Essential Health Benefits Final Rule: No Major Departures

Yesterday the Administration released its final regulation implementing the Affordable Care Act’s requirement that health plans cover a minimum set of “essential” health benefits (EHB). The final rule largely mirrors the proposed rule, which they issued in November, and includes the final list of state benchmarks. In addition to establishing requirements for EHB, the rule provides guidance on the ACA’s limits on out-of-pocket costs and deductibles, the calculation of actuarial value and “minimum value,” and the accreditation of health plans participating in the exchanges. In this blog, I’ll be taking a high level look at the EHB provisions of the rule. We’ll follow up on the other provisions in future blogs.

Treatment of State Benefit Mandates

The final rule confirms the policy laid out in the proposed rule, which allows state mandates enacted on or before December 31, 2011 (even if not effective until a later date) to be considered part of the EHB. For these mandates, the state would not be required to defray any associated costs. For mandates enacted after December 31, 2011, the state would have to defray any associated costs for those enrolled in qualified health plans. The responsibility for determining what those extra costs would be falls to the state’s exchange (or federally facilitated exchange (FFE), as the case may be).

Treatment of Habilitative Benefits

The final rule cements the policy outlined in the proposed rule regarding the addition of habilitative benefits to the base benchmark EHB package. Because many of the base benchmark packages do not identify habilitative services as covered benefits, the administration proposed that states be given the opportunity to define those benefits for packages that did not clearly include them. If states do not define habilitative benefits, then insurers would be allowed to define them. Insurers can do so in one of two ways:

  • Provide parity by covering habilitative services that are similar in scope, amount, and duration to benefits covered for rehabilitation, or
  • Decide which habilitative services to cover and report those to the U.S. Department of Health and Human Services (HHS).

Benefit Substitution

Again, the policy allowing insurers to substitute benefits within a benefit category was confirmed in the final rule. Substitution is allowed if the benefits being added are “actuarially equivalent” to those being replaced. In addition, the substitution policy does not apply to prescription drugs. The final rule also confirms that states may limit benefit substitution or prohibit it.

In addition, the final rule codifies the proposal that insurers may have non-dollar limitations on coverage (i.e., limits on the number of physical therapy visits, days in the hospital, etc) that differ from the limitations in the EHB benchmark plan, so long as the coverage and limitations are “substantially equal” to the benefits in the benchmark.

Mental Health and Substance Use Disorder – Parity

The final rule confirms that health plans must comply with the mental health and substance use disorder requirements in both the individual and small group markets in order to satisfy the requirement to cover the EHB. In addition, states would not be required to defray any costs, if benefits need to be added to the base benchmark in order to bring it into compliance with the parity requirements.

Prescription Drugs

HHS largely held the line on its proposed prescription drug policy, in spite of considerable public comment urging HHS require either greater or less generous coverage. To meet EHB, insurers must cover “at least the greater of:”

  • One drug in every category and class listed in the United States Pharmacopeia’s (USP) guidelines, or
  • The same number of drugs in each category and class as the EHB- benchmark plan.

Insurers will be required to report their drug lists to the state’s exchange (or FFE) and, if operating outside the exchange, then they must report their drug list to the state department of insurance.

The final rule does make one positive change, by adding language requiring insurers to have procedures in place to allow enrollees to request and gain access to clinically appropriate drugs not on the plan’s formulary. The Administration has promised that they will issue further guidance on this requirement.


This is one area in which the Administration has deviated – and not, apparently, for the better – from its proposed rule. While the rule confirms that states will be asked to monitor and identify discriminatory benefit designs, both the designs themselves and “the implementation thereof,” the final rule eliminates a provision that prohibited insurers from using consumer cost-sharing in a discriminatory manner. HHS notes that this provision was removed at the request of commenters concerned about the “administrative burden” on health plans. We’ll be examining what removing this provision might mean for consumers in future blogs.

Monitoring and Enforcement

HHS has reiterated that its EHB policy is a “transitional” one, in place only for 2014 and 2015. The agency has committed to monitoring the implementation of state-based EHBs and the impact on consumers’ access to care. HHS will also be relying extensively on state insurance departments to be the “first line” of oversight and enforcement to ensure that consumers actually receive what they are promised.

Stay tuned for more updates on EHBs and other ACA rulemaking here, at CHIRblog!

The opinions expressed here are solely those of the individual blog post authors and do not represent the views of Georgetown University, the Center on Health Insurance Reforms, any organization that the author is affiliated with, or the opinions of any other author who publishes on this blog.