Flexibility on ‘essential benefits’ will increase cost of insurance for pregnancy, addiction, and mental illness

The Affordable Care Act protects people who buy insurance against a comprehensive set of health care risks. It specifies a set of 10 essential health benefits that all plans must cover, and also requires that plans provide those benefits with defined levels of cost-sharing by the individuals covered. By offering benefit “flexibility,” the Republican bill to replace the ACA could mean more expensive insurance for covering pregnancy, newborn care, mental illness, and addiction disorders.

The 10 essential benefits now required of all plans sold in the health insurance marketplaces, also called health exchanges, include outpatient care, hospital care, emergency services, prescription drugs, laboratory tests, preventive care, rehabilitative services, pediatric care, mental health services and addiction treatment, and maternity and newborn care.

The ACA doesn’t define coverage levels using specific deductibles, copays, etc. Instead, it uses the “actuarial value” of the plan. A plan with an actuarial value of 60 percent (a bronze plan) means that the plan will pay on average 60 percent of an enrollee’s health care expenses, while he or she will pay the remaining 40 percent using copays, coinsurance, deductibles, etc. A platinum plan covers 90 percent, with the enrollee on the hook for 10 percent.

House Republicans have unveiled the American Health Care Act, their bill to replace the ACA. It envisions a return to the pre-ACA world of insurance company “benefit flexibility” by removing the essential benefit requirements for plans covering the Medicaid expansion population.

For individual marketplace insurance, the AHCA removes the requirement to cover specified percentages of the expected medical costs. This means that while plans are required to include the full set of benefits, they are free to raise the cost sharing for particular benefits — like mental health services or maternity and newborn care — to potentially prohibitive levels.

What might that mean for the resulting plans sold to the estimated 22 million people who buy their health insurance in the individual health insurance market? That’s a question we can answer, thanks to a survey conducted by the Department of Health and Human Services when one of us (S.A.G.) was the department’s assistant secretary of planning and evaluation.

Before the opening of the ACA’s health insurance marketplaces in 2014, most companies selling plans on the individual market had flexibility in what they included. In most states, plans sold in the individual market did not have to include any particular set of benefits. States had the same flexibility to set benefit standards.

In 2011, HHS looked at the design of plans in this largely unregulated market using data that health insurance companies had submitted. These data represented an estimated one-third of all people who bought their own non-group health insurance.

The survey had three important findings:

Benefit flexibility yielded only modest savings. The cost savings from allowing benefit flexibility were modest. Most plans in the survey covered most of the categories in the essential health benefits set. The overwhelming majority of employer-sponsored health insurance met or exceeded the minimum benchmark set of services later required by the ACA. In the individual health plans, about 95 percent of the cost was accounted for by basic benefits — inpatient, outpatient, emergency, lab, and pharmaceutical. Because most individual health insurance plans covered most of the essential benefits, there was little in the way of savings from allowing benefit design flexibility.

Often omitted: maternity and pregnancy coverage. One of the most frequently omitted benefits across the market was maternity and pregnancy coverage. Nearly two-thirds of the plans surveyed didn’t include it. Although many insurers did sell health insurance riders that covered maternity and pregnancy care, they were expensive, costing about $5,000 more a year.

Also missing: treatment for mental illness and substance use disorder. Another category missing from many of the individual plans was coverage for mental illness and substance use disorder. About 34 percent of the plans surveyed did not include any coverage for substance use disorder treatment, and 18 percent provided no coverage for mental health care. Translated into today’s individual health insurance market, that means about 7.5 million people currently covered by ACA plans would lose coverage for substance use disorder treatment and 4 million would lose coverage for mental health care. Buying that care could cost an average of $2,000 to $4,000 for a single episode of treatment. Among the plans that did offer coverage for these behavioral health disorders, patients were usually restricted to a limited number of covered days or visits. The typical coverage before 2014 was 20 outpatient visits and 30 inpatient days a year. This left households with family members suffering from addiction or mental illness susceptible to very large uncovered medical bills.

Consequences for pregnant women, people with mental illness

If pregnancy benefits aren’t included in an individual health plan, or are covered with extremely high cost-sharing, women and their families with such coverage who anticipate having a child will pay an extra tax of thousands of dollars to cover the expected costs of pregnancy. Today, the cost of carrying a pregnancy to term averages at least $20,000 for pregnancy and newborn care. That’s certainly not family-friendly coverage.

In the employer-sponsored health insurance market, the costs of pregnancy and newborn care have long been spread across all those covered. The ACA requires that non-group insurers act in the same way, adding roughly 5 percent to average premiums while making childbirth affordable for millions of families.

Insurers would also like to avoid covering people with depression, serious mental illnesses, and alcohol or opioid addictions. Like other preexisting conditions, they are generally more expensive to cover. While these severely disabling illnesses can be addressed effectively through treatment, they are also highly stigmatized chronic illnesses.

But what makes sense for insurers’ bottom lines doesn’t make much sense for us as a nation. As we struggle with the burdens of the opioid epidemic and of untreated mental illness in our communities, our social welfare programs, and our families, we should be simplifying the path to treatment, not reinstalling barriers to treatment.

The evidence from research on and experience with the individual health insurance market shows that providing essential health benefits is not the source of meaningful upward pressure on the cost of health care. Moreover, the benefits most prone to dramatically shrink or disappear in the absence of essential health benefits and coverage requirements are those that protect parents of newborns against substantial financial burdens and provide tools against the nation’s scourge of opioid deaths, serious mental illness, and suicide.

If Republicans move forward with their current health care bill, health insurance companies will regain benefit flexibility, but two key groups will suffer the consequences: pregnant women and their families, and people struggling with mental illness or addiction. These vulnerable groups of people will be forced to pay more for their health coverage, and will lose access to critically needed health care.

Richard G. Frank, PhD, is professor of health economics at Harvard University and Sherry A. Glied, PhD, is dean of the Wagner Graduate School of Public Service at New York University. Both were previously the assistant secretary of planning and evaluation in the Department of Health and Human Services, Glied from 2010 to 2012 and Frank from 2014 to 2016.