California Weighs In on Essential Health Benefits for Group Health Plans and Insurers

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

As a reminder of the significant role that states will play in implementing the provisions of the Affordable Care Act (ACA), we wanted to highlight some recent legislative developments in California that will be of interest to employers in the small group market (i.e., generally employers with 100 or fewer employees). For California employers with between 50 and 100 employees, these developments may add some complexity to ongoing discussions about the “shared responsibility” or “pay-or-play” requirements adopted by the ACA. For more information about the ACA’s shared responsibility requirements, please refer to our prior client alerts, available here .

Beginning January 1, 2014, the ACA requires that non-grandfathered group health plans in the small group market offer a menu of “essential health benefits” to their enrollees. (These requirements also apply to health insurance policies issued in the individual market.) Bear in mind that neither grandfathered group health plans maintained by both large and small employers (i.e., those that are not fully subject to the ACA’s requirements, at least not yet) nor self-funded group health plans are subject to this requirement. The ACA outlines a group of 10 essential health benefits that must be offered, including:

  • ambulatory patient services,
  • emergency services,
  • hospitalization benefits,
  • maternity and newborn care,
  • mental health and/or substance abuse treatment and services,
  • prescription drugs,
  • rehabilitative and habilitative services and devices,
  • laboratory services,
  • preventive and wellness services, and
  • pediatric services (including dental and vision care).

Proposed regulations issued by the U.S. Department of Health and Human Services (DHHS) in late 2012 generally indicate that the scope of the essential health benefits to be provided in each state will be determined by reference to those available under a typical employer plan; the proposed regulations include a preliminary listing by state of the benchmarks to be used for assessing whether small group health insurance policies offer the required essential health benefits. The ACA gives each state authority to make its own determination of the benchmark insurance policy to be used to assess essential health benefits coverage within its borders and, perhaps not surprisingly, California legislators anticipated this development and adopted amendments to the Insurance Code in September 2012 to formally designate the Kaiser Foundation Health Plan Small Group HMO 30 policy as the state’s benchmark for 2014 and 2015. (DHHS has indicated in subregulatory guidance issued on February 17, 2012, that it intends to revisit the benchmarking process for plan years beginning in 2016.)

As amended by Senate Bill 951, the California Insurance Code mandates that all individual or small group health insurance policies issued, renewed, or amended on or after January 1, 2014, provide essential health benefits. Both the ACA and the proposed regulations make allowances for state-specific insurance mandates, but generally require states to cover the added costs of these mandated benefits over and above the costs of the required essential health benefits. Further to these allowances, SB 951 expressly incorporates California insurance mandates in effect on or before December 31, 2011, into the package of essential health benefits to be available beginning on January 1, 2014. In addition to the minimum suite of essential health benefits available through SB 951, a number of additional benefits will continue to be mandated, including: medically-necessary basic health services (e.g., physician services, hospital and inpatient ambulatory care services, home health services, etc.); HIV testing and AIDS vaccines; certain medically-necessary equipment and supplies for diabetes treatment; breast cancer screening, mammography, and mastectomies; various kinds of cancer screenings; and clinical cancer trials. California’s inclusion of these additional benefits in the essential health benefits package is contingent on the state’s ability to avoid paying for their added costs under an exception in the proposed regulations; presumably, if that exception ceases to be available, the additional mandated benefits would no longer be included in the standard menu of essential health benefits.

Affected employers should also bear in mind an additional key point to avoid confusion: although the terms “essential health benefits” and “minimum essential coverage” may seem to overlap, they are wholly distinct concepts and apply to different aspects of compliance with the ACA. “Minimum essential coverage” is a term primarily of interest to employers in attempting to avoid a penalty under the ACA’s shared responsibility requirements, while the requirement to cover essential health benefits is primarily directed at health insurers and individuals who are attempting to avoid a penalty under the individual mandate requirement (i.e., that individuals either procure “minimum essential coverage” for themselves or pay a penalty).

As California employers in the small group market wrestle with the implications of the ACA to their existing health benefits, they should be aware that the group insurance policies available to them beginning with renewals for plan years beginning on and after January 1, 2014, will include the essential health benefits package specified by SB 951. Depending on the scope of benefits offered by these employers in 2013 and prior years, these changes may result in increased costs of coverage as the new mandate becomes effective.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | Attorney Advertising

Written by:

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Ogletree, Deakins, Nash, Smoak & Stewart, P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.