The Patient Protection and Affordable Care Act’s Essential Health Benefits (EHB)
Released: 2016-07-06T00:00:00

T he Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) includes many provisions that apply to health plans offered in the private health insurance market. The private market often is described as having three segments: the non-group, small-group, and large-group markets; and many of the ACA's provisions focus specifically on the non-group and small-group insurance markets. These reforms are intended to address perceived failures in those markets, such as limited access to coverage and higher costs of coverage relative to the large-group market pl ans, and to provide some parity with the large-group market. For example, benefit coverage in non-group and small-group market health plans generally was perceived to be limited in comparison to benefit coverage in large-group market health plans. Thus, to provide some similarity to plans in the large-group market, the ACA requires non-group and small-group health plans to offer the essential health benefits (EHB), which is a core package of health care services.

The EHB are one of the three components of the EHB package. The EHB package requires plans to (1) cover certain benefits (i.e., the essential health benefits); (2) comply with specific cost-sharing limitations; and (3) meet a certain generosity level.

This report provides an overview of the first component of the EHB package—the essential health benefits. The report examines how the EHB are defined, regulations related to the EHB, state variation in the EHB, applicability of the EHB to health plans, and how the EHB interact with other ACA provisions.

Essential Health Benefits

Since 2014, all non-grandfathered plans in the non-group and small-group markets are required to offer a core package of health care services, known as the EHB. The ACA does not specifically define this core package. Instead, it lists 10 benefit categories from which benefits and services must be included (see Figure 1 ) and requires the Secretary of the Department of Health and Human Services (HHS) to further define the EHB.

The HHS Secretary has the purview to define and periodically update the EHB. However, in defining the EHB, the HHS Secretary must take a number of parameters into account. For example, the scope of the EHB is to be equivalent to the scope of benefits typically provided under an employer-sponsored insurance plan. To accomplish this task, the ACA requires the Secretary of the Department of Labor (DOL) to conduct surveys of employer-sponsored insurance plans to determine typical benefits and provide a summary of the findings to the HHS Secretary.

The EHB are to be balanced among the 10 categories, without a weighted preference toward any category. The HHS Secretary cannot make any coverage decisions, determine reimbursement rates, establish incentive programs, or design benefits in ways that discriminate against individuals because of their age, disability, or expected length of life. Furthermore, the HHS Secretary must take into account the diverse health care needs of the population, which includes women, children, persons with disabilities, and other groups.

The HHS Secretary is tasked with reviewing the EHB, and part of the EHB review process includes providing a report to Congress and the public. The report is supposed to assess whether enrollees are facing any difficulty accessing services, either due to coverage or cost, and to consider whether the EHB need to be modified or updated due to changes in medical evidence or scientific advancement. If any modifications are to be made, the HHS Secretary is to include in the report how the EHB would be modified. Consequently, the Secretary periodically may update the EHB based on issues identified during the review process.

Essential Health Benefits for 2014-2017

State Selection of Benchmark Plans

In December 2011, the Centers for Medicare & Medicaid Services (CMS) released a bulletin that outlined a reference plan approach for the EHB. This approach was based on employer-sponsored coverage in the current market. To define the EHB, HHS considered findings from the DOL's report that described the scope of benefits under a typical employer-sponsored plan. HHS also considered a report from the Institute of Medicine that recommended criteria and methods for determining and updating the EHB.

The HHS Secretary outlined a process in which each state identified a single plan to serve as a reference plan on which most non-group and small-group market plans must base their benefits packages in terms of the scope of benefits offered (see Figure 2 ). These reference plans are known as EHB-benchmark plan s. The benchmark selection approach identified by the Secretary applied for the 2014, 2015, 2016, and 2017 coverage years. Each state's EHB-benchmark plan applied to non-grandfathered health plans offered in the non-group and small-group markets, both inside and outside the exchanges (also known as marketplaces ).

