SECOND OPINIONS: Which Health Plan Benefits Are "Essential" under PPACA?

On 12/16/11, the Center for Consumer Information and Insurance Oversight (CCIIO), which operates under the Department of Health and Human Services, issued a bulletin outlining the process it intends to propose in defining "essential health benefits" under PPACA.  Below we discuss several questions we have received on essential health benefits, as well as the new bulletin.

How does PPACA Define Essential Health Benefits?  

PPACA defines “essential health benefits” to include items and services in the following general categories: 

  • Ambulatory patient services; 
  • Emergency services; 
  • Hospitalization; 
  • Maternity and newborn care; 
  • Mental health and substance use disorder services, including behavioral health treatment; 
  • Prescription drugs; 
  • Rehabilitative and habilitative services; 
  • Laboratory services; 
  • Preventive and wellness services and chronic disease management; and 
  • Pediatric services, including oral and vision care. 


Until further guidance is issued, PPACA regulations say the agencies will take into account “good faith efforts” to comply with a “reasonable interpretation” of the term “essential health benefits.”     

Are Plans Required to Cover Essential Health Benefits?  

Generally, non-grandfathered insured plans in the small group market, as well as plans offered through an Exchange, will be required to offer essential health benefits beginning in 2014.  Self-funded plans and insured plans in the large group market will not be required to offer this list of benefits (although they may want to in order to meet other PPACA requirements).  

However, all group health plans (both insured and self-funded) are prohibited from imposing lifetime or annual dollar limits on essential health benefits.  Starting with the 2011 plan year, plans no longer can impose lifetime limits on essential health benefits.  Group health plans only may impose restricted annual limits on essential health benefits until 2014, when plans may no longer impose any annual limits on essential benefits.  Prior to 2014, a group health plan is permitted to have an annual limit on essential benefits, as long as the annual limit is at least: 

  • $750,000 for the 2011 Plan Year (which begins on or after 9/23/10, but before 9/23/11); 
  • $1.25 million for the 2012 Plan Year (which begins on or after 9/23/11, but before 9/23/12); and 
  • $2 million for the 2013 Plan Year (which begins on or after 9/23/12, but before 1/1/14). 


What Does The New CCIIO Guidance Provide?  

CCIIO proposes to adopt a “benchmark” standard to define essential health benefits.  Specifically, states would choose a reference plan, which must include benefits in the 10 statutorily-required areas and which will serve as the standard for the essential health benefit covered services.  For 2014 and 2015, a state would be required to select the benchmark plan from:   

  • the largest plan by enrollment in any of the three largest small group insurance products in the state;  
  • any of the largest three state employee benefit plans;  
  • any of the largest three national Federal Employee Health Benefits Program (“FEHBP”) plans; or  
  • the largest commercial HMO in the state. 

If a state does not choose a benchmark, the default plan will be largest plan by enrollment in the small group market.  In addition, a state would be required to supplement a benchmark plan to the extent that the benchmark was missing a category of benefits.     

Clearly, this process could be extraordinarily burdensome to multi-state plans, since these plans would be exposed to 50 different essential health benefit definitions.  This approach essentially could require multi-state employers to tailor any lifetime or annual dollar limits to the specific requirements of each state.  In addition, while ERISA usually preempts state law with respect to self-funded plans, this is a federal mandate, so ERISA’s preemption provisions may not apply.    

Comments on CCIIO’s proposed approach are due via email by January 31, 2012.  This will be an areas for all health plans to watch.    

The bulletin can be accessed at


Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at     

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at      


Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.   

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.   


PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.