Saying Goodbye to Junk Insurance: The Benefit of Essential Health Benefits in California…

Health Access has fought a long battle against junk insurance, the kind of limited benefit policies that leave patients in significant medical debt, even after paying premiums–and leave the rest of us in fear of the fine print, wondering if what we come down with is actually covered.

Former Insurance Commissioner John Garamendi sometimes called these “skeleton policies.” Some policies permitted under California’s Insurance Code cover only hospital care, but not doctor care, or only the second day in the hospital, but not the first, or that provide no coverage for prescription drugs except for a handful of generic drugs. These policies are not permitted for coverage regulated by the Department of Managed Health Care under the Knox-Keene Act: these policies must cover medically necessary doctor visits, hospitalization, lab, radiology, etc.

On Friday, Dec. 16, HHS issued a “bulletin” seeking comment on a proposed approach to “essential health benefits” that would in California outlaw junk insurance in the individual and small employer markets where it has been most prevalent. Essential health benefits (or EHB) are the minimum benefits that insurers must sell to individuals and small employers.

Other, earlier action by HHS on annual and lifetime limits had already made it clear that “mini-meds” and other limited benefit policies will not be allowed in the large employer market after 2014 and HHS re-affirmed that policy on Friday.

Federal Proposal: Not as Good as a Strong National Standard but Likely Okay for California

Like other consumer advocates, Health Access California had hoped for a strong national standard on essential health benefits.

We have been comforted to learn that nationally most employers, both large and small, cover a similar set of services that is very similar to what the vast majority of employers provide in California. The difference between large employers and small employers is that small employers tend to pay a smaller share of the premium or have higher copays and deductibles but they usually cover the same benefits as large employers.

A strong national standard was our first choice. But we had begun to be worried by what we heard from other states and from the national level. Some advocates talked about limits on hospital stays or caps on doctor visits as a possibility. The Institutes of Medicine recommended a dollar cap far below what is spent in California. So we were worried.

In our testimony to the federal HHS listening session in November, we pointed out that limits on medically necessary care would be a take-away for the nearly 20 million Californians who have coverage regulated by the Department of Managed Health Care. Coverage regulated by DMHC must by law and regulation cover medically necessary care, including hospitals, physicians, laboratory, radiology, hospice and other basic services.

The bulletin released on Friday indicates a proposed regulatory approach from the federal government. Similar to what was done for CHIP (Healthy Families in California), states are offered a menu of “benchmark plans” including:
· One of the three largest plans for small employers by enrollment
· One of the three largest state employee plans by enrollment
· One of the three largest federal employee health plan options by enrollment
· The largest HMO plan offered in the state’s commercial market by enrollment.

This gives each state flexibility, but within limits. National consumer advocates are appropriately concerned about what states will do with such flexibility. Each state has to pick one: what is California likely to do? What should advocates support?

Knox-Keene plus drugs (plus mental health/substance abuse plus more)

California’s current standards have both gaping holes in the Insurance Code, but actually most of the market abides by a comprehensive standard in the Health and Safety Code called “Knox-Keene.” The plans regulated by DMHC under the Knox-Keene Act cover more than 90% of Californians with coverage regulated at the state level. DMHC is the sole regulator of HMOs. Over two-thirds of small employer coverage is regulated by the Department of Managed Health Care.

All of this suggests that the kind of benefits most Californians get from their employer, benefits that cover medically necessary doctors, drugs, hospitalizations, lab/radiology, etc., should and will be the benchmark for essential health benefits. In the shorthand of advocates, this is known as Knox-Keene plus drugs (plus mental health and substance abuse treatment plus pediatric dental and vision). The addition of medications would mostly follow industry practice: The Knox-Keene which was enacted in 1975 did not include prescription drugs as a basic benefit though today over 95% of employers, large and small, purchase comprehensive prescription drug coverage.

Benefit Mandates: Mammograms, maternity, autism, and more

There have also been lots of questions about what happens with benefit mandates. Insurers in California complain that California has 46 benefit mandates: our response is to ask them which do they want to repeal? Pap smears, mammograms, childhood immunizations or diabetes supplies? Maternity coverage (enacted in 2011) or autism coverage (also enacted in 2011)?

The new federal guidance says that if the benchmark plan picked by a state includes benefit mandates, then the state can leave those in place, at least through the year 2016. This means that if California picks either the largest HMO plan or one of the three largest plans offered to small employers, then the benefit mandates in place today remain in place.

Because the recently enacted autism mandate does not include CalPERS, it is less likely that the state public employee plans offered by CalPERS will be the standard for benefits in California. And because federal employee health benefits limit reproductive services in a manner not permitted by the privacy clause of the California Constitution, as repeatedly interpreted by the California Supreme Court, it is less likely that the federal employee health benefits plans will be the benchmark chosen in California.

More to learn

We do not yet know precisely which products meet the standards proposed by the feds. We have some pretty good guesses but we await the regulators gathering solid information.

We also need to understand better what this means for autism, for mental health parity, for substance abuse treatment and for rehabilitative services as well as pediatric services, particularly vision and dental.

But for now, we can say that the proposed approach on essential health benefits is probably okay for California and certainly better than what we feared.

And at long last, it means the end of junk insurance. No longer will people who buy “catastrophic” coverage find it does not cover breast cancer like Susan Braig of Altadena. No longer will people who buy health insurance find that it does not cover $98,000 of hospitalization for a rattlesnake bite. Health insurance will actually cover the health care people need.

Health Access California promotes quality, affordable health care for all Californians.
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