In a move that seemed to please neither side of the argument, President Obama has agreed to let the states decide benefit levels for health insurance policies that will be sold on the exchanges being set up for 2014 to service individuals and small groups.

As initially envisioned in the Patient Protection and Affordable Care Act (PPACA) of 2010, the Department of Health and Human Services (HHS) would set the benefit packages for the state exchanges, but now the states are being awarded some flexibility.

Insurers selling plans in the state-based exchanges, however, must still cover a basic set of benefits, including hospitalizations, emergency care, and newborn and maternity care and pediatric services, as set forth in the PPACA legislation.

Rather than issue a proposed regulation, the administration chose to advise the states through a “pre-rule bulletin,” which does not have the force of law. Unlike a rule, however, the "bulletin" cannot be overruled by Congress. The administration also does not have to provide definitive economic estimates of the proposal or determine its regulatory impact on small businesses because it is not an official rule. Official rule-making is expected to occur sometime next year.

As reported by the Los Angeles Times, the new approach seems to have left activists on both sides of the issue less than satisfied.

"What's to guarantee that the state's choice of a benchmark plan will be affordable?" asked National Retail Federation Vice President Neil Trautwein, who is helping lead a coalition of business and insurance groups. "If coverage is unaffordable today, this doesn't change the equation."

Families USA Executive Director Ron Pollack, a longtime advocate for federal health reform, also expressed reservations.

"We understand the inclination to balance flexibility, comprehensiveness of coverage, and cost," he said. "However, flexibility must yield to reliable, comprehensive coverage of benefits for consumers.… It is essential that HHS provide strong oversight and enforcement."

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