Standardization of Benefits in QHPs
The California Health Benefit Exchange must consider its options related to the degree to which the benefits offered in Qualified Health Plans (QHPs) are standardized versus allowing more variation among QHPs. Effective 2014, under the Affordable Care Act (ACA), all health benefit plans offered, including those offered through the Exchange must:
- Provide coverage for all Essential Health Benefits; and
- Meet the actuarial value requirements for the Platinum, Gold, Silver, or Bronze coverage tiers.
Adverse Selection Concerns
While these requirements ensure minimum coverage and a level of standardization, they allow for a wide range of potential variation in plan designs. The Exchange must address the concern that through strategic plan design a health plan issuer can attract its preferred customers and more risky ones or “cherry pick”. Standardization can limit the ability of health plans to structure benefit plan designs to drive certain populations into or away from their plans. Standardization can also reduce consumer confusion and frustration, but it does so at the expense of limiting consumer choice. If the Exchange decides to standardize cost-sharing features of its offerings, close attention must be given to market preferences so that adjustments can be made quickly because there will be variation outside of the Exchange that will require the Exchange to respond accordingly.
Advantages of QHP Standardization
- Simplifies comparison of competing offerings by consumers
- Simplifies calculation and validation of benefit plan actuarial values
- Reduces opportunities for risk selection by health plans through plan design
- Promotes competition among health plans based on price, quality and customer service
Disadvantages of QHP Standardization
- Reduces the options available to consumers
- Standardized plans may not meet the needs of every consumer
- May stifle innovation if standardization is overly restrictive
- Standard plans will need to be regularly updated to reflect consumer preferences, market changes, and healthcare inflation