The ACA and essential health benefits: Overview of new coverage standards in individual and small group markets

September 19, 2014

A doctor shelters a drawing of a family between his hands.

Beginning in January 2014, the Affordable Care Act (ACA) introduced a series of health insurance reforms, particularly for consumers purchasing coverage through the individual market or covered through employment at a small firm. One of the most prominent of these reforms is the requirement that all health plan products in certain market segments must cover an established set of essential health benefits (EHBs). EHBs create a minimum standard for insurance coverage; however, because many health plan products often lacked benefits for certain services, implementation was lengthy, involving federal regulators, state agencies, private insurers, and consumers.

These EHBs are an important element of the health insurance marketplaces, also known as exchanges, which were created by the ACA and launched by the federal government and states to facilitate the purchase of qualified health plans by individuals, families, and small businesses, with financial assistance for those who qualify. This brief discusses how EHBs were defined and implemented, what plans must cover them, and how this has changed the insurance market. An analysis of the implementation process in Michigan is also provided.

The ACA mandated that non‐grandfathered1 individual and small group health plans (both on and off the marketplaces) cover a minimum set of essential health benefits to make coverage more equivalent to that of a “typical employer plan.” The set of benefits must include services from the following ten categories, as defined by the ACA:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory service
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including dental and vision care