For the 2014-2016 coverage years, the process required each state to select an EHB-benchmark plan based on plans available in the 2012 coverage year. For the 2017 coverage year, the process requires each state to update its EHB-benchmark plan based on plans available in the 2014 coverage year. States select a benchmark plan among the following four options:

1. Small-group market health plan . Any of the three largest small-group market health plans, by enrollment, in that state; 2. State employee health benefit plan . Any of the three largest employee health benefit plan options, by enrollment, available to state employees in that state; 3. Federal Employees Health Benefits (FEHB) plan . Any of the three largest national FEHB plan options, by aggregate enrollment; or 4. Non-Medicaid Health Maintenance Organization (HMO) . The largest insured commercial non-Medicaid HMO, by enrollment, operating in that state.

If a state does not make a selection, the default EHB-benchmark plan is the largest health plan, by enrollment, in that state's small-group market.

For 2014-2016, each state's benchmark plan was finalized in early 2013. Figure 3 maps the type of benchmark plan selected by each state. The EHB-benchmark plan for 45 states and the District of Columbia (DC) is the small-group market health plan. Three states selected a non-Medicaid HMO, and two states selected a state employee health benefit plan as their EHB-benchmark plans. No state selected an FEHB plan as its benchmark plan.

For 2017, each state's benchmark plan was finalized in late 2015. Figure 3 maps the type of benchmark plan selected by each state. The EHB-benchmark plan for 46 states and DC is the small-group market health plan. One state selected a non-Medicaid HMO, and three states selected a state employee health benefit plan as their EHB-benchmark plans. No state selected an FEHB plan as its benchmark plan.

Coverage in Each Benefit Category

According to the regulations, the EHB-benchmark plan had to provide coverage for all 10 EHB categories. However, a number of state benchmark plans did not include all 10 EHB categories. If the selected benchmark plan did not include items or services within a category, the plan had to be supplemented accordingly.

Generally, if an EHB-benchmark plan did not cover 1 or more of the 10 EHB categories, the state supplemented the EHB-benchmark plan by adding that particular category in its entirety from another benchmark plan option (i.e., the small-group market health plan, state employee health benefit plan, FEHB plan, or non-Medicaid HMO options described in " State Selection of Benchmark Plans ," above).

For states that did not select an EHB-benchmark plan and thus defaulted to an EHB-benchmark plan (the largest health plan, by enrollment, in that state's small-group market), HHS, if necessary, supplemented the state's EHB-benchmark plan. The default benchmark plan was supplemented in the following order: (1) the second-largest plan, by enrollment, in the state's small-group market; (2) the third-largest health plan, by enrollment, in the state's small-group market; and (3) the largest national FEHB plan by enrollment across states.

CMS also released additional guidance for certain EHB categories. In a December 2011 bulletin, CMS noted that of the 10 EHB categories, 3 categories were lacking under "typical employer plans." These three categories were pediatric oral and vision services, habilitative services, and mental health and substance use disorder services. To address these issues, CMS outlined a separate supplemental process for pediatric oral and vision services and a separate determination process for habilitative services. Furthermore, CMS released additional guidance in regard to mental health and substance use disorder and prescription drug services.

Pediatric Oral and Vision Services

HHS outlined separate guidelines for supplementing pediatric oral and vision services. An EHB-benchmark plan that does not cover the pediatric oral and vision category is to be supplemented by adding the pediatric oral and/or vision services from either (1) the Federal Employees Dental and Vision Insurance Program (FEDVIP) plan with the largest national enrollment or (2) the benefits from a state's separate Children's Health Insurance Program (CHIP) plan with the highest enrollment, if a separate CHIP plan exists.

For the 2014-2016 coverage years, 49 states and DC had to supplement their EHB-benchmark plans for pediatric oral services—25 states and DC selected a FEDVIP plan, and 24 states selected a CHIP plan as their supplementary plan type (see Figure 4 ). For pediatric vision services, 45 states and DC had to supplement their EHB-benchmark plans; 38 states and DC selected a FEDVIP plan, and 7 states selected a CHIP plan as their supplementary plan type (see Figure 4 ).

