Date:  Oct. 6, 2011




IOM Recommends Criteria and Methods to Develop Essential Health Benefits Package That Balances Comprehensiveness With Affordability


WASHINGTON — A new Institute of Medicine report provides the U.S. Department of Health and Human Services with a set of criteria and methods to develop a package of essential health benefits that will cover many health care needs, promote medically effective services, and be affordable to purchasers.  HHS decisions about which benefits warrant designation as essential should be made in a transparent manner that is informed by input from structured public discussions, added the committee that wrote the report.   


Certain insurance plans, including those participating in the state-based health insurance exchanges to be established under the Patient Protection and Affordable Care Act (ACA), must cover a package of preventive, diagnostic, and therapeutic services and products in areas that have been defined as essential by HHS.  The package will establish the minimum benefits that plans must cover; insurers may offer additional benefits.  The report neither recommends a list of essential benefits nor comments on whether any particular service should be included or excluded, as doing so would have been beyond the committee's charge.


"This report offers guidance for developing a package of essential health benefits that will achieve two equally important goals: to provide coverage for a range of Americans' health needs and to ensure the affordability of coverage, particularly for small employers and individuals who must buy their own insurance," said committee chair John Ball, former executive vice president, American Society for Clinical Pathology, Chicago.


Establishing the Essential Health Benefits Package


The ACA stipulates that the essential health benefits should reflect the scope of benefits covered by a typical employer plan and include 10 specific categories.  To refine the package, HHS staff should determine what is typical of small employer plans because they will be among the main customers for policies in the state-based exchanges, the report says.  HHS officials should gauge potential services and products against a set of criteria, including medical effectiveness, safety, and relative value compared with alternative options, and evaluate whether the package as a whole protects the most vulnerable individuals, promotes services that have proved effective, and addresses the medical concerns of greatest importance to the public, the report says.  Benefits that have been mandated for insurance coverage by individual states should be subject to the same review and criteria.  Products and services that do not meet the criteria should not be included.


Because the package must be affordable to the small firms and individuals who will be the principal customers for the exchanges, its comprehensiveness should be balanced with its potential cost, the committee concluded.  The report recommends that HHS determine what the national average premium of typical small employer plans would be in 2014 and ensure that the package's scope of benefits does not exceed this amount.  This premium target would be used only as a criterion in developing the package; the premium that a particular employer or individual purchaser ultimately pays for a plan with the package could be different because of a variety of other factors. 


HHS officials would benefit from gathering input on the health priorities of the public from a series of structured deliberative sessions held nationwide.  These sessions would engage small-business owners, uninsured people, and others in weighing benefits and costs and considering trade-offs, and the process would promote transparency, the report says. 


The committee urged HHS officials to be as specific as possible about what benefits are included and which can be excluded when they issue the resulting package.  Pragmatically, however, the department will not be able to spell out every service and product that would be included initially, the report says. 


Updating the Package


HHS will need to amend the package over time to keep pace with advances in clinical technologies, changes in patient populations, and other trends.  As research yields more knowledge, the list of essential health benefits can become more detailed and promote greater value over time, the report notes, and the report's criteria should continue to be used to evaluate the list.  The premium target should be updated to reflect medical inflation, and changes in the benefits package should be cost-neutral against this revised target.


Once again, HHS officials would benefit from public input gathered through the deliberative process to inform any adjustments that need to be made.  In addition, they should glean input from a National Benefits Advisory Council ,a new independent entity recommended by the committee.  The council should have the necessary expertise to advise HHS on research necessary to evaluate benefits' effectiveness and value, changes to the premium target, and benefit administration and design issues.  Members should be appointed by a nonpartisan organization, such as the U.S. Office of the Comptroller General, and represent a range of disciplines and perspectives, including those of employers and consumers.


HHS should also develop a strategy to cut the health care spending growth rate, the committee urged.  Since 1990, health care costs have risen faster than the gross domestic product at a rate of two to three percentage points a year.  If the country does not address medical inflation, the range of benefits that can be covered affordably within the package will erode.




