DOWN IS JUST A LOWER LEVEL OF UP

The NAIC suggests more detail and less
uniformity in Essential Health Benefits

By Kevin P. Hennosy

The Centers for Medicare and Medicaid Services (CMS) will soon announce revisions to Essential Health Benefits (EHB) under the Affordable CareAct (ACA). In December 2022, the Centers requested comments from the public on the existing EHB to inform its deliberations in the Spring of 2023.

The ACA establishes that any qualified health plan, a product eligible for sale on the ACA Exchange, contain an EHB package.

In addition, the Public Health Service Act (PHS Act) extends the EHB requirement to “non grandfathered individual and small group health insurance coverage … irrespective of whether such coverage is offered through an Exchange,” according to the CMS Request for Information (RFI).

(May we use a few more acronyms?)

Open formula

The EHB provision of the ACA reminds this writer of an incident in the early professional life of Nationwide Insurance founder Murray D. Lincoln.

In Lincoln’s memoir, Vice President in Charge of Revolution, he recounted his early days as executive vice president of the Ohio Farm Bureau Federation. Lincoln looked out for new products and services that the cooperative’s members needed and that the Farm Bureau could offer as membership benefits. This is how Lincoln retained and expanded the membership rolls.

In the 1920s, one such need that Ohio farmers shared was the availability and affordability of unadulterated animal feed. Farmers complained to Lincoln that feed companies charged higher prices at the retail level than many small farmers could afford.

To make matters worse, farmers could never be sure what kind or number of “fillers” manufacturers added to their feed mixtures. Some of the fillers provided no nutritional value to livestock and other material could do harm.

Lincoln’s first initiative was the cooperative purchase of the components of animal feed, which the Farm Bureau combined and bagged for sale to its membership. The feed was not only offered at lower cost to the consumer members, but the bags carried an accurate breakdown of what the bag contained.

The success of the Farm Bureau feed products forced other feed companies to improve their products from the perspective of the farmer.

The “open formula feed” proved popular with the consumer co-op’s membership. Farmers’ trust in the Farm Bureau grew stronger. That trust proved vital when Lincoln launched Ohio Farm Bureau Mutual Automobile Insurance Company, which today is the Nationwide Group.

 The Centers for Medicare and Medicaid Services (CMS) will soon announce revisions to Essential Health Benefits (EHB) under the Affordable Care Act (ACA).

Informed choice

Of course, EHB provision represents a break with state-based insurance regulation.

In the 1940s, Congress empowered the states to regulate the business of insurance in the stream of interstate commerce, but only to the extent that state officials used that power. If the states did not apply regulation to any aspect of the “relationship between insurer and insured,” then jurisdiction over that unregulated aspect of the business reverts to the federal government in that state.

Congress and the Roosevelt Administration recognized that the complexity of insurance products made informed consumer choice impossible. In the absence of such choice, a competitive market could not exist, so the policymakers provided for a regulated market to assure fair pricing and product design.

In the intervening decades, state officials walked away from “rate and form” regulation. Without affirmative regulation by state authorities, the price, availability, and regular content of health insurance coverage became increasingly rare. No amount of consumer demand could create a competitive market capable of improving the situation because informed consumer choice did not exist to improve pricing and product design.

In the absence of state action to effectively regulate health insurance in the public interest, Congress passed the ACA.

The Obama Administration and Congressional leadership rejected the establishment of a National Healthcare Program. Some members of Congress wanted to establish a publicly underwritten plan, a “Public Option,” as a means of jumpstarting competition in the private market.

Ultimately, Congress and the Administration settled on including the EHB provision in the ACA. The approach preserved the private market but established consistency useful in reintroducing informed consumer choice necessary for market competition.

CMS

The CMS RFI notes the agency is “mindful that the EHB-benchmark plan documents can describe the covered benefits differently, which may create ambiguity in defining the EHB in a particular State.”