For the 2017 coverage year, 32 states have to supplement their EHB-benchmark plans for pediatric oral services. Of these, 19 states selected a FEDVIP plan and 13 states selected a CHIP plan as their supplementary plan type (see Figure 4 ). For pediatric vision services, 23 states had to supplement their EHB-benchmark plans; of these, 20 states selected a FEDVIP plan and 3 states selected a CHIP plan as their supplementary plan type (see Figure 4 ).

Habilitative Services

HHS found that many employer-sponsored plans did not identify habilitative services as a distinct group of services. Thus, in determining habilitative services, HHS proposed policies for coverage of such services.

For the 2014 and 2015 coverage years, the HHS policies allowed states to define the benefits if the EHB-benchmark plan did not include coverage for habilitative services. If a state did not define habilitative services, either plans would have to cover habilitative services benefits that were similar in scope, amount, and duration to benefits covered for rehabilitative services or plans could determine their habilitative services benefits and report them to HHS for review.

For the 2016 coverage year, HHS modified the habilitative services benefits policy. Rather than allowing plans to cover habilitative services that are offered at parity with rehabilitative services, HHS adopted a uniform definition for habilitative services. Habilitative services are defined as follows:

Health care services that help a person keep, learn, or improve skills and functioning for daily living. Examples include therapy for a child who is not walking or talking at the expected age. These services may include physical and occupational therapy, speech-language pathology and other services for people with disabilities in a variety of inpatient and/or outpatient settings.

Although HHS adopted a definition, states may continue to define habilitative services so long as the state definition complies with EHB policies, including nondiscrimination. Plans, however, no longer may define habilitative services themselves. For the 2017 coverage year, nine states use the federal definition and two states use the state definition for habilitative services. The remaining 39 states and DC include habilitative services in their EHB-benchmark plans.

For the 2017 coverage year, HHS finalized additional guidance for habilitative services. HHS now requires plans to have separate visit limits on habilitative and rehabilitative services.

Mental Health and Substance Use Disorder Services

For non-group and small-group plans to be EHB compliant, the plans must provide mental health and substance use disorder services, including behavioral health treatment services. These services must be compliant with the Mental Health Parity and Addiction Equity Act (MHPAEA; P.L. 110-343 , as amended), which generally requires health insurance coverage for mental health services to be offered on par with covered medical and surgical benefits.

Prescription Drug Services

As part of the EHB, HHS outlined additional requirements regarding prescription drug services. Non-group and small-group market plans must cover at least the greater of (1) one drug in every United States Pharmacopeia (USP) category or class or (2) the same number of prescription drugs in each category and class as the EHB-benchmark plan.

For the 2016 coverage year, HHS finalized additional guidance for the drug exceptions process and formulary drug lists. HHS outlined a drug exceptions process for enrollees to request and gain access to clinically appropriate drugs that are not covered by their health plan. The process takes 72 hours for a standard exception and 24 hours for an expedited review request. If the exception is granted, the plan must treat the drug as an EHB, including counting any cost sharing toward the plan's annual cost-sharing limits. For 2016, plans must have an up-to-date, accurate, and complete formulary drug list, which must include price tiers, on their websites. The formulary must be easily accessible to plan enrollees, prospective enrollees, the state, the exchange, HHS, the U.S. Office of Personnel Management (OPM), and the general public.

For the 2017 coverage year, HHS requires plans to use a pharmacy and therapeutics (P&T) committee system in addition to the current standard. The P&T committees will develop formulary drug lists that cover prescription drugs across a broad range of therapeutic categories and classes and that do not discourage enrollment by any group of consumers. The P&T committees also will have to review and approve plan policies that affect consumer access to drugs.

Inclusion of State Benefit Mandates

Prior to the passage of the ACA, many states had laws, known as state benefit mandates , that required health plans to cover certain health care services, health care providers, and/or dependents. Examples of state benefit mandates include coverage for substance abuse treatment, chiropractors, or adopted children. A state may require non-group and small-group plans to cover these state benefit mandates in addition to the EHB. Moreover, any state benefit mandates enacted on or before December 31, 2011, are considered to be part of the EHB.

