The Obama administration said Friday it would shift to states the decision about what treatments many insurance plans must cover under the health-care overhaul, sidestepping contentious fights with Republican state officials and patient-advocacy groups.
The move—a departure from the way the administration had been expected to implement the provision—disappointed some disease-advocacy groups that had hoped federal regulators would spell out exactly what services insurance policies for millions of Americans will have to cover to be sold in state-run insurance exchanges that open in 2014.
Instead, the administration said states could use what is now offered in their local markets as the basis to determine what benefits must be included in new plans sold to individuals and small groups.
The move represents an attempt by the administration to defuse Republican criticism that the law gives the federal government too much control over Americans' medical care. But some small-business employers immediately raised concerns that the change would make plans more expensive for them.
States will be able to set their coverage standards to align with either those of the most popular federal-employee plans in the state; the most popular state-government employee plans; the largest plans offered to consumers who buy coverage in small groups, or the largest HMO in a state's market.
"As we've acknowledged many times, coverage that works in Florida may not work in Nebraska," said Health and Human Services Secretary Kathleen Sebelius.
Republicans and employer groups warned the approach could allow states to mandate a rich benefit package, particularly because the federal employees' health-benefits plan is among the country's more generous packages. The most popular national federal-employee plan offered by Blue Cross and Blue Shield typically covers some therapies for a person with autism, chiropractic services and infertility drugs, among other things.
Neil Trautwein, employee-benefits policy counsel at the National Retail Federation, said he was concerned the cost of a federal-employee plan could be beyond the reach of an individual purchaser or a small employer.
The approach also made some disease groups wary that their ailment could get left out of the final benefits requirements.
"It's not what we were asking for," said Carl Schmid, deputy executive director of the AIDS Institute. "I think it's very clever what they did, but I think that what patient groups were looking for was a list of mandated services. This is still going to allow a patchwork of care and that's what I thought we were going to try to get beyond."
Some larger patient-advocacy groups said they were optimistic that if states opt for the standards of the federal plan, it would be helpful for their members, though they were less sure about the impact of states picking the other benchmarks.
"People with cancer and their families have fared well under the largest federal employees' health-benefits plan," said Stephen Finan, senior director of policy at the American Cancer Society Cancer Action Network. "The quality of coverage patients receive under the three other options…is less certain."
Federal health officials said Friday they expected most of the options offered in the state exchanges to meet the wider coverage requirements outlined in the law. In some instances, they said, states might have to ensure their standards included rehabilitative and pediatric dental and vision services to comply with the measure.
The implementation plans also raise questions of possible disparity, with people in some states having better plans than others. And depending how substantive the coverage differences are among states, it could lead some people to move in an attempt to get better coverage elsewhere.
The move came in a "bulletin," which isn't binding but indicates the regulations the federal government is going to issue in the future.
Steve Larsen, a top HHS official in charge of enacting the overhaul law's insurance changes, said the bulletin was intended to help states plan ahead as they start new legislative sessions in January.
If a state refuses to set up an exchange, the federal government will run it for them. If this happens, the government will use one of the largest local small-group plans operating in the state to set standards for its exchange, officials said, an effort to be seen as committed to a market-based approach.
Many state governments are hostile to the overhaul law, and 26 have brought a case challenging its constitutionality, which will be decided by the Supreme Court next year.
Some of those states are simultaneously taking steps to implement the law locally, including setting up exchanges. Many governors in those places argue that it is preferable to retain as much state control over how the law is operating in their state if it is upheld.