Double-edged sword of federalism: variation in essential health benefits for mental health and substance use disorder coverage in states

The Affordable Care Act requires all insurance plans sold on health insurance marketplaces and individual and small-group plans to cover 10 Essential Health Benefits (EHB), including behavioral health services. Instead of applying a uniform EHB plan design, the Department of Health and Human Services let states define their own EHB plan. This approach was seen as the best balance between flexibility and comprehensiveness, and assumed there would be little state-to-state variation. Limited federal oversight runs the risk of variation in EHB coverage definitions and requirements, as well as potential divergence from standardized medical guidelines. We analyzed 112 EHB documents from all states for behavioral health coverage in effect from 2012 to 2017. We find wide variation among states in their EHB plan required-coverage, and divergence between medical-practice guidelines and EHB plans. These results emphasize consideration of federated regulation over health insurance coverage standards. Federal flexibility in states benefit design nods to state-specific policymaking-processes and population needs. However, flexibility becomes problematic if it leads to inadequate coverage that reduces access to critical health care services. The EHBs demonstrate an incomplete effort to establish appropriate minimum standards of coverage for behavioral health services.

The Regulatory Failure to Define Essential Health Benefits

Basic principles of economics suggest that health insurers should seek to avoid covering sick individuals and attempt to minimize the amount they have to spend if, despite the insurer's best efforts, such individuals enroll in coverage. The drafters of the Affordable Care Act recognized this natural tendency of insurers and put in place multiple provisions aimed at avoiding such behavior. One such tool was the requirement that all health insurers in the individual and small group markets cover an identical, comprehensive set of benefits known as the Essential Health Benefits (“EHBs”). EHBs were designed to ensure that consumers are able to access comprehensive coverage, but also to prevent insurers from trying to avoid high-risk enrollees by designing plans that appeal only to the healthy. Congress did not, however, statutorily define the full package of benefits, instead delegating primary authority for that task to the Department of Health & Human Services (“HHS”). This article argues that HHS has implemented the EHB requirements in a manner that appears structurally incapable of achieving the goals of the statute. By utilizing a vague definition of benefits, allowing benefit substitutions, and failing to limit use of service-level selection tools, HHS has permitted insurers to compete for low-risk insureds, avoid paying for certain high-cost treatments, and prevented consumers from making fully informed purchasing decisions.