Nonetheless, in addition to covering the EHB, states may choose to impose additional benefit mandates. However, if a state does decide to impose additional benefits, the state itself must defray the cost of those benefits for plans offered in the exchange. The state must make a payment either to the enrollee or directly to the plan on behalf of the enrollee for all plans, regardless of whether an individual is receiving financial assistance. The plan quantifies the cost of the additional benefits. The cost calculation is based on analysis in accordance with generally accepted actuarial principles and methodologies, is conducted by a member of the American Academy of Actuaries, and is reported to the exchange by the plan.

Variation in Essential Health Benefits Coverage

Interstate Variation

Because states select their own EHB-benchmark plan there is considerable variation in EHB coverage from state to state. This variation occurs in terms of specific covered services as well as in terms of amount, duration, and scope. For example, some state EHB-benchmark plans may include bariatric surgery as a covered service whereas other state EHB-benchmark plans may not cover bariatric surgery. In addition, among states that cover bariatric surgery as an EHB, the amount, scope, and duration of the service may vary. For example, the service may be limited to individuals diagnosed as morbidly obese in one state and limited to individuals for whom the service was deemed medically necessary in another state. Additional discussion and illustrative examples of coverage variation from state to state for selected services can be found in Table 1 . State benefit mandates also may be considered to be part of that state's EHB and thus add to state-level coverage differences.

Intrastate Variation

In addition to EHB variation by state, benefit coverage among plans within a state may differ. States may allow non-group and small-group market plans that offer the EHB to substitute benefits. A benefit may be substituted if the substitution is actuarially equivalent to the benefit being replaced and is made within the same EHB category. For example, a plan could offer coverage of up to 10 physical therapy visits and up to 20 occupational therapy visits as a substitute for EHB-benchmark plan coverage of up to 20 physical therapy visits and 10 occupational therapy visits, assuming actuarial equivalence and the other criteria are met. Substitutions, however, cannot be made for prescription drug benefits.

Applicability of Essential Health Benefits Requirements to Health Plans

Health Plans Subject to Essential Health Benefits Requirements

Generally, non-group and fully insured small-group market health plans are required to offer the EHB. This requirement applies to non-group and small-group plans offered both inside and outside the exchanges. Additional plan types are subject to the EHB (see Figure 5 ).

Qualified Health Plans

The ACA generally requires that non-group and small-group health insurance plans offered through exchanges are Qualified Health Plans (QHPs). Typically, to be a certified as a QHP a plan has to offer the EHB, comply with cost-sharing limits, and meet certain market reforms. Each exchange is responsible for certifying the plans it offers. However, QHPs can be offered both inside the health insurance exchanges and outside the exchanges on the private health insurance market. The exchanges also offer variants of QHPs such as multistate plans and child-only plans.

Multistate Plans

The ACA directs OPM to contract with private insurers in each state to offer at least two comprehensive health insurance options, known as multistate plans (MSPs). MSPs are designed to offer nationally available QHPs through the exchanges; MSPs are not available outside the exchanges. Some MSP options also offer in-network care for out-of-state services, but not all do.

MSPs must offer a package of benefits that includes the EHB (see Figure 1 ). MSPs also must offer a package of benefits that is substantially equal to either the state-selected EHB-benchmark plan for the state in which the plan is offered or an OPM-selected benchmark plan. Moreover, MSPs must comply with any state standards related to benefit mandates, substitution of benefits, and habilitative services.

Child-Only Plans

Child-only health insurance plans are a type of QHP available in the exchanges. To offer child-only plans in an exchange, a health insurance plan must also offer a QHP in the exchange. The ACA requires the plan to offer the child-only exchange plan at the same coverage level as the QHP. Only individuals under the age of 21 may enroll in child-only exchange plans. Child-only health plans are treated as a type of QHP and thus are subject to EHB requirements.

