A package of essential health benefits should build upon benefits offered by most small employers and should adhere to an annual premium target, an Institute of Medicine panel recommended Oct. 6.
While the panel did not suggest coverage of specific services or procedures, it explicitly recommended that costs be taken into account when setting benefits.
"If cost is not taken into account, the [essential health benefits] package becomes increasingly expensive, and individuals and small businesses will find it increasingly unaffordable," according to the panel’s report.
The report also pointed out that health benefits are a resource and "no resource is unlimited." Thus, the package should provide a balance between cost and comprehensiveness, said the committee.
The panel was charged with offering guidance to the Health and Human Services department on how to create an essential benefits package. Under the Affordable Care Act (ACA), all state health insurance exchanges must offer such a package when they start up in 2014.
Setting a premium target will be essential to getting that balance, according to the Institute of Medicine panelists. The target "acknowledges that everybody cannot have everything they want," IOM committee member Christopher F. Koller, who is health insurance commissioner for Rhode Island, said during a press briefing.
"If we ignore rising health costs, we’re set up to fail," said panelist Elizabeth A. McGlynn, director of the Kaiser Permanente Center for Effectiveness Research.
The panel urged transparency and flexibility in all aspects of creating the package, in part in recognition that health care is a dynamic area with constantly evolving technologies and methods of delivery.
"The report recognizes that we had to develop a strategy that works today and in the future," Ms. McGlynn said.
To get to the initial premium target, the committee recommended tying the benefits package to what small employers would have paid, on average, for benefits in 2014. The target should be updated annually, based on medical inflation, according to the report.
The panel also endorsed the use of "medical necessity" to guide decisions on whether certain procedures or services should be covered, and called for transparency in developing rules for that process.
Comparative effectiveness research and evidence-based practices should be used when designing benefits, according to the report. "New and alternative treatments, in the view of the committee, should meet the standard of providing increased health gains at the same or lower cost."
States should have some flexibility in designing their own benefits packages, but only if the packages are consistent with ACA requirements and if not more generous that the federal package, according to the report, which now will be submitted to Health and Human Services.
The agency will quickly review the recommendations, Secretary Kathleen Sebelius said in a statement.
"But before we put forward a proposal, it is critical that we hear from the American people," Ms. Sebelius said. "HHS will initiate a series of listening sessions where Americans from across the country will have the chance to share their thoughts on these issues."
The agency then will propose a rule outlining more specifically how the benefits packages can be designed.
The IOM panel recommended that the secretary establish the initial package by May 1, 2012.
While the panel’s recommendations are not binding, HHS has closely followed previous IOM guidance, most recently in adopting almost wholesale its recommendations on preventive health services for women in a final rule issued in August.
The IOM panel was headed by Dr. John R. Ball, a former executive vice president of the American Society for Clinical Pathology. The panel was dominated by policy experts, but also included Dr. Alan Nelson, a former internist and endocrinologist who has been an adviser to the American College of Physicians.