Seeking to defuse a potential showdown over a key part of the new healthcare law, the Obama administration moved Friday to let states, rather than the federal government, define which medical benefits insurance companies will have to offer consumers starting in 2014.
That allows state leaders to retain more control of health insurance even as the law extends a new federal guarantee that all Americans can get coverage, even if they are sick.
“This is significantly more state-flexible and friendly than many would have expected,” said Alan Weil, head of the National Academy for State Heath Policy.
It remains unclear, however, whether the administration’s efforts to shift responsibility for a critical part of the law onto states will ease its implementation or control rising costs, a major threat to the new law.
The law creates Internet-based insurance exchanges in 2014 where Americans who don’t have job-based coverage will be able to buy health insurance much as they now comparison shop for airline tickets.
Insurers selling plans in these state-based exchanges must cover a basic set of benefits, including hospitalizations, emergency care, newborn and maternity care and pediatric services. The law gave the Department of Health and Human Services the authority to decide how generous those benefits should be.
That has fueled an intense debate between consumer advocates, who are pushing for more extensive coverage, and employers and insurance companies, which are worried that too many benefit mandates would push up costs.
More than 30 million Americans, including many who work for small businesses, ultimately are expected to use these exchanges to get health plans. Many will qualify for federal aid to help them buy their plans.
By giving states authority to define the scope of covered benefits, the Obama administration potentially sidestepped an ugly showdown between consumer and business groups in the run-up to the presidential election. Administration officials also may have undercut a charge from opponents of the law that the federal government is usurping state authority.
Under the guidance issued Friday, state leaders can define their own set of benefits by using an existing major health plan in their state as a benchmark.
That means that some states may require insurers to cover services such as chiropractic therapy or in vitro fertilization, while others may not. The rules will not affect co-payments, cost sharing and deductibles, which play a major role in determining premiums.
Debates over insurance mandates are common at the state level, where consumer advocates often square off against insurers and business groups.
On Friday, the prospect of more such debates in the 50 states was greeted warily by both sides.
“What’s to guarantee that the state’s choice of a benchmark plan will be affordable?” said National Retail Federation Vice President Neil Trautwein, who is helping lead a coalition of business and insurance groups. “If coverage is unaffordable today, this doesn’t change the equation.”
Families USA Executive Director Ron Pollack, a longtime advocate for federal health reform, also expressed reservations.
“We understand the inclination to balance flexibility, comprehensiveness of coverage, and cost,” he said. “However, flexibility must yield to reliable, comprehensive coverage of benefits for consumers.… It is essential that HHS provide strong oversight and enforcement.”