Reform Alert - News from the Blues' Office of National Health Reform

Institute of Medicine report says costs key in shaping essential health benefits

Update: Dec. 30, 2013 — Pre-Existing Condition Insurance Plan extended

Nov. 11, 2011

The Institute of Medicine has released its recommendations for defining essential health benefits, the minimum standard of covered benefits that all health insurers will be required to offer in order to sell policies in the non-grandfathered individual or small group markets, on or off exchanges, beginning in 2014. State Medicaid programs must also cover essential benefits by 2014. 

The IOM recommendations are only advisory in nature and do not have the authority of federal regulation. The Department of Health and Human Services is expected to release a proposed rule on essential benefits in 2012.

In November 2010, HHS asked the IOM to recommend criteria and methodology for defining essential benefits. 

The Institute of Medicine's report makes recommendations to realize two key goals:

  1. Providing coverage for a wide range of health care needs 
  2. Ensuring the affordability of coverage 

The report recommends that unless costs are taken into account in designing the essential benefits, individuals and small businesses will find the plans increasingly unaffordable, and the Affordable Care Act will not achieve its coverage expansion goals.

Instead of listing specific services that should be covered, the report makes the following recommendations:

  • To keep plans affordable, HHS should determine the approximate cost of a silver-equivalent small employer plan in 2014 and ensure that the cost of essential benefits does not exceed this amount. 
  • To update the benefit package, the Institute recommends establishing a new National Benefits Advisory Council - an independent, nonpartisan committee staffed by HHS and comprised of a diverse group of stakeholders. 
  • State mandated benefits should not be automatically included as essential benefits, but rather should be evaluated in the same way as other potential benefits - based on medical effectiveness, safety, relative value compared to alternative options and protecting the most vulnerable. 
  • States should have flexibility to develop alternatives to the federal essential benefits. 

The ACA specifies that at a minimum, essential benefits must include: 

  • 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 

The Institute of Medicine report is available through the group's website.

The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.