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.

Paying for individual health insurance through tax-sheltered cafeteria plans.

When employees without group health insurance buy individual coverage, they do so using after-tax income--costing them from 20% to 50% more than others pay for equivalent coverage. Prior to the passage of the Patient Protection and Affordable Care Act (PPACA), several states promoted a potential solution that would allow employees to buy individual insurance through tax-sheltered payroll deduction. This technical but creative approach would allow insurers to combine what is known as "list-billing" with a Section 125 "cafeteria plan." However, these state-level reform attempts have failed to gain significant traction because state small-group reform laws and federal restrictions on medical underwriting cloud the legality of tax-sheltered list-billing. Several authorities have taken the position that insurance paid for through a cafeteria plan must meet the nondiscrimination requirements of the Health Insurance Portability and Accountability Act with respect to eligibility, premiums, and benefits. The recently enacted Patient Protection and Affordable Care Act addresses some of the legal uncertainty in this area, but much remains. For health reform to have its greatest effect, federal regulators must clarify whether individual health insurance can be purchased on a pre-tax basis through a cafeteria plan.