The ACA drafters chose not to institute a one-size-fits-all approach to EHB. The statute enabled the regulation to create a package of benefits equal in scope, but not necessarily in detail. The benefits could vary by state based on “typical employer plans” in each jurisdiction.

Federal regulators established 10 categories of benefits for the EHB: 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; and pediatric services, including oral and vision care.

The CMS RFI notes “some State EHB benchmark plan documents are well over 100 pages and include these more detailed descriptions of covered benefits and limitations, while other EHB benchmark plans are only a few dozen pages, with shorter, more generalized descriptions of covered benefits and limitations.”

The RFI explains, “The difference in how the benefits are described in the EHB-benchmark plans is not particularly surprising.” Furthermore, “These plan documents were written by different authors at different times, serving different segments of the population with different health needs, and subjected to different Federal or State requirements.”

The RFI cites this example: “one State’s EHB-benchmark plan may specifically mention coverage of ground, water, and air ambulance, while another State’s EHB-benchmark plan may simply cover ‘medically necessary transportation’ without distinguishing whether such coverage includes ground, water, or air ambulance.”

What the CMS describes echoes the commerce-based reasons that Hamilton, Madison, and Jay proposed the establishment of a national government based on federalism, rather than confederation. (Far too many teachers and pundits use the term “federalism” to describe “confederation” today.)

Under the Articles of Confederation, state-based parochialism impaired American’s national interests in fostering a nationwide market. Hamilton recognized that federalism—making one nation—would foster that market.

Furthermore, the Federalists understood that, as the United States became a mature country, many issues that began as local interests would become the citizenry’s national interests.

NAIC

In response to the CMS RFI, the National Association of Insurance Commissioners (NAIC) submitted comments and “applauded” this aspect of the rulemaking process. Readers may find the complete NAIC comments on the association’s website.

As is so often the case with NAIC comments filed with federal agencies, this letter has the ring of a product of George Orwell’s Ministry of Truth in Nineteen Eighty-Four. The NAIC comments contain compound sentences where the first phrase contains a welcoming message toward the CMS, followed by a second phrase that rejects national consistency.

The NAIC comments assured CMS that “State insurance regulators have observed many of the same issues with the EHBs outlined in the RFI.” That sounds like an expression of agreement, but then the NAIC makes arguments that run counter to the CMS findings.

Contrary to the CMS-expressed concerns about 100-page-long coverage descriptions, the NAIC opines, “Descrip-tions of benefits and their limitations are not always comprehensive.”

The NAIC comments champion concepts such as “local standards of care,” which echoes the Anti-Federalists’ defense of the Articles of Confederation.

The NAIC’s reference to the “limitations” seems particularly meaningful. Some state officials want to limit access to some forms of medical care, which requires more than simply an affirmative listing of treatments.

NAIC observed, “Using existing benefits and carrying them forward each year has led to some that fail to capture advances in medical treatments and local standards of care, diverge from the currently typical employer plan, or are otherwise out-of-date.”

A sentence buried at the end of the NAIC comment letter’s second paragraph is the clearest statement of the association’s policy preferences: “We support continuing the lead role for states in selecting EHBs while adding additional clarity and flexibility to the process.”

The NAIC asks for more detailed federal rules but less uniformity at the local level.

Just how is that trick performed? Can you have your cake and eat it, too? Is white just a lighter shade of black? Where is Rod Serling when we really need him?

In other words, the NAIC seems to invite us to “return with us now to those thrilling days of yesteryear,” when an insurance carrier could offer a bag of magic beans as health insurance if the insurer found an insurance “supervisor” willing to “ink-up” a rubber stamp and approve it.

The author

Kevin P. Hennosy is an insurance writer who specializes in the history and politics of insurance regulation. He began his insurance career in the regulatory compliance office of Nationwide and then served as public affairs manager for the National Association of Insurance Commissioners (NAIC). Since leaving the NAIC staff, he has written extensively on insurance regulation and testified before the NAIC as a consumer advocate.