Catastrophic Plans

Catastrophic plans are a type of health plan offered in the individual exchanges. Catastrophic plans offered through exchanges provide the EHB and coverage for at least three primary care visits. The monthly premium for catastrophic plans generally is lower than for other QHPs. However, catastrophic plans impose a very high deductible, and cost sharing generally is higher. These plans also do not meet the minimum requirements related to coverage generosity (i.e., actuarial value). Catastrophic plans may be offered only in the individual market for (1) individuals under the age of 30 and (2) persons exempt from the ACA requirement to obtain health coverage because no affordable coverage is available or they have a hardship exemption.

Health Plans Not Subject to Essential Health Benefits Requirements

Certain health plans are not subject to the EHB requirements. Examples of these health plans include grandfathered plans, large-group market plans, self-insured plans, and dental-only plans (see Figure 5 ).

Grandfathered Plans

Health insurance plans that were in existence (in the non-group, small-group, or large-group market) and in which at least one person was enrolled on the date of the ACA's enactment (March 23, 2010) are considered grandfathered and have a unique status under the ACA. As long as a plan maintains its grandfathered status, the plan has to comply with some but not all ACA provisions. Grandfathered plans are not subject to the EHB requirements. Plans may lose their status if they apply certain changes to benefits, cost sharing, employer contributions, and access to coverage.

Large-Group Market Plans

Large-group market plans typically are employer-sponsored insurance plans and are defined by the number of employees. In general, a large-group plan has 50 or more employees. Many of the market reform provisions in the ACA targeted the non-group and small-group markets. The reforms focused on perceived failures in these markets and provided parity with the large-group market. Accordingly, large-group plans are exempt from a number of ACA market reforms, including coverage of the EHB.

Nonetheless, benefits and coverage offered in large-group market plans play an important role for the EHB. Recall that in defining the EHB, HHS examined the scope of benefits under a typical employer-sponsored insurance plan and used that information in determining what services would be covered as well as additional supplemental guidelines.

Self-Insured Plans

Self-insured plans are a type of group health plan. Organizations that self-insure do not purchase health coverage from insurance carriers. Self-insured plans refer to health coverage that is provided directly by the organization seeking coverage for its members (e.g., a firm providing health benefits to its employees). Such organizations set aside funds and pay for health benefits directly. Under self-insurance, the organization bears the risk for covering medical expenses. Firms that self-insure may contract with third-party administrators to handle administrative duties such as member services, premium collection, and utilization review. Self-insured plans are not subject to many of the ACA market reforms, including the EHB.

Dental-Only Plans

In the exchanges, an individual can obtain dental coverage as part of a QHP or as a stand-alone dental plan. Dental-only plans must provide coverage for pediatric oral services (1 of the 10 EHB categories). Dental-only plans are not required to cover the remaining EHB categories.

Essential Health Benefits and Other ACA Provisions

Cost Sharing

The ACA imposes an annual cap on consumer cost sharing for the EHB. The ACA specifies that the limits work in two ways: they prohibit (1) applying deductibles to preventive health services and (2) annual out-of-pocket limits that exceed existing limits in the tax code. The cost-sharing limits apply only to in-network benefits and must include all co-payments, coinsurance, and deductibles.

In 2016, the cost-sharing limits are $6,850 for an individual plan and $13,700 for a family plan. For 2017, the cost-sharing limits are $7,150 for an individual plan and $14,300 for a family plan.

Lifetime and Annual Dollar Limits

Prior to the ACA, plans generally were able to set lifetime and annual limits—dollar limits on how much the plan would spend for covered health benefits either during the entire period an individual was enrolled in the plan (lifetime limits) or during a plan year (annual limits). The ACA prohibited both lifetime and annual limits on the EHB. Plans are permitted to place lifetime and annual limits on covered benefits that are not considered EHBs, to the extent that such limits are permitted by federal and state law.

Minimum Essential Coverage

The EHB differs from minimum essential coverage. Minimum essential coverage is a term defined in the ACA and its implementing regulations that refers to the individual mandate, or the ACA requirement that most individuals must have health insurance coverage for themselves and their dependents or potentially pay a penalty for noncompliance. The definition of minimum essential coverage does not refer to minimum benefits but rather includes most private and public coverage (e.g., employer-sponsored coverage, individual coverage, Medicare, and Medicaid, among others).