One criticism of the Affordable Care Act is that it imposes a costly, one-size-fits-all standard, drastically increasing premiums by requiring everyone to buy health insurance that covers the same mandated benefits. This is not so.
It’s true that the health reform law imposes some requirements — “essential health benefits” — on what individual market and small business plans offer. But the statute left a lot of discretion to federal regulators, who, in turn, passed much of it on to states, each of which interpreted the requirements differently. And, because most plans already covered these so-called essential health benefits, the additional cost of the regulation is small.
The mistaken notion that the Affordable Care Act imposes a nationally uniform set of required benefits comes, perhaps, from language in the statute itself. It lists 10 broad areas of essential health benefits plans must cover, including hospital, outpatient and emergency services, along with related laboratory services; maternity, newborn and pediatric care; prescription drugs; rehabilitative and habilitative services and devices; mental health and substance abuse treatment; and wellness and chronic disease management.
Though that’s a fairly comprehensive list, including areas of care one would typically expect of a health insurance plan, it’s not specific. What does it mean, for instance, to cover “prescription drugs”? Must all drugs be covered? If not, which ones?
How regulators addressed these questions is what gave rise to state variation.
The law delegates authority to the secretary of Health and Human Services to flesh out which benefits plans must cover. As my colleague Nicholas Bagley wrote with his co-author, Helen Levy, this presented the secretary with a dilemma. Defining essential health benefits narrowly would lead to lower-cost plans but would also leave more care uncovered, rendering that care unaffordable for some patients. A broader definition would increase premiums, potentially making health insurance too costly for some people the health law was designed to help.
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Jeffrey R. Ungvary President