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.
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