New Regulatory Guidance on EHBs Merely Postpones Health Benefit Nationalization

Obamacare requires the federal government to define a list of minimum health benefits, called the Essential Health Benefits (EHB), which certain insurers must provide. But with presidential campaign season upon us, the Obama Administration is dodging this controversial decision by passing it off to the states.

On December 16, 2011, the Department of Health and Human Services issued a regulatory guidance document that allows for there to be a separate definition for each state and gives the states a role in defining the EHB for themselves.[1]

Dodging Another Adverse Effect of Obamacare

Essentially, the Obama Administration is giving states an out from one of Obamacare’s adverse effects.

Last month we reported that the EHB definition could force states to repeal their health benefit mandates.[2]

Obamacare requires states to make reimbursements for health benefits mandated by state law but not included in the EHB definition in two situations:

First, when such health services are rendered to individuals covered by a multi-state health insurance plan. Obamacare requires the federal government to create at least two multi-state plans. In order to create a level playing field for these plans, states that have benefit mandates not included in the EHB definition must reimburse these plans.[3]

Second, states must also make reimbursements when such health services are rendered to individuals who are eligible for federal health insurance subsidies.[4]

The result of these reimbursement requirements would have been to force budget-strapped states to repeal their state health benefit mandates.

Federal Control Remains

At first glance it may seem that the Administration has granted flexibility to the states. However, as with other Obamacare provisions, the Obama Administration has merely used purported state flexibility as a veil to shroud Obamacare’s flaws. Buried deep in the document the Administration admits its intention to “evaluate the benchmark approach for the calendar year 2016 and will develop an approach that may exclude State benefit mandates from inclusion in the State EHB package.”[5]
So, federal power to nationalize health benefit mandates remains.

Who’s Going to Pay?

Who pays for these extra health mandates? Three hundred-fifty billion dollars in federal taxes will be spent on health insurance subsidies.6 The health benefit mandates in individual states will now be subsidized by the taxpayers of every state.
It is difficult to determine how much more this change in policy will cost. What is clear is that health providers that have been lobbying the Obama Administration to have their medical services included in the health insurance exchanges will now be shifting their focus to lobbying individual states.

Such lobbyists will have to act fast. State health benefit mandates must be in place by July 1, 2012 for 2014 plans. (See our article, The Nitty Gritty: State Options for Choosing an EHB Definition for further details.)

1. Ctr. for Consumer Info. and Ins. Oversight, Essential Health Benefits Bulletin, Dec. 16, 2011, available at http://cciio.cms.gov/resources/files/Files2/12162011/essential_health_benefits_bulletin.pdf (emphasis added).

2. Defining Essential Health Benefits and Defining Away States’ Rights, OBAMACAREWATCHER.ORG, Nov. 16, 2011 available at http://obamacarewatcher.org/articles/281.

3. P.L. 111-148 § 1334(c)(4).

4. Id. at 1311(d)(3)(B)(ii).

5. Ctr. for Consumer Info. and Ins. Oversight, supra note 1 at 10 (emphasis added).
Letter from Douglas W. Elmendorf, Dir., Congressional Budget Office to Nancy Pelosi, Speaker of the House, U.S. House of Representatives (March 20, 2010) Table 2, available at http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf.