Defining Essential Health Benefits

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Among recent developments in the implementation of the Patient Protection and Affordable Care Act (ACA), the Secretary of Health and Human Service’s decision to give states significant discretion in prescribing which benefits insurers must offer generated significant media attention. As described by Robert Pear in the New York Times, the ACA requires that insurance include “essential health benefits” in ten categories. Most observers had expected Secretary Sebelius to lay out exactly what insurers must provide in each category. Instead, the federal government will allow each state to designate an existing health insurance plan as a benchmark. Insurers will be required to provide benefits within each category that are of the same or greater value as the benefits offered by the benchmark plan. While proponents maintain that this approach allows states the flexibility to design benefits that reflect their own local marketplaces, other experts have expressed concern that the Secretary’s decision provides insurers with no certainty about what they must offer and adds to the states’ burden in implementing the law.

For public and private policymakers faced with decisions about health insurance benefit design, HCFO’s portfolio of funded research includes several relevant studies. Among them:

1. Factors Influencing the Success of Value-Based Insurance Design Programs (May 1, 2010—April 30, 2012). Niteesh K.Choudry, M.D., Ph.D., Brigham and Women’s Hospital. This on-going grant is analyzing a series of natural experiments of value-based insurance design (VBID) plans implemented by CVS Caremark on behalf of its clients. VBID provides incentives for enrollees to obtain high-value services through copayments that are lower than those of other services. To-date, this grant has produced one publication:

• Choudry, N. et al., “Assessing the Evidence for Value-Based Insurance Design,” Health Affairs, Vol. 29, No. 11, pp. 1988-94, November 2010. In this article, Choudry and colleagues present evidence for the widespread and growing use of VBID by employers, and document the lack of evidence to-date about its ability to improve quality and lower costs.

2. The Patient and System Benefits of Value-based Insurance Design (April 1, 2010—September 30, 2011), Matthew L. Maciejewski, Ph.D., Duke University. This grant explored the business case for VBID and has produced one publication to-date:

• Maciejewski, M.L. et al, “Copayment Reductions Generate Greater Medication Adherence in Targeted Patients,” Health Affairs, Vol. 29, No. 11, pp. 2002-08, November 2010. Using data from Blue Cross Blue Shield of North Carolina, Maciejewski found that VBID improved medication adherence for patients with chronic conditions in the short term, while noting that evidence on impacts on adherence and health spending over the long term is still needed to support the business case for VBID.

3. Effect of State Parity Laws on Children with Mental Health Care Needs (February 1, 2006—July 31, 2007), Susan Busch, Ph.D., Yale University. While other studies have evaluated the impacts for adults of state laws requiring that mental benefits be on par with physical health benefits in insurance policies, this study specifically looked at the impact on utilization of services and out-of-pocket financial burden for families with mental health needs.

• Busch, S.H. and C.L. Barry, “New Evidence on the Effects of State Mental Health Mandates,” Inquiry, Vol. 45, No. 3, pp. 308-22, Fall 2008. The researchers examine whether state mental health parity laws affect the use of behavioral health services more for some than others. They find that individuals in smaller firms are more likely to use services post-parity implementation and that this effect is especially pronounced among lower-income individuals.

• Barry, C.L., and S.H. Busch, “Do State Parity Laws Reduce the Financial Burden on Families with Mental Health Care Needs?” Health Services Research, Vol. 42, No. 3, Pt. 1, pp. 1061-84, June 2007. Using data from a large telephone survey of families with special needs children, the researchers found that living in a state with a mental health parity mandate significantly lowers the financial burden on families of children with mental health care needs.

4. Evaluation of Medicare's Local Medical Review Policies for New Medical Technologies (May 1, 2001—December 31, 2003), Susan Bartlett Foote, J.D., University of Minnesota. In this study, the author sought to determine the extent of variation across local Medicare carriers in their coverage of new and widely used technologies, and to assess the relative merits of uniform versus flexible approaches to coverage of services.

• Foote, S.B. et al., “Variation in Medicare’s Local Coverage Policies:  Content Analysis of Local Medical Review Policies” American Journal of Managed Care, Vol. 11, pp. 181-7, 2005. In examining local Medicare carrier coverage policies for various technologies, the authors found substantial similarity in coverage of new technologies and extended uses of new technologies, while there was significant variation in policies concerning the management of widely used procedures.

• Foote, S. B., “Focus on Locus:  Evolution of Medicare’s Local Coverage Policy,” Health Affairs, Vol. 22, No. 4, pp. 137-46, 2003. In this paper, Foote examines the history of local Medicare coverage policy and concludes that the focus on local versus national decision-making obscures fundamental issues of equal access to health benefits and quality.

While the grants above provide a sample of HCFO-funded evidence on benefit design, other studies related to this issue include:

Generic Substitution within a Class of Drugs for Medicare Part D Plans
Grantee Institution: Georgetown University
Principal Investigator: Jack Hoadley
Grant Period: April 1, 2010--September 30, 2011

Impact of State Policies Supporting Medicare Part D for the Dually Eligible
Grantee Institution: Brandeis University
Principal Investigator: Cindy Thomas
Grant Period: May 1, 2010--April 30, 2012

Surviving the Perfect Storm: Impacts of Benefit Reductions and Increased Cost Sharing in a Medicaid Program
Grantee Institution: Office of Oregon Health Policy and Research
Principal Investigator: Jeanene Smith
Grant Period: June 1, 2004--August 31, 2006

The Kaiser Permanente Medicare Demonstration: Policy Implications of Offering a Dual Option Benefit Package in an HMO
Grantee Institution: Brandeis University
Principal Investigator: Walter Leutz
Grant Period: October 1, 2003--April 30, 2005

Impact of Medicare [National Coverage Decisions]
Grantee Institution: University of Minnesota
Principal Investigator: Susan Bartlett Foote
Grant Period: November 1, 2003--October 31, 2006
 
An Early Portrait of Consumer-Directed Health Benefits: Design, Integration, Penetration, and Effects
Grantee Institution: Mercer Human Resource Consulting
Principal Investigator: Arnold Milstein
Grant Period: May 1, 2003--December 31, 2003

Effects of Prior Authorization of New Medications among Medicaid Beneficiaries with Bipolar Disorder
Grantee Institution: Harvard Pilgrim Health Care, Inc.
Principal Investigator: Stephen Soumerai
Grant Period: October 1, 2007--March 31, 2009

Establishing the Value of Stable Prescription Coverage for Medicare Beneficiaries
Grantee Institution: University of Maryland at Baltimore
Principal Investigator: Bruce Stuart
Grant Period: February 1, 2004--December 31, 2005

The Impact of Pharmaceutical Formularies on Prescription Drug and Health Care Costs and Utilization
Grantee Institution: Harvard University
Principal Investigator: Richard Frank
Grant Period: May 1, 2001--April 30, 2004

Capped Prescription Benefits and Medicare Managed Care
Grantee Institution: University of Arizona Health Services Center
Principal Investigator: Brenda Motheral and  Emily Cox
Grant Period: August 1, 1999--July 31, 2000