IOM Panel Outlines Criteria for Essential Benefits Package

October 7, 2011 — In recommendations to HHS on Thursday, an Institute of Medicine committee emphasized that affordability should be the agency's main priority in setting the basic coverage standards for health plans sold through the state exchanges established under the federal health reform law, National Journal reports (McCarthy, National Journal, 10/6).

The so-called "essential benefits" package will define the minimum coverage health plans will have to offer in selling policies through the state-based health insurance exchanges, which will launch in 2014. The health reform law outlines 10 broad categories of coverage -- such as hospitalization, childbirth, prescription drugs and pediatrics -- that should be included, but it directs HHS to specify what services should be covered. The law also sets caps on out-of-pocket costs -- $6,000 per year for an individual or $12,000 for a family -- and requires that the essential benefits package be equal to the benefits provided in a typical employer-sponsored health plans (Galewitz/Appleby, Kaiser Health News, 10/6).

The report recommended that only medically necessary services be covered but did not recommend establishing a national definition of medical necessity (National Journal, 10/6). The panel did not outline the specific benefits that HHS should include in the health plans offered through the exchanges, according to the Wall Street Journal (Radnofsky, Wall Street Journal, 10/7).

The IOM committee said the cost of any benefits should be "offset by savings" elsewhere in the health system. "Unless we are able to balance the cost with the breadth of benefits, we may never achieve the health care coverage envisioned in the [health reform law]," the panel said, adding, "If the benefits are not affordable, fewer individuals will buy insurance" and "if health care spending continues to rise so rapidly, the benefits will begin to erode."

The committee included guidelines for HHS on how to define essential benefits, noting that minimum benefits should reflect those provided by small employers in the private market, rather than by large or medium-size employers that offer more generous coverage. It said federal officials also should determine what the national average premium of a typical small employer plan would be in 2014 and attempt to limit the national average cost of essential benefits below that threshold. The committee said the federal government generally should not require the coverage of new treatments unless they offer a "meaningful improvement in outcomes over current effective services."

According to the New York Times, the committee's recommendations likely would please employers and insurers but cause some concern for patient and consumer advocates who would like a broader set of benefits for specific conditions and services. Over the last two decades, many states have enacted coverage mandates for specific services and treatments. However, the IOM report said these state-mandated benefits should be subject to review and not automatically included in the federal list of essential benefits (Pear, New York Times, 10/6).