The Obama administration on Friday rolled out a benefits framework for millions of people who will get private insurance through the health care overhaul, but states will decide the specifics. The new law calls for the federal government to set a basic benefits package for private insurance. But that's tricky territory for the administration as it tries to avoid the "big brother" label on health care. Obama will be defending his signature domestic law on two fronts next year — before the Supreme Court and the voters.
Friday's proposal from Health and Human Services Secretary Kathleen Sebelius allows states to retain some leeway. Private insurance traditionally has been regulated at the state level, and many state officials don't like having to answer to Washington. The basic benefits package could eventually affect 90 million people, HHS said. That includes those who would gain private insurance thanks to the health care law, as well as many more currently enrolled in small employer and individual plans.
The new proposal would let states pick a benefits package from several federally approved options. Those range from benefits offered to federal and state employees to the most popular small business plans in the state and to a large health maintenance organization, or HMO.
"The proposal we're putting forward today reflects our commitment to giving states the flexibility they need," Sebelius said. It's a prickly relationship, with 26 states asking the Supreme Court to toss out the law. If a state doesn't want to pick benefits, the default will be the package available through the largest small business plan in that state.
Initial state reaction was positive. "This was a very smart approach for HHS," said Kansas Insurance Commissioner Sandy Praeger. "It builds on existing state law." Praeger, a Republican, chairs the health care committee of the National Association of Insurance Commissioners.
Starting in 2014, millions of people now uninsured will be able to buy private coverage in new state markets; taxpayer subsidies would help with premiums. Insurers wanting to participate in the new state health insurance exchanges will have to offer at least the federally approved "essential benefits package."
Business groups and consumer advocates are watching closely because they expect the federal government's decisions to set new national standards for health insurance. At issue is the right balance between affordable coverage and comprehensive benefits. Under the law, the benefits package must include such fundamentals as inpatient and outpatient care, emergency services, maternity and childhood care, prescription drugs, preventive screenings and labs.
It must also cover mental health and substance abuse treatment, as well as rehabilitation for physical and cognitive disorders, and dental and vision care for children. Such additional benefits are often not fully covered by frugal plans that are now the best that many small businesses can afford.
Traditionally regulated by the states, private insurance benefits vary widely across the country. Large companies can opt out of most state rules, although they usually offer comprehensive coverage. Consumer advocates had hoped Obama would set a robust standard for the whole nation. But his administration only met them part way.
"The essential health benefits package will for the first time define a minimum standard for health insurance coverage," said Stephen Finan of the American Cancer Society Cancer Action Network. "We urge states to choose a benchmark plan that provides the best care for someone at risk of a life-threatening chronic disease such as cancer."