On February 20, 2013, the Department of Health and Human Services (HHS) issued final rules regarding the essential health benefits (EHB) that certain health insurance providers must provide, pursuant to the Patient Protection and Affordable Care Act (PPACA). In particular, these rules define the specific benefits that must be included in an EHB package, establish the actuarial values that those packages must achieve, and impose out-of-pocket cost-sharing limits for individuals and families in the event of a catastrophic illness or injury.

Essential Health Benefits
First, certain health insurance packages, including all non-grandfathered health plans in the individual and small-group markets, as well as Medicaid benchmark and benchmark-equivalent plans, will be required to provide coverage of EHBs beginning on January 1, 2014. Under PPACA, EHBs must include items and services ten broad categories, including (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services, including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; (10) and pediatric services, including oral and vision care, subject to cost-sharing limits and actuarial value requirements.

PPACA did not specify precisely which benefits within these categories were to be included in an EHB package; however, these rules establish that each State may set its own EHB package based on a "base-benchmark plan," which shall become the model EHB package for all applicable plans in that State. Thereafter, all applicable plans subject to the EHB requirement will have to offer benefits that are substantially equal to the benefits offered in the base-benchmark plan. The final rules allow each State to select its base-benchmark plan from among four options, including: (1) the largest health plan by enrollment in the State's small group market; (2) any of the largest three employee health benefit plan options by enrollment offered and generally available to State employees; (3) any of the largest three national Federal Employees Health Benefits Program plan options; and (4) the coverage plan with the largest insured commercial non-Medicaid enrollment offered by an HMO operating in the State. If a State fails to select a base-benchmark plan from among these options, the default EHB package will be the largest plan by enrollment in the State's small group market. To date, 26 states and the District of Columbia have selected a base-benchmark rule. Of these, 19 and the District have selected a small group market plan, three states have selected a state employee health plan, and four states have selected an HMO plan.

Actuarial Value Requirements
Second, the final rules classify grandfathered health plans, which are not subject to the EHB requirements, based on their actuarial values. Plans with a value of 60% are classified as bronze, plans with a value of at least 70% are classified as silver, plans with a value of at least 80% are classified as gold, and plans with a value of at least 90% are classified as platinum. The purpose of this classification is to help consumers identify plans that offer similar levels of coverage and compare those plans more directly based on premiums, provider networks, and other factors. The final rules further outline how actuarial value is to be determined and HHS has indicated that it will provide an actuarial value calculator to help determine a given plan's proper classification.

Cost-Sharing and Deductible Limits
Third, to shield individuals and families from the costs of catastrophic illness or injury, the final rules establish annual cost-sharing limits on regulated plans. In 2014, individual plans are limited to $5,000 in cost-sharing and $2,000 in deductibles. In subsequent years, these limits are to be increased by a premium adjustment percentage, to be determined by HHS, for that year. Family plans are also subject to similar limits, which for any year are defined as twice the individual plan limits for that year.

Conclusion
Together with the development of health insurance exchanges, the Essential Health Benefits program is intended to inject additional certainty and standardization into the individual and small group insurance markets as well as the provision of health care services to covered individuals. By requiring regulated health plans to include certain essential benefits, the final rules provide additional certainty to both providers and patients. Further, by establishing a uniform means to calculate a given plan's actuarial value and by classifying that plan based on its value, consumers will be able to purchase an appropriate level of coverage to meet their expected needs. Finally, by imposing cost-sharing and deductible limits, the final rules will help mitigate the financial impact of catastrophic illness and injury and help ensure that the costs of necessary treatment in such circumstances are paid for.

For reference, the final rules are available at http://www.gpo.gov/fdsys/pkg/FR-2013-02-25/pdf/2013-04084.pdf.