Question: How do the ACA essential health benefits rules apply to employer-sponsored group health plans?

Short Answer: Most employer-sponsored group health plans are not required to offer essential health benefits, but all plans cannot impose a lifetime or annual dollar limit on any covered essential health benefit.

Essential Health Benefits Defined

The ACA broadly defines essential health benefits (EHB) into ten categories:

• Ambulatory patient services (outpatient care you get without being admitted to a hospital)

• Emergency services

• Hospitalization (like surgery and overnight stays)

• Pregnancy, maternity, and newborn care(both before and after birth)

• Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy)

• Prescription drugs

• Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)

• Laboratory services

• Preventive and wellness services and chronic disease management

• Pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits)

Most Employer-Sponsored Group Health Plans are Not Required to Offer EHB

Employer-sponsored group health plans (GHPs) are not required to offer EHB unless they meet all three of the following:

• Small group market;

• Fully insured; and

• Non-grandfathered.

This means that most GHPs are not required to offer EHB.  In other words, any GHP that is large group, self-insured (including level funded), or grandfathered is not subject to the ACA requirement to offer EHB.

For more details on grandfathered plan status, see our previous post: ACA Grandfathered Plan Status. 

The ACA Prohibits All Employer-Sponsored GHPs from Imposing Lifetime or Annual Dollar Limits on EHB

Even though most GHPs are not required to offer EHB, the ACA prohibits all GHPs from imposing a lifetime or annual dollar limit on any EHB that the plan does offer.

State Benchmark Plan Determines EHB Scope for Purposes of ACA Annual and Lifetime Dollar Limit Prohibition

The ACA outlines ten basic categories of EHB, but the specific EHB within each category are set by reference to a state EHB benchmark plan selected by the GHP.  The GHP may choose any state benchmark plan to define EHB for the plan’s purposes—regardless of whether the employer has any connection to that state.

Although many such GHPs will not be required to offer EHB, all GHPs still need to be aware of the EHB defined by the selected state benchmark plan for purposes of determining which benefits are subject to the ACA prohibition on lifetime or annual dollar limits.

A collection of all of the state EHB benchmark plans is available here (beginning at “Essential Health Benefits Benchmark Plans”): https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html

Note Regarding ACA Terminology

The ACA essential health benefits rules are not related to the ACA employer mandate rules requiring Applicable Large Employers (ALEs) to offer “minimum essential coverage” that is “affordable” and provides “minimum value” to avoid potential §4980H penalties.  For more details on those rules, see our Newfront ACA Employer Mandate Pay or Play and ACA Reporting Guide.

Regulations

45 CFR §156.110(a):

(a) EHB coverage.

Provide coverage of at least the following categories of benefits:

(1)   Ambulatory patient services.

(2)   Emergency services.

(3)   Hospitalization.

(4)   Maternity and newborn care.

(5)   Mental health and substance use disorder services, including behavioral health treatment.

(6)   Prescription drugs.

(7)   Rehabilitative and habilitative services and devices.

(8)   Laboratory services.

(9)   Preventive and wellness services and chronic disease management.

(10)   Pediatric services, including oral and vision care.

78 Fed. Reg. 12834, 12869 (Feb. 25, 2013):

https://www.govinfo.gov/content/pkg/FR-2013-02-25/pdf/2013-04084.pdf

Non-grandfathered plans in the individual and small group markets both inside and outside of the Exchanges along with certain other types of plans must cover EHBs beginning in 2014. Self-insured group health plans, health insurance coverage offered in the large group market, and grandfathered health plans are not required to cover the essential health benefits.

80 Fed. Reg. 72191, 72200 (Nov. 18, 2015):

https://www.gpo.gov/fdsys/pkg/FR-2015-11-18/pdf/2015-29294.pdf

Thus, under these final regulations, group health plans (and health insurance coverage offered in connection with such plans) and grandfathered individual market coverage that are not required to provide EHB may select among any of the 51 EHB base-benchmark plans identified under 45 CFR 156.100 and selected by a State or the District of Columbia and the FEHBP base-benchmark plan, as applicable for plan years beginning on or after January 1, 2017, for purposes of determining which benefits cannot be subject to annual and lifetime dollar limits.

29 CFR §2590.715-2711:

(a) Prohibition.

(1) Lifetime limits. Except as provided in paragraph (b) of this section, a group health plan, or a health insurance issuer offering group health insurance coverage, may not establish any lifetime limit on the dollar amount of essential health benefits for any individual, whether provided in-network or out-of-network.

(2) Annual limits.

(i) General rule. Except as provided in paragraphs (a)(2)(ii) and (b) of this section, a group health plan, or a health insurance issuer offering group health insurance coverage, may not establish any annual limit on the dollar amount of essential health benefits for any individual, whether provided in-network or out-of-network.

(ii) Exception for health flexible spending arrangements. A health flexible spending arrangement (as defined in section 106(c)(2) of the Internal Revenue Code) offered through a cafeteria plan pursuant to section 125 of the Internal Revenue Code is not subject to the requirement in paragraph (a)(2)(i) of this section.

…

(c) Definition of essential health benefits.

The term “essential health benefits” means essential health benefits under section 1302(b) of the Patient Protection and Affordable Care Act and applicable regulations. For the purpose of this section, a group health plan or a health insurance issuer that is not required to provide essential health benefits under section 1302(b) must define “essential health benefits” in a manner that is consistent with the following:

…

(2) For plan years beginning on or after January 1, 2020, an EHB-benchmark plan selected by a State in accordance with the available options and requirements for EHB-benchmark plan selection at 45 CFR 156.111, including an EHB-benchmark plan in a State that takes no action to change its EHB-benchmark plan and thus retains the EHB-benchmark plan applicable in that State for the prior year in accordance with 45 CFR 156.111(d)(1), and including coverage of any additional required benefits that are considered essential health benefits consistent with 45 CFR 155.170(a)(2).