HHS Releases Insurance, Pre-Existing Conditions Regulations

By Matt Cover | November 21, 2012 | 9:49 AM EST

President Barack Obama and HHS Secretary Kathleen Sebelius at the White House, Feb. 10, 2012. (AP Photo/Susan Walsh)

(CNSNews.com) – The Department of Health and Human Services (HHS) released long-awaited proposed regulations outlining which types of health care services insurance companies must offer and which pre-existing conditions they can take into account when adjusting premiums.

Days after it extended the deadline for states to decide if they will establish an insurance

exchange, HHS issued proposed regulations outlining what the Obamacare law calls Essential Health Benefits – the package of health care services insurance companies must provide in order to be allowed to sell their product on the exchanges.

The EHB regulation is important, because they are the final missing piece of the puzzle many states were waiting for to see if they would establish their own exchanges because each state-run exchange is required to verify whether insurance companies provide all of the EHBs.

HHS defined essential health benefits as providing health benefits in 10 broad 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 and devices

-- Laboratory services

-- Preventive and wellness services and chronic disease management

-- Pediatric services, including oral and vision care

Obamacare states that each of these 10 categories be based on the typical employer plan in each state. Because such a thing does not technically exist, HHS established a benchmarking process states can use to determine exactly what EHBs are.

HHS said “that all plans that cover EHB must offer benefits that are substantially equal to the benefits offered by the benchmark plan.”

In other words, HHS is letting states that choose to establish an exchange have the authority to fix the insurance market in their states, essentially establishing one health insurance company’s product as the government-approved standard for health insurance that all consumers must have.

If any other company wants to sell health insurance in that state, it must offer the same product as this government-favored competitor.

If states do not establish an exchange, HHS will pick for them, choosing the benefits package of the largest small-group insurance plan in that state.

HHS also set out regulations for Obamacare’s ban on using pre-existing conditions to determine health care premiums.

Most commonly thought of as a ban on denying people coverage based on a previous illness or health problem, the ban in fact goes much farther than that. In reality, the ban dictates to insurance companies the factors they may take into consideration when determining where to set premiums.

In its proposed regulation, HHS said that insurance companies can only take four factors into account when setting premiums: age, tobacco use, family size, and geographic location. HHS said that any other characteristic, including alcohol and drug abuse, cannot be taken into account when determining premiums.

HHS also said that consumers were guaranteed the ability to renew their coverage and could not be denied the ability to renew coverage based on pre-existing conditions or because they became sick.

The proposed rule also mandates that states have only one risk pool for individual and group health plans respectively, forcing insurance companies to put high-risk, high-cost customers such as drug addicts or alcoholics into the same risk pool as healthy people.