The Essential Health Benefits (EHB) represent a comprehensive minimum standard for health insurance coverage established under the Affordable Care Act (ACA). This provision ensures that certain health plans offer a core package of services, setting a floor for the scope of benefits millions of Americans can expect. EHB was a foundational element of the ACA, designed to reform the individual and small group health insurance markets.
Defining Essential Health Benefits
The core purpose of the EHB provision is to guarantee consumers purchase robust, meaningful health coverage. Before the ACA, many policies excluded fundamental needs like maternity or mental health services, often causing significant financial distress. EHB requirements closed these gaps, ensuring all subject plans provide a broad range of medical services.
This standard prevents insurance companies from placing annual or lifetime dollar limits on coverage for any included services. For instance, a patient with a chronic condition cannot have benefits cut off after reaching a financial cap. This elimination of monetary limits provides greater financial security and access to necessary, long-term medical care. EHB applies primarily to the individual and small group health insurance markets.
The Ten Core Coverage Categories
The federal framework for EHB requires coverage for ten distinct categories of services:
- Ambulatory patient services: Outpatient care received without hospital admission, such as doctor visits and same-day surgical procedures.
- Emergency services.
- Hospitalization: Coverage for planned inpatient care.
- Maternity and newborn care: Includes prenatal, labor, delivery, and post-natal care for both mother and infant.
- Mental health and substance use disorder services: Includes behavioral health treatment provided at a level equivalent to medical and surgical care under federal parity laws.
- Prescription drugs: Plans must cover at least one drug in every category and class of medications.
- Rehabilitative and habilitative services and devices: Covers therapies and equipment used to recover from injuries or improve skills for daily functioning.
- Laboratory services: Ensures diagnostic tests, blood work, and health screenings are included.
- Preventive and wellness services and chronic disease management: Covers routine check-ups and evidence-based screenings with no cost-sharing.
- Pediatric services: Must include coverage for both oral and vision care for children.
Which Health Plans Must Comply
The requirement to offer the full EHB package applies specifically to non-grandfathered plans sold in the individual market, both on and off the federal and state Health Insurance Marketplaces. It also applies to non-grandfathered plans in the fully-insured small group market. Small group size is defined by state law, often including employers with up to 50 employees, though some states use a threshold of up to 100 employees.
Several common types of health plans are exempt from the EHB requirement. Large group health plans, which cover employers above the state’s small group threshold, are not mandated to include all ten categories. Plans that are self-funded by an employer, where the company directly assumes the financial risk for providing benefits, are also exempt.
A final significant exemption applies to “grandfathered” plans. These plans existed before the ACA was enacted in March 2010 and have not made significant changes to their benefits or cost-sharing structure since then. They are allowed to continue operating without adhering to the EHB standards, which determines whether the policy provides the full breadth of federally defined benefits.
How States Determine Specific Coverage
While the federal government established the ten broad categories of EHB, it delegated to each state the responsibility of defining the actual scope of services within those categories. This means the quantity, duration, and specific medical necessity rules for a benefit, such as the number of physical therapy sessions covered, can vary by state. States accomplish this through the selection of a specific Benchmark Plan.
Each state must select an existing health plan—often the largest small group commercial plan, the state employee plan, or a specific HMO—to serve as the standard for EHB within its borders. All individual and small group plans in that state must then offer coverage “substantially equal” to the benefits provided by this designated benchmark plan. This mechanism provides flexibility, allowing the EHB package to reflect the standard of care and existing benefit designs common to the state’s insurance market.
This system ensures that while every plan covers the ten federal categories, the practical application of that coverage is tailored to local health care practices and mandates. States can select or update their benchmark, allowing them to enhance benefits over time to address evolving health care needs. The use of the benchmark plan ensures the definition of what is essential is both comprehensive and locally relevant.