Prior to the Affordable Care Act (ACA) in 2014, comprehensive health plans were allowed multiple exclusions for essential services like maternity care, hospital treatment, or even prescription drugs. Since the ACA’s passage, all individual and small group medical plans must offer a set package of services, or essential health benefits, for all those enrolled.
While large group plans are exempt from this requirement, most employer-sponsored plans typically cover the essential health benefits to ensure their employees have the best coverage.
For those that have their own individual health insurance plan, such as with a health reimbursement arrangement (HRA), their plans are subject to essential health benefit regulations.
In this article, we’ll go over what the essential health benefits are, why they were created, and how an HRA works under essential health benefits requirements.
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- What are the ten essential health benefits?
- Do essential health benefits vary from state to state?
- Why were essential health benefits created?
- How health reimbursement arrangements (HRAs) cover essential health benefits
What are the ten essential health benefits?
Essential health benefits are a minimum package of ten items and services that must be covered by all plans in the individual and small group market. This includes health plans offered on the ACA’s health insurance exchange and off-exchange.
Understanding what qualifies as essential health benefits is important in order to make the most of your health insurance plan. Even if your plan covers these benefits, your premiums and copays will vary, so take a close look at the details of your plan and the costs.
The ten essential health benefits include:
- Ambulatory patient services. Outpatient care that you receive without being admitted to a hospital
- Emergency services. You can’t be charged more for going to an out-of-network hospital’s emergency room if it’s a true emergency
- Hospitalization. This includes overnight, in-patient stays at a hospital
- Pregnancy, maternity, and newborn care. Medical services for you and your child, both before and after birth, as well as the cost of the delivery, birth control, and breastfeeding services
- Mental health and substance use disorder services. This includes counseling or psychotherapy
- Prescription drugs. All drugs may not be covered but insurers must offer an approved list of medications for which they’ll pay a portion of the costs
- Rehabilitative and habilitative services and devices. This is intended to help people with chronic conditions, disabilities, or injuries regain or improve skills
- Laboratory services. Tests that doctors might run to aid in diagnosis
- Preventive and wellness services and chronic disease management: This outlines doctor’s visits, such as annual exams and vaccinations
- Pediatric services, including oral and vision care: In addition to the above benefits, children’s benefits must include vision and dental care
Once you’ve reached your annual out-of-pocket limit for essential health benefits, your plan will cover 100% of the cost of the above benefits. With essential health benefits, annual or lifetime maximums on the amount of money the insurer will pay for the covered services are prohibited.
Do essential health benefits vary from state to state?
Because minimum coverage requirements for essential health benefits are specifically defined in each state’s plan, the details of the coverage will vary from one state to another. It's important for employers to know which benchmark plan—meaning the plan used to define essential health benefits within the state—they must follow so they are adhering to the right rules. However, some regulations are standard.
For example, all plans must offer dental coverage for children, but dental benefits for adults are optional. You’ll be able to see exactly what each plan offers when you compare plans while health insurance shopping.
Why were essential health benefits created?
The core essential health benefits were created to bridge the gap between a comprehensive and affordable plan for all consumers by ensuring essential services are covered and consumer out-of-pocket expenses are limited.
Before the ACA, health plans available on the individual market were permitted to exclude certain types of coverage without penalty. Many people found out too late that their plan wouldn’t pay for the care they needed, or that they had to pay large premiums just to cover their pre-existing conditions.
The ACA solved this by requiring that insurers provide coverage to anyone, regardless of pre-existing health conditions, ensuring it would no longer be difficult or expensive for consumers to buy health insurance on their own.
How health reimbursement arrangements (HRAs) cover essential health benefits
An HRA is a health benefit that reimburses an employee for insurance premiums and qualified medical care expenses incurred by the employee up to a maximum set allowance amount.
In order to comply with the ACA, some HRAs must be integrated with other coverage as part of a group health plan, such as individual health insurance. The individual insurance would naturally comply with essential health benefit regulations, while your HRA is used for reimbursements.
However, there are other HRAs that don’t require insurance. The IRS Publication 502 contains the list of all the HRA-eligible expenses, so if any of your essential healthcare needs aren’t covered by your insurance, or you don’t have insurance, your out-of-pocket expense will be reimbursed.
Two of the most popular HRAs that PeopleKeep offers are the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA). A QSEHRA is for employers with less than 50 employees, whereas an ICHRA has no employee size limit. With both options, employees are able to be reimbursed for their medical expenses once they submit proof of expense, usually in the form of a receipt, and it is verified.
The largest difference between the two HRAs is that with an ICHRA, employees can opt in or out of the benefit and they must attest each month that they are still covered by a qualifying form of individual insurance. But with either HRA, your employees will have a well-rounded health benefit that covers essential health benefits and guarantees tax-free reimbursements.
Researching essential health benefits in advance can make it easier for you to pick a new health insurance plan that covers everything you need. If your employer offers an HRA, you’ll get an even more comprehensive health benefit that will ensure your essential health benefits are covered.
This article was originally published on November 28, 2014. It was last updated November 5, 2021.