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Essential Health Benefits and the Affordable Care Act: Law and Process

20 Pages Posted: 18 Jan 2013 Last revised: 1 Sep 2016

Nicholas Bagley

University of Michigan Law School

Helen Levy

University of Michigan at Ann Arbor - Institute for Social Research (ISR); National Bureau of Economic Research (NBER)

Date Written: January 17, 2013

Abstract

Beginning in 2014, the Affordable Care Act (ACA) will require private insurance plans sold in the individual and small-group markets to cover a roster of 'essential health benefits.' Precisely which benefits should count as essential, however, was left to the discretion of the Department of Health and Human Services (HHS). The matter was both important and controversial. HHS nonetheless announced its policy on essential health benefits by posting on its website a 13-page bulletin stating that it would allow each state to define essential benefits for itself by choosing a 'benchmark' plan modeled on existing plans in the state. On both substance and procedure, the move was surprising. The benchmark approach departed from the uniform, federal standard that the statute appears to anticipate and that many informed observers expected HHS to adopt. And announcing the policy thorough an internet bulletin arguably allowed HHS to sidestep orthodox administrative procedures, including notice and comment, White House review, and preenforcement review in the courts.

What are we to make of this? This chapter explores two questions. First, is the benchmark approach a lawful exercise of HHS’s authority under the ACA? Although HHS has brushed up against the limits of its discretionary authority, we conclude that the approach likely will (and, in our view, should) be upheld in the event of a challenge. Second, did HHS’s announcement of the benchmark approach through an internet bulletin allow the agency to sidestep the administrative procedures that are meant to shape the exercise of its discretion? The answer, we believe, is no. The agency’s use of guidance, in the context of a broader effort that also included significant public engagement, led to a process that was more open to public scrutiny and external oversight than conventional rulemaking would have been.

Keywords: Affordable Care Act, administrative law, health law, essential health benefits, subregulatory guidance

JEL Classification: K23, I18, K32

Suggested Citation

Bagley, Nicholas and Levy, Helen, Essential Health Benefits and the Affordable Care Act: Law and Process (January 17, 2013). U of Michigan Public Law Research Paper No. 302; U of Michigan Law & Econ Research Paper No. 13-003. Available at SSRN: https://ssrn.com/abstract=2202387 or http://dx.doi.org/10.2139/ssrn.2202387

Nicholas Bagley (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

Helen Levy

University of Michigan at Ann Arbor - Institute for Social Research (ISR) ( email )

Ann Arbor, MI 48106-1248
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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