The Nitty Gritty: State Options for Choosing an EHB Definition

Update (02/07/2012): According to an insurance insider we spoke with last week, in order to give insurance companies enough time to make changes to their plans, states that wish to add a health benefit mandate without having to pay for it would have to make the mandate effective in the first quarter of this year. Practically speaking, our source tells us States don't have enough time. Furthermore, we are told that HHS is preparing a Q&A document that will address this and other issues.

Update #2(02/17/2012):
HHS issued an FAQ today which states in part:

4. Could a State add State-mandated benefits to the State-selected EHB benchmark plan today without having to defray the costs of those mandated benefits?

A: No. We intend to clarify that under the proposed approach any State-mandated benefits enacted after December 31, 2011 could not be part of EHB for 2014 or 2015, unless already included within the benchmark plan regardless of the mandate. Note that any State-mandated benefits enacted by December 31, 2011 would be part of EHB if applicable to the State-selected EHB benchmark plan. As mentioned above, HHS intends to revisit this approach for plan years starting in 2016.

[Original Article]
Under recently issued federal regulatory guidance, states have some say in determining what minimum benefits health plans in the individual, small group, and exchange markets must offer to their beneficiaries. These minimum required benefits are called the Essential Health Benefits (EHB).

The Obama Administration is allowing each state to choose an insurance plan as a “benchmark” for their state. Assuming the benchmark plan meets minimum requirements, the benefits it offers will become the EHB for that state.

States can choose their benchmark plan from any of the following four categories :

  1. the largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market;
  2. any of the largest three State employee health benefit plans by enrollment;
  3. any of the largest three national FEHBP plan options by enrollment; or
  4. the largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the State.[1]

To determine the universe of potential plans, states must look at enrollment information from the first quarter two years prior. So, for 2014 states will look at enrollment data for January through March of 2012.[2]

Once the state has chosen a benchmark plan, it looks to see what benefits that plan offered in the third quarter two years prior. So, for the 2014 EHB definition, states must determine what benefits the benchmark plan offered on July 1, 2012.[3]

States that wish to add health benefit mandates while avoiding Obamacare’s reimbursement costs must put such mandates in place by July 1, 2012. States that pass new mandates after this date risk having to make reimbursements.

For instance, suppose Virginia passes a law that procedure A should be a mandated benefit, but the mandate does not go into effect until July 1, 2013. The state’s EHB list for 2015 will use the benefits offered by the benchmark plan including the mandated procedure A.[4] For 2015, then, since the state’s mandate for procedure A is included in its EHB list Virginia will not have to make reimbursements. Virginia would, however, have to make reimbursements for procedure A for the entire year of 2014 since the 2013 law would be in effect but the 2014 EHB list would be based on a 2012 plan when the mandate was not in effect.

All this means you can expect to see heavier state lobbying this legislative season.

1. Ctr. for Consumer Info. and Ins. Oversight, Essential Health Benefits Bulletin, Dec. 16, 2011, 9 (emphasis added) available at

2. Id.

3. Id.

4. This assumes a state and not a federal benchmark plan is chosen and that the state plan is subject to state health benefit mandates.