What are essential health benefits?

The Affordable Care Act (ACA) makes a number of changes to private health insurance plans. One important protection is the establishment of a package of essential health benefits.

This protection addresses two challenges for consumers. Too often, it is difficult to know exactly which health benefits are included in insurance plans. Also, insurers can sell plans that do not provide adequate benefits for enrollees and exclude coverage for services most people will need at some point in their life. The ACA addresses both problems by requiring most health insurance to contain at least a minimum set of core benefits, called the essential health benefits.

The details of what is included in the essential health benefits package will be determined by the Secretary of Health and Human Services (HHS) in a future regulation, but the ACA lists a set of core, federally-required benefits and describes the health plans which will not be required to offer these essential health benefits.

What benefits will be included in essential health benefits?

While the ACA sets a standard for the range of benefits health plans must cover, depending on the plan's actuarial value, a consumer's cost-sharing for those benefits could vary.

The essential health benefits are intended to mirror those provided under a typical employer-sponsored health plan. The HHS Secretary must define a package that includes, at a minimum:

• Ambulatory patient services, such as doctor's visits and outpatient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services, including behavioral health treatment
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including oral and vision care

While the ACA requires coverage for each of these categories, the law does not define the specific services that must be covered or the amount, duration, or scope of services. The HHS Secretary will define the specific benefits within each of these categories and will be able to update the definition over time to address gaps or respond to changing medical practices in the future.

In defining the essential benefits package, the HHS Secretary must decide not only which health services to include, but also how much discretion to leave to insurers in coverage decisions. For example, if the Secretary determines that physical therapy to treat lower back pain is a covered benefit, she could determine the minimum number of physical therapy sessions that must be covered to treat the condition, or she could leave that to the discretion of the insurers.

Currently, many insurers must cover certain services as requirements of state law. The ACA allows states to continue to mandate health benefits. However, going forward, if the mandated benefits are not included in the essential health benefits defined by the HHS Secretary, states will have to pay for any increased premium costs that result from those mandates. HHS will likely determine this process in future regulations. 

What are the cost-sharing rules for the essential health benefits?

The ACA links the essential health benefits package to limits on cost-sharing. So health plans that are required to provide essential health benefits will also be required to limit the amount consumers will have to pay out-of-pocket. Specifically, health plans will be prohibited from requiring consumers to pay annual cost-sharing that is greater than the limits for high deductible plans linked to health savings accounts. Currently, those limits are $5,950 per year for individuals and $11,900 per year for families. In addition, small group plans must limit deductibles to $2,000 for individual coverage and $4,000 for family coverage. As with all health plans under the ACA, there is no cost-sharing for certain preventive health services recommended by the United States Preventive Services Task Force.

Within these allowable limits, all health plans except grandfathered or self-insured plans will be required to provide consumers with specified levels of coverage, determined by the plan's actuarial value. The levels of coverage are set as percentages of the actuarial value of a plan that covers the full essential benefits package with no cost-sharing. These levels are represented as Bronze, Silver, Gold, and Platinum.

Which health plans must offer essential health benefits?

Starting January 1, 2014, the ACA requires individual and small group plans to include all essential health benefits, limit consumers' out-of-pocket costs, and meet the Bronze, Silver, Gold and Platinum coverage level standards - however, grandfathered and self-insured plans will be exempt. Large group plans (in most states, groups with more than 50 employees) are required to meet the cost-sharing limits and the benefit levels, but are not required to provide the full scope of benefits in the essential benefits package.

 

Beginning January 1, 2014			Must Provide Essential Health Benefits	Must Limit Cost Sharing and Deductibles
Health Plans in Exchange	Small Group		Yes	Yes
	Non-Group		Yes	Yes
Other Health Plans	New Plans	Self-insured	No	No
		Large Group	No	Yes
		Small Group	Yes	Yes
		Individual	Yes	Yes
	Grandfathered Plans	Self-insured	No	No
		Large Group	No	No
		Small Group	No	No
		Individual	No	No