How to understand the ACA’s minimum essential benefits, costs

Starting next year, the Affordable Care Act requires individual and small group insurance plans to cover 10 “essential” health benefits. But, these minimum essential benefits go beyond the coverage that many individuals and small businesses purchase today, so plan costs may increase to meet the coverage requirements.

“Regardless of your funding type, whether you’re self-funded or not, your plan is required to provide the minimum essential benefits,” says Mark Haegele, director, sales and account management at HealthLink. “But something that wasn’t really contemplated is the difference by states based on price points from different providers.”

Smart Business spoke with Haegele about the minimum essential benefits and their impact on individuals and small employers.

What are minimum essential benefits?

Starting Jan. 1, 2014, all health insurance policies sold to individuals and small employers must cover a broad range of benefits, setting a standard for all plans and allowing for easy comparison. The 10 categories of coverage are:

  • Ambulatory services. 
  • Emergency services.
  • Hospitalization. 
  • Maternity/newborn care. 
  • Mental health/substance abuse. 
  • Prescription drugs. 
  • Rehabilitative and habilitative services and devices. 
  • Laboratory services.
  • Preventive and wellness/chronic disease management.
  • Pediatric services, including oral and vision.

Plans offered on the insurance marketplaces also must cover these benefits. 

In addition, plans will be separated into tiers, which helps consumers compare plans. Known as the metal levels, there are bronze, silver, gold and platinum plans. Essential health benefit plans must cover at least 60 percent of costs. The only exception is catastrophic plans that target people younger than 30 or otherwise unable to obtain affordable coverage.

How is this different from minimum essential coverage?

Although they sound the same, minimum essential coverage (MEC) only applies to large employers, those with more than 50 full-time equivalent employees. MEC relates to the employer mandate, ‘play or pay,’ that was pushed back to 2015, where employers must at least provide preventive and wellness care or face fines.

Small employers aren’t required to offer insurance. But if they do, the plans they buy must cover the 10 essential categories. 

Large employer group plans do not have to cover the essential health benefits, but there cannot be annual or lifetime dollar limits on the benefits within this set.

How might minimum essential benefits increase insurance premiums?

Plans may now have to cover new areas, such as pediatric vision care coverage as part of the medical benefit for children up to age 19, which could increase premium costs. Like other essential health benefits, there are no annual or lifetime dollar limits allowed. 

According to the U.S. Department of Health and Human Services, many individuals purchasing coverage don’t currently have coverage for maternity services (62 percent), substance abuse services (34 percent), mental health services (18 percent) and prescription drugs (9 percent).

However, the out-of-pocket costs paid by individuals will likely be lower, according to the American Academy of Actuaries.

How might costs vary by state?

If you live in a state with a lightly regulated insurance industry, the minimum essential benefit plans’ more comprehensive coverage will have a greater impact. That’s because insurers previously sold ‘bare bones’ plans that excluded the sick, keeping costs down. Independent estimates of premium impact in the individual market, according to America’s Health Insurance Plans, have large increases in Maine (33 percent), Indiana (20 percent) and Ohio (20 percent). Other states — Rhode Island (0.13 percent), Colorado (2.2 percent) and Wisconsin (6 percent) — will see less of an impact.

To further complicate matters, states can specify benefits within each of the essential categories, at least for 2014 and 2015.

Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or [email protected].

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