Essential health benefits final rule provisions are favorable for mental health care

The rule applies to health plan benefits effective January 2014.

By Legal & Regulatory Affairs staff

March 14, 2013—On Feb. 25, 2013, the Department of Health and Human Services (HHS) released the final rule on essential health benefits (EHB) mandated by the 2010 federal health care reform law – the Affordable Care Act (ACA). The final rule on EHB will become effective on April 26, 2013.

The Affordable Care Act is intended to provide health insurance coverage for tens of millions more Americans. This new coverage mainly comes in the form of expansion of Medicaid and enhanced federal support for the Children’s Health Insurance Program (CHIP), as well as through the establishment of state-based Health Insurance Exchanges where health plans will be offered primarily to individuals and small businesses.

ACA ensures that, except for “grandfathered” health plans, all health plans offered in the individual and small group markets as of February 2014, both inside and outside the health insurance exchanges, must offer the core package of essential health benefits. Even so, these plans will still vary regarding the extent to which they cover essential health benefits, including mental health benefits. The exchanges will offer plans that have different deductible levels and payment levels in order to provide options for individuals based on the coverage they need and affordability.

The American Psychological Association (APA) submitted comments to the Centers for Medicare and Medicaid Services (CMS) in support of the proposed rule on standards related to EHB packages. As did the proposed rule, the final rule released in January specifies mental health and substance use disorder services, including behavioral health treatment, among 10 required health insurance benefit categories.

A Positive Impact

Several key elements of the rule will have a positive impact on people with mental health and addiction disorders:

  • The federal Mental Health Parity and Addictions Equity Act applies to essential benefits. Plans that do not already include mental health and addiction benefits — or include these benefits but not at parity with medical/surgical benefits — must supplement their plans to come into compliance with parity. HHS did not offer specific guidance on the process by which plans should augment behavioral health benefits. 

  • The rule includes language to assure non-discrimination in plan design, a major issue for people with chronic conditions. The rule prohibits cost-sharing structures, utilization management techniques and benefit designs that discriminate against beneficiaries based on race, age, disability status, health status, quality of life, having extensive health care needs or other characteristics. HHS clarifies the prohibition on discrimination would not preclude the use of utilization management techniques, but such techniques may only be implemented in a manner that does not discriminate on the basis of age, expected length of life, present or predicted disability, degree of medical dependency, quality of life or other health conditions. States must monitor and identify discriminatory benefit designs. 

  • The definition of essential benefits includes both the required preventive services outlined in ACA as well as any state-mandated benefits (for example, autism coverage mandates) that were in effect prior to Dec. 31, 2011.

Additional Provisions

Other major provisions of the rule include:

Supplementing essential benefits: Many health care advocates have expressed concern that the benchmark plans that states have selected to use as the basis for essential benefits (known as the “base-benchmark plan”) do not include adequate coverage of certain types of services. Most commonly, these base-benchmark plans do not cover pediatric dental and vision. However, two states’ (Alaska and Arkansas) selected plans do not cover mental health or substance use disorder benefits and 19 states’ plans do not cover rehabilitative services.

The rule outlines a process by which states must supplement the base-benchmark plan if it fails to include a required category of essential benefits. For most benefits, this process is to draw that entire category of benefits from one of the other benchmark plan options. For example, in Alaska and Arkansas, the largest and second largest federal employee health benefits plans have been identified to provide supplementary coverage for mental health and substance use disorder services for the respective states’ benchmark plans.

Benefit substitutions: The rule clarifies that plans are permitted to implement benefit substitutions within — but not across — benefit categories. Any substitutions must be actuarially equivalent to the original benefits, and substitutions cannot result in a plan design that discriminates against particular groups of people, for example, elderly persons and individuals with HIV/AIDS. Plans are also permitted to substitute coverage limitations – such as restrictions on the amount, duration, or scope of services — but these must be “substantially equal” to the original benchmark plan limitations and cannot discriminate against particular groups of people. The resulting plan benefits are subject to the non-discrimination requirements mentioned above.

Grandfathered/Self-Insured Plans

Under ACA, all non-“grandfathered” health plans offered in the individual and small group markets, both inside and outside of the health insurance exchanges, must offer the core package of essential health benefits. Grandfathered plans, including self-insured plans and individual coverage purchased before the ACA was enacted, are excluded from this requirement.

Grandfathered plans are plans that fall into one of two categories:

  1. Individual insurance coverage purchased on or before March 23, 2010 when the ACA was enacted. An individual may add family members to the individual policy without the plan losing its grandfathered status. However, plans offering individual coverage are not considered grandfathered plans for those individuals who purchase coverage after March 23, 2010 or if the plans significantly change the benefits package or increase costs to enrollees; or

  2. Employer-sponsored insurance coverage (including self-insured coverage) is considered grandfathered unless the coverage plan makes significant changes to its benefits package or its costs to enrollees, whether it is providing coverage through its current insurer or starting a contract with a new health insurer.

A grandfathered plan may not significantly cut benefits or increase out-of-pocket consumer costs without risking its grandfathered status and thus, having to comply with the ACA’s requirements, including EHBs. The following changes would result in existing grandfathered plans (including self-insured plans) losing grandfather status:

  • Significant cuts or reduction of benefits 

  • Increase in co-insurance charges 

  • Significant increase in co-payments 

  • Significant increase in deductibles 

  • Significant decrease in employer contributions 

  • Addition or restriction on annual dollar limits paid by the insurer

All health plans — whether grandfathered or not — were already required to provide certain benefits for plan years beginning Sept. 23, 2010:

  • No lifetime coverage limits 

  • No rescissions of coverage for persons who become ill or whose insurance applications contain unintentional errors 

  • Coverage for young adults under 26 years of age through their parents’ coverage

Employer-sponsored health coverage must also offer:

  • No coverage exclusions for children with pre-existing conditions 

  • No “restricted” annual limits (where coverage limits would be below federal standards set by regulation in the future)