to remain on parental coverage to age 26 has not resulted in a huge spike in premiums (see story, p. 4), the bottom line will be under pressure to meet other health reform mandates, such as EHB rules, Rosen explains.

“There is a lot of unknown out there,” he says, until CMS’s Center for Consumer Information and Insurance Oversight (CCIIO) issues final rules on EHBs and insurers start pricing products. But he predicts that once people, especially those uninsured now, see the price tag for meeting essential benefits, there will be a lot of sticker shock. Rosen says some people have mistakenly concluded that the federal premium tax credit, which will be available to low-income people through the state exchange, will offset most of their premiums costs. In response, he expects many of the now-uninsured to opt out of coverage and instead pay the penalty for not taking health insurance.

Peter Harbage, president of Harbage Consulting, based in Sacramento, Calif., and former assistant secretary of health for the state of California, tells HPW that the two main challenges for health plans looking to develop new products that incorporate the yet-to-be-finalized EHBs are time to develop products and having the right actuarial values and cost.

“There is a lag time issue. The longer it takes for EHB to finalize, the more uncertainty/harder it is for insurers trying to put together rates. Also, no one knows what the market looks like post-2014 and actuarial values are based on historical trends, so there may be issues with actuarial values not accurately projected to market needs,” he says.

“Also, it takes time for insurers to come up with rates. Under the exchange, plans are supposed to bid for QHP [Qualified Health Plan] contracts late this year/early next year. They will need to know specific details on how much they can play with EHB rules, such as whether benefit substitution can occur. So, exchange QHP policy will play a role here,” Harbage adds. The EHB categories, he continues, are patterned on the most common benefit set offered by large group. “Thus, these products tend to be more comprehensive than those offered in the individual or small-group market in California. They also tend to be more expensive. Now that most plans must meet this benefit level floor, most experts expect cost will go up initially before there is broad participation; it will take time before the market rights itself and costs come down,” Harbage says.

States Move at Different Speeds

Lisa Murphy, senior manager for Washington, D.C.-based health care consultancy Avalere Health LLC, says that in looking at California, a state she tells HPW is an “early mover” on EHBs, the participants are still in the dark in many ways. “There’s definitely a lot of uncertainty for health plans as they begin to set up benefit designs for 2014 this year and through spring of 2013. And a lot of it hinges on the definition of EHBs. It is tough to be a health plan waiting for that,” Murphy says.

California is one of 11 that Avalere is tracking as having finalized or nearly finalized their benchmark selections. Avalere also counts Colorado, Connecticut, Michigan, Mississippi, Oregon, Rhode Island, Utah, Vermont, Virginia and Washington (along with the District of Columbia). Nineteen others, according to Avalere’s research, are in the process of identifying a benchmark plan. The remaining 20 have not progressed on EHBs, and may in fact be waiting on the November election results before taking action or allowing CCIIO to choose their benchmark plan by default, Murphy notes.

Further complicating matters is this week’s statement by HHS that Sept. 30, which had been thought of in the insurance industry as the deadline for states to decide their benchmark, was not in fact a hard deadline, as HPW reported Sept. 3.

“Consistent with the bulletin on intended guidance issued in December 2011 and to ensure plans have ample time to design benefit offerings, we have encouraged states to submit their selected Essential Health Benefits Benchmark by Oct. 1. HHS will work with any state coming in after Oct. 1. This approach maximizes state flexibility as they continue to build their health insurance marketplaces,” HHS spokesperson Alicia Hartinger told HPW sister publication AIS’s Health Reform Week.

The answer from HHS on a deadline leads to the next question: What is the cutoff date before a state cedes the benchmark choice to the federal government? “To my knowledge, HHS has said [prior to this week] that if a state did not make a selection by Sept. 30, the benchmark plan would go to a default plan, which would be the largest small-group plan in the market,” Murphy says. She also says HHS must clarify in its still-to-be-released final rule on EHBs if a health plan must include add-ons to the 10 federally mandated essential benefits in their offerings. “You may not necessarily have to provide acupuncture and chiropractic benefits as in California,” she adds.

© 2012 by Atlantic Information Services, Inc. All Rights Reserved.

Are you confident the health plan marketplace will be able to handle the rush to get new plans together, reflecting the new mandated benefits? Will the price of premiums for these new plans overwhelm those uninsured who they are intended to help? Join the conversation at the AIS Blogs.