Essential health benefits and minimum essential coverage are two phrases used throughout the health care reform law and although they sound similar, each has very different meanings and implications under health reform.
A common assumption is minimum essential coverage is required to cover essential health benefits. But the two concepts are not directly related. Just because coverage is minimum essential coverage does not automatically mean it has to cover essential health benefits.
Under health care reform, minimum essential coverage is the coverage needed to avoid the individual mandate penalty. All employer-sponsored health coverage is minimum essential coverage, even if essential health benefits are not provided. So if an individual has employer-sponsored health coverage, the individual mandate penalty will not be imposed.
Essential health benefits are generally benefits that must be covered by a plan offered through the new health insurance exchanges created by health care reform. As currently written, the health care reform law does not require coverage of essential health benefits by self-funded group health plans or large group market insured health plans outside of the Exchanges. However, to the extent these plans do offer essential health benefits, they must comply with certain restrictions, such as no lifetime limits on essential benefits. (See our post from 7/15/2010 for details about essential health benefits and lifetime and annual limits.) Essential health benefit coverage will be required by 2014 for small group market insured health plans and individual market plans, unless grandfathered.