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Report Urges Affordable Health Plans for State-Run Insurance Exchanges

Source: WSJ - Louise Radnofsky

Posted on 10 Oct 2011

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Requirements for health-insurance plans offered through new government-run exchanges should be tailored to what small businesses can afford, a key report to the Obama administration recommended.

The report—from the Institute of Medicine, an independent board that advises the government on health policy—will play a pivotal role in determining how the Department of Health and Human Services decides what benefits must be covered under plans offered on state-run insurance exchanges starting in 2014.

It didn't tell the administration which types of benefits should be included in plans. But it strongly warned against requiring lots of coverage for specialized services that could make plans costly.

"If it was not affordable, then many people would not be able to obtain it, even with government help, and this would conflict with the purpose" of the health care overhaul law, the institute wrote in its report to the government.

How the package is designed is creating a showdown that pits medical specialists and advocacy groups against employers and insurance companies.

Groups representing autism specialists, chiropractors, acupuncturists and others see a chance to get broad coverage and are lobbying heavily for specific inclusion in the final package requirements. Employers and insurers are forcefully pushing back, warning that covering too many ailments will make insurance so expensive that some employers could stop offering coverage altogether.

"We had feared that they might take a different tack and favor benefits over cost, and we think they've taken the best course," said Neil Trautwein, a vice president at the National Retail Federation.

Marc Boutin, executive vice president for the National Health Council, an umbrella group for specialized disease advocacy organizations, said he had hoped to see the institute make more-explicit recommendations in favor of a broad range of coverage and that his group now "strongly encouraged" HHS to consider the suggestions proposed by patients groups.

The guidelines apply to policies that will be sold in insurance exchanges designed for individuals and companies employing fewer than 50 workers. But they are expected to broadly influence how employers design their benefits packages. The institute estimated that 68 million Americans will have access to insurance covered by the provision.

The report recommends that HHS calculate the average premium that would be paid by typical small employer plans in 2014, and make sure that rules issued by the HHS secretary for what benefits are "essential" don't push premiums over that amount.

"The committee was concerned about affordability, not just for the individual but for small businesses and the government," said Paul Fronstin, one of the members of the committee that compiled the report. "We wanted to give the secretary a tool to use as a test as to whether the package was affordable or not, keeping in mind that coverage is already unaffordable for a lot of people."

A separate actuarial analysis by the National Health Council found that if regulators based the benefit package on a popular Blue Cross Blue Shield plan used by federal workers, it would cost $5,032 for an individual plan and $12,418 for a family plan. There would be no way to provide all those benefits and still meet the cost guidelines for the cheapest plan design that's supposed to be sold inside the exchange, the group found.

The institute's report suggests that the department form its conclusions through a "public deliberation process" of small group meetings around the country, and that it update its final decisions annually.

HHS Secretary Kathleen Sebelius, responding to the report, said that the department would be following the institute's recommendations to organize "listening sessions" to get input for what should be included. "Before we put forward a proposal, it is critical that we hear from the American people," she said in a statement.

HHS hasn't said when it intends to issue rules that precisely spell out which benefits must be included for the new plans.