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If “Essential Health Benefits” Standards Are Repealed, Health Plans Would Cover Little

The White House and House Republican leaders are reportedly negotiating with House Freedom Caucus members to eliminate federal minimum benefit (“Essential Health Benefits”) standards for individual and small-group market plans as part of the House health bill.  That would leave many people with pre-existing conditions unable to find the coverage they need at any price, much less an affordable one; result in women being charged more than men; and expose many people with health insurance to unaffordable bills, or even put them at risk for medical bankruptcy.

All told, individual market coverage could end up as skimpy as it was before the Affordable Care Act (ACA) – or even skimpier.  Insurers in the individual market would still have to accept all applicants and charge them the same premium, regardless of health status. But eliminating what are known as “Essential Health Benefits” would once again let insurers discourage enrollment by people with costly health needs: they would do so by cutting covered health services and raising out-of-pocket costs.  Many insurers would substantially reduce and restructure the benefits they cover to entice healthy people to enroll, and to avoid those in poorer health or with pre-existing conditions.

What’s more, eliminating Essential Health Benefit standards could weaken the ACA’s core protections even for people with coverage from large employers. The ACA’s prohibition on annual and lifetime limits is tied to the definition of Essential Health Benefits. Thus, repeal of Essential Health Benefit standards could make this protection meaningless, putting almost all Americans with private health insurance coverage — not just those with individual or small-group market coverage — at risk.

Currently, federal minimum standards require that all individual and small-group health plans cover ten Essential Health Benefits: emergency services; hospitalizations; outpatient care; maternity and newborn care; mental health and substance use disorder treatment; prescription drugs; rehabilitation services; laboratory services; preventive services and chronic disease management; and pediatric care.  Most people purchasing health insurance probably assume that it covers these basic services. But before the ACA, it frequently didn’t. For example, in 2011, among people in the individual market:

  • 62 percent had plans that didn’t cover maternity care;
  • 34 percent had plans that didn’t cover substance use treatment;
  • 18 percent had plans that didn’t cover mental health; and
  • 9 percent had plans that didn’t cover prescription drugs.

If the Essential Health Benefit standards were eliminated, individual and small-group market plans would quickly revert to pre-ACA benefit packages.  In the individual and small-group markets, eliminating the Essential Health Benefit standards would likely:

  • Leave people who have pre-existing conditions without the coverage they need. People with pre-existing conditions — who need services like substance abuse treatment,  mental health services, or comprehensive prescription drug coverage — often wouldn’t be able to find the coverage they need at any price, much less an affordable one.

    Pre-existing conditions protections would still exist on paper: people with pre-existing conditions couldn’t be denied coverage or charged higher premiums for a given plan. But that wouldn’t matter much if they couldn’t find any plans that covered the health care benefits they need. Without Essential Health Benefit standards, insurers would likely stop covering those services as a way to discourage enrollment by sicker, more costly enrollees. And if plans did cover such costly treatments, they would charge exorbitant premiums because only those with pre-existing conditions would enroll in them.

  • Charge women more than men. In practice, eliminating Essential Health Benefit requirements means that women would once again be charged more than men, since they’d have to pay more for plans with maternity coverage — if they could find them.

  • Burden even insured people with unaffordable bills and medical bankruptcies. Before the ACA, millions of people had health insurance that wouldn’t actually cover them if they got sick. Plans often had annual and lifetime limits on coverage and no limits on individuals’ out-of-pocket costs, and they omitted key services.

    The ACA fixed this by prohibiting annual and lifetime limits and setting an annual limit on what enrollees can be required to pay out-of-pocket for deductibles and other cost-sharing. But eliminating the Essential Health Benefit standards would make these rules meaningless. That’s because the prohibition on annual and lifetime limits applies only to Essential Health Benefits, and the cap on out-of-pocket costs applies only to covered benefits — not to costs related to services that insurers decide to drop.

    That means insurers could again effectively cap the amount they would pay for a consumer with a high-cost or long-term health need such as cancer treatment. And just like before the ACA, people with health insurance would often be surprised, discovering too late that their health plan wouldn’t cover treatments they need, leaving them with staggering out-of-pocket costs — or even in medical bankruptcy.