The U.S. Department of Health and Human Services (HHS) released an Essential Health Benefits Bulletin and related fact sheet on December 16, 2011, outlining proposed policies intended to give states greater flexibility to implement the federal Patient Protection and Affordable Care Act (PPACA).

The PPACA mandates that health insurance plans offered in the individual and small group markets provide a comprehensive package of items and services, known as “essential health benefits,” as determined by HHS. The new HHS bulletin describes an approach that would allow individual states to choose one of the following health insurance plans to set the “benchmark” for items and services included in the essential health benefits package:
  • One of the three largest small group plans in the state.
  • One of the three largest state employee health plans.
  • One of the three largest federal employee health plan options.
  • The largest health maintenance organization (HMO) plan offered in the state’s commercial market.

The benefits and services included in the health insurance plan selected by the state would be the essential health benefits package for that state. Plans could modify coverage within a benefit category so long as they did not reduce the value of coverage. If a state chooses not to select a benchmark, HHS intends to propose that the default benchmark will be the small group plan with the largest enrollment in the state.

Public input on this proposal is encouraged. Comments are due by Jan 31, 2012 and can be sent to

Consistent with the reform law, states must ensure the essential health benefits package covers items and services in at least 10 categories of care:
  • Ambulatory patient services.
  • Emergency services.
  • Hospitalization.
  • Maternity and newborn care.
  • Mental health and substance use disorder services, including behavioral health treatment.
  • Prescription drugs.
  • Rehabilitative and habilitative services and devices.
  • Laboratory services.
  • Preventive and wellness services and chronic disease management.
  • Pediatric services, including oral and vision care.

If a state selects a plan that does not cover all 10 categories of care, the state will have the option to examine other benchmark insurance plans to determine the type of benefits that must be added to its essential health benefits package.

Some business advocates, including state chambers of commerce and trade groups, have expressed concerns that the approach could allow states to mandate a rich benefit package, particularly because the federal employees' health benefits plan is among the country's most generous packages.

The bulletin leaves unanswered the question of affordability in the states. HHS will likely continue to work to develop a rule that balances state-selected and reasonably comprehensive benefits with affordability for employers and individuals.

The HHS bulletin addresses only the services and items to be covered by health plans and not PPACA limits on cost-sharing such as deductibles, co-payments, and co-insurance. The cost-sharing features will be addressed in future bulletins and rules addressing formulas for determining the actuarial value of the plan.


Hedley Lawson, Contributing Editor
Managing Partner
Aligned Growth Partners, LLC