HHS should grant states' requests to adopt alternatives to the federal essential health benefits package only if the alternatives are consistent with ACA requirements and the criteria specified in this report and if they do not vary significantly from the federal package. 


The essential health benefits package will be available through a variety of health insurance policies with an array of choices in premiums, deductibles, and provider networks.  Services or products excluded from the package could still be added to plans at an insurer's discretion, for example, as a way to make its plans more attractive and competitive, but consumers may have to bear additional costs for these extra benefits just as they do now.


The study was sponsored by the U.S. Department of Health and Human Services.  Established in 1970 under the charter of the National Academy of Sciences, the Institute of Medicine provides independent, objective, evidence-based advice to policymakers, health professionals, the private sector, and the public.  The National Academy of Sciences, National Academy of Engineering, Institute of Medicine, and National Research Council make up the National Academies.  For more information, visit or  A committee roster follows.



Christine Stencel, Senior Media Relations Officer

Luwam Yeibio, Media Relations Assistant

Office of News and Public Information

202-334-2138; e-mail


Additional resources:

Report in Brief

Full Report

Project Website

Recommended Criteria 
Webcast Audio
Webcast Slides

Pre-publication copies of Essential Health Benefits: Balancing Coverage and Cost are available from the National Academies Press; tel. 202-334-3313 or 1-800-624-6242 or on the Internet at  Reporters may obtain a copy from the Office of News and Public Information (contacts listed above).

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Board on Health Care Services


Committee on Defining and Revising an Essential Health Benefits Package For Qualified Health Plans

John R. Ball, M.D., J.D., MASCP, MACP (chair)

Executive Vice President

American Society of Clinical Pathology (retired)

Asheville, N.C.


Michael S. Abroe, FSA, MAAA

Principal and Consulting Actuary

Milliman Inc.



Michael E. Chernew, Ph.D.

Professor of Health Care Policy

Harvard Medical School



Paul Fronstin, Ph.D.


Health Research and Education Program

Employee Benefit Research Institute

Washington, D.C.


Robert S. Galvin, M.D., M.B.A., FACP

CEO of Equity Health Care

Blackstone Group

New York City


Marjorie Ginsburg, B.S.N., M.P.H.

Executive Director

Center for Healthcare Decisions

Rancho Cordova, Calif.


David S. Guzick, Ph.D.

Senior Vice President for Health 

Affairs, and


Shands at the University of Florida

Health System

University of Florida



Sam Ho, M.D.

Executive Vice President and Chief Medical Officer

United Healthcare

Cypress, Calif.


Christopher F. Koller, MPPM, MAR

Health Insurance Commissioner

State of Rhode Island



Elizabeth A. McGlynn, M.D., M.P.P.


Kaiser Permanente Center for Effectiveness and Safety Research

Pasadena, Calif.


Amy B. Monahan, J.D.

Associate Professor

University of Minnesota Law School



Alan R. Nelson, M.D., MACP


Private Practice

Fairfax, Va.


Linda A. Randolph, M.D., M.P.H.

President and CEO

Developing Families Center

Washington, D.C.


James E. Sabin

Clinical Professor

Departments of Psychiatry and Population Health

Harvard Medical School, and


Harvard Pilgrim Health Care Ethics Program



John Santa, M.D., M.P.H.


Health Ratings Center

Consumer Reports

Yonkers, N.Y.


Leonard D. Schaeffer, M.D.

Judge Robert MacClay Widney Chair

and Professor

University of Southern California

Santa Monica


Joe V. Selby, M.D., M.P.H.

Executive Director

Patient-Centered Outcomes Research Institute

Washington, D.C.


Sandeep Wadhwa, M.D., M.B.A

Chief Medical Officer and Vice 

President of Reimbursement and Payer Markets

3M Health Information Systems

Murray, Utah




Cheryl Ulmer

Study Director