A key question for HHS is to consider how to comment on the use of limits—which are prevalent in benefit plan administration—given the ACA’s intent to reform insurance industry practices, she said. Health insurance coverage entails legal and financial risk. For this reason, insurers logically seek to structure their products to provide risk exposure protection against the covered population. These risk avoidance techniques, however, go well beyond strategies for assuring that insurance pays only for medically necessary care. Ms. Rosenbaum cited an example of a once prevalent, but now precluded intoxication exclusionary clause from when many believed alcoholism was a behavioral choice not a medical condition: if the injury or the illness was related to intoxication, the plan would not provide coverage on the grounds of this “morals clause” (Rosenbaum et al., 2004). She urged the committee to keep this example in mind when developing recommendations for the Secretary. She clarified that it is necessary to put some limits on what is a covered treatment, but she believes the ACA is trying to convey that insurers cannot come up with treatment distinctions by labeling underlying conditions in ways that push specific individuals outside of the scope of the contract.
Under the ACA, the Secretary has the primary responsibility for setting up a federal framework for essential health benefits (EHB) coverage, but Ms. Rosenbaum opined that the Secretary may decide on a framework that delegates a “fair amount” of authority back to plans. For example, the Secretary could conceivably instruct insurers and plan administrators to utilize the terms and definitions in their most popular group health products as long as such terms and definitions do not discriminate on the basis of disability by, for example, defining a benefit as covered only in cases in which restoration or recovery are possible. This approach to tempering delegated authority is consistent with other laws, such as the Mental Health Parity Act,9 which gives insurers and health plans discretion over whether to cover mental illness and substance use disorder benefits but prohibits the use of discriminatory quantitative and non-quantitative coverage limits. “It is wrong,” she said, “to conclude that the essential health benefit statute leaves the status quo in play. The essential benefit statute is an enormous, profound departure from the way in which we’ve conceptualized the discretion of insurers, but that is not to say that [the Secretary] could not specify a fair and nondiscriminatory framework and process to avert discrimination in benefit design and making coverage determinations.”
The clearest precedent for the prohibitions against discrimination in the EHB statute can be found in the Medicaid statute. Since the Medicaid statute’s original enactment,10 its “reasonableness” provision11 has been understood by both the agency12 and the courts13 as barring arbitrary limits in required services based solely on an individual’s condition, diagnosis, or type of illness. Furthermore, at least two recent court decisions suggest that at least some courts will reject coverage denials under Medicare where the basis of the denial is the arbitrary exclusion of otherwise covered services based on absence of “recovery” potential.14
The required elements for consideration provision of Section 1302, Ms. Rosenbaum argued, is designed to address the issue of insurer discretion to discriminate against certain types of conditions in the context of benefit design and coverage determinations. In some cases, excluded conditions may be quite specific, while in others, a proxy of “recovery” or “restore” is commonly used to differentiate chronic conditions for which there may be
7 U.S. Code, Title 29 Section 794.
8Alexander v. Choate, 469 U.S. 287 (1985).
9 The Mental Health Parity Act of 1996, Public Law 104-204, 104th Cong., 2d sess. (September 26, 1996).
10 The precursor to the federal non-discrimination rule can be found in the Handbook of Public Administration, Supplement D, issued in 1966 by HEW.
11 U.S. Code, Title 42 Section 1396a(a)(17).
12 U.S. Code of Federal Regulations Title 42 Section 440.230(c).
13 See, for example, Pinnecke v. Preiser, 623 F. 2d 546 (8th Cir. 1980).
14 See, for example, Papciak v. Sibelius— F.Supp. 2d —, 2010 WL 3885605 (W.D. Pa.). and Anderson v. Sibelius, F. Supp. 2d, 2010 WL 4273238 (D.Vt.).