NCPA - National Center for Policy Analysis

ObamaCare Rule Creates Health Care Disparities among States

April 18, 2013

The ObamaCare mandate requires all states to offer health insurance plans to everyone in the individual and small group markets. The essential health benefits (EHB) package is the minimum health insurance a state can offer. The Department of Health and Human Services (HHS) issued final rules for the EHBs that will create disparities among states, say Edmund Haislmaier, a senior fellow, and Alyene Senger, a research associate, with the Heritage Foundation.

  • According to the HHS rule, the EHB packages will be a state benchmark plan, meaning that the package will vary from state to state.
  • The Obama administration claims that this approach will create less market disruption and allow more flexibility, but the arrangement will lead to some states receiving more in ObamaCare subsidies than others.
  • The federal plan will, for most states, be determined by their largest small group plan, which is already dictated by state-mandated benchmark plans.

The result will be that federal funds will cover state benefit mandates as all insurers offering plans on the market will provide coverage equal to the federal mandate. Because federal taxpayers will be covering the cost, states will have an incentive to add benefits but the EHB regulation grandfathers only state benefits that were mandated before 2012. Any benefit mandated in 2012 or later will be paid for by the state.

  • Each state has different minimum standards, which will result in different EHBs and plan premiums.
  • Federal subsidies will be tied to the second-lowest-cost silver plan, also called the reference plan.
  • Recipients of ObamaCare subsidies receive a certain amount based on their income, not the cost or expanse of available coverage, which means that in states where the premium for the reference plan is higher, the federal government will subsidize more heavily.

The new system institutionalizes previously existing disparities between states and requires medical procedures in some states with questionable effectiveness. The policy penalizes states that previously tried to keep health costs more affordable while rewarding states that previously had more generous plans.

Source: Edmund Haislmaier, "ObamaCare's Essential Benefits Regulation Creates Disparities among States," Heritage Foundation, April 10, 2013.


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