Medicaid is a health coverage program funded jointly by the federal government and individual states, designed to provide medical assistance to millions of Americans with limited income and resources. While traditional Medicaid mandates a comprehensive set of benefits for most eligible individuals, federal law introduced a mechanism to offer a different package of services for certain populations. This mechanism is known as the Alternative Benefit Plan (ABP), which allows states to tailor their offerings to align more closely with commercial insurance models.
Defining the Alternative Benefit Plan
The Alternative Benefit Plan (ABP) is a specific type of Medicaid coverage package authorized under Section 1937 of the Social Security Act. This provision gives states the option to offer a benefit package that intentionally differs from the traditional, comprehensive Medicaid state plan. The primary purpose of an ABP is to provide states with flexibility in designing coverage, especially for newly eligible adult populations. By adopting an ABP structure, states are able to bypass some of the traditional Medicaid requirements, such as the rule that benefits must be equal in amount, duration, and scope for all eligible groups. The ABP concept allows a state to define its benefit package by referencing an existing, defined insurance model, moving toward a more holistic package of care similar to how private insurance is structured. The benefit package under an ABP must be either a “benchmark” or “benchmark-equivalent” in terms of coverage.
Establishing Coverage Through Benchmark Models
States use a structural mechanism based on “benchmark” coverage models to construct their Alternative Benefit Plans. The benchmark plan serves as a template, ensuring the ABP provides a defined level of coverage modeled after established insurance products. Section 1937 of the Social Security Act offers states four specific options for this benchmark structure.
One option is to model the ABP after the Standard Blue Cross/Blue Shield Preferred Provider Option offered through the Federal Employees Health Benefit Program (FEHBP). Alternatively, states can choose to use the health benefits plan offered to their own state employees as the benchmark. A third option is to base the plan on the commercial Health Maintenance Organization (HMO) with the largest insured commercial, non-Medicaid enrollment within the state.
The fourth, and often most utilized, option is “Secretary-approved coverage,” which allows a state to create a customized benefit package. A state might use this option to align the ABP closely with its existing traditional Medicaid state plan. Regardless of the choice, the benchmark selection dictates the framework for the entire benefit package. The state may also choose to offer a “benchmark-equivalent” package, which requires the overall benefits to be actuarially equivalent to one of the benchmark options while including certain specified services.
Required Services and Permitted Benefit Modifications
Although ABPs offer states significant flexibility in design, federal law imposes specific requirements regarding the content of the benefit package. For individuals enrolled through the ACA’s adult expansion group, the ABP must include the 10 Essential Health Benefits (EHBs) defined in the ACA. These EHBs cover major service categories like hospitalization, ambulatory patient services, prescription drugs, and mental health and substance use disorder services. The requirement to include EHBs ensures that the benefit package is comprehensive and comparable to coverage available in the private health insurance market. While states can modify benefits found in traditional Medicaid, they cannot substantially reduce access to any of the 10 required EHB categories. Furthermore, any financial requirements or treatment limitations imposed on behavioral health benefits must comply with the Mental Health Parity and Addiction Equity Act (MHPAEA).
Certain services must be included in the ABP regardless of the chosen benchmark plan or the EHB requirements. For example, all children under the age of 21 who are enrolled in an ABP are entitled to the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit. This comprehensive child health benefit cannot be diminished or excluded by the ABP design. Additionally, coverage must include services provided by Federally Qualified Health Centers (FQHCs) and family planning services and supplies.
Populations Covered by Alternative Benefit Plans
Alternative Benefit Plans are designed for specific groups of Medicaid beneficiaries, and states have the option to choose which eligibility groups to enroll. The most common use of the ABP is for the Medicaid Expansion population, which consists of non-elderly adults under age 65 with incomes at or below 138% of the federal poverty level. States that elected to expand Medicaid under the ACA are required to provide benefits to this new adult group through an ABP.
Federal rules protect certain vulnerable populations from mandatory enrollment. Children under 21, pregnant women, the elderly, and individuals who qualify for Medicaid based on blindness or disability are generally entitled to the full, comprehensive benefits of the traditional state plan. These groups cannot be required to enroll in an ABP.
Individuals determined to be “medically frail,” which includes people with serious or complex medical conditions or chronic substance use disorders, are also protected. If a medically frail individual belongs to a group mandated into an ABP, they must be given a choice between the ABP and a benefit package that includes all the services provided under the state’s traditional Medicaid plan. This protection ensures that people with the highest medical needs do not lose access to comprehensive, long-term services.