Was IOM Wrong to Consider Costs?

There is a bit of uproar over the Institute of Medicine (IOM) report recommending that Essential Health Benefits, the minimum standard for health insurance plans participating in the exchanges, be based off of typical small employer plan offerings. This angered some stakeholder groups, who would rather that the benefit plan be modeled on more generous plans. Apparently, many in the public health sector do not believe that cost should be a consideration.

2,400 individuals have signed on to a letter urging HHS Secretary Kathleen Sebelius to disregard the IOM report when deciding on the scope of benefits. The letter argues that essential benefits must be more comprehensive, and that adopting a more restrictive plan would hurt patients. The letter states “Our patients urgently need what people in these other nations already enjoy: universal and comprehensive coverage in a nonprofit system that prioritizes human need over corporate profit.”

Ironically, the “corporate profit” for insurance companies is capped by the Medical Loss Ratio rule (MLR), so the letter signers can be assured that insurance profit is not the key motivation for limiting benefits. Could it be that protecting patients and consumers includes designing Essential Health Benefits that are affordable? A Boston Globe article quotes IOM panelist and Harvard Professor Michael Chernew explaining, “The entire system runs the risk of collapsing if it just becomes too expensive.”

The federal government, via the Affordable Care Act's Essential Health Benefit provision, is making an unprecedented foray into insurance regulation. While this is not ideal, the least they can do is keep the floor low, and let the insurance market and consumers determine which plans do best in the exchanges.