ACA Plan Design: What Must Be Covered
The Affordable Care Act establishes binding requirements for what health plans must include, creating a floor of coverage that applies across individual, small-group, and, in modified form, large-group markets. These requirements are not optional design choices — they are statutory mandates enforced through a combination of federal agencies and, in many states, parallel state regulators. Understanding which requirements apply to which plan types is foundational to both compliance and benefit strategy, topics explored more broadly in the regulatory context for ACA.
Definition and scope
ACA plan design requirements fall into two distinct but overlapping categories: Essential Health Benefits (EHBs), which define the categories of services a plan must cover, and market-wide consumer protections, which govern how coverage is structured regardless of plan type.
Essential Health Benefits are defined under Section 1302 of the Affordable Care Act (42 U.S.C. § 18022) and must be included in non-grandfathered individual and small-group plans both inside and outside the Marketplace. The Department of Health and Human Services (HHS) operationalizes EHBs through federal regulations at 45 C.F.R. § 156.110, which establish ten mandatory benefit categories:
- 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 services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
Each state selects a benchmark plan that defines the specific services covered within each category, meaning the precise scope of EHBs varies by state even though the ten categories are uniform nationwide. As of the 2023 benefit year, HHS revised the benchmark selection process under 45 C.F.R. § 156.111, allowing states greater flexibility in customizing benchmarks.
Large-group and self-funded plans are not required to cover EHBs, but they remain subject to other ACA mandates — most critically, the prohibition on annual and lifetime dollar limits for EHB-equivalent services, preventive care requirements, and parity rules. This distinction is central to understanding plan design strategy, particularly for employers weighing the ACA and self-funded plan design.
How it works
For plans required to cover EHBs, the compliance mechanism works through three layers:
Layer 1 — Category coverage. A plan must offer at least one covered service in each of the ten EHB categories. A plan that entirely excludes maternity care or mental health services would fail this test regardless of how generous its other benefits are.
Layer 2 — No discriminatory benefit design. Under 45 C.F.R. § 156.125, plans may not use benefit design — including step therapy protocols, prior authorization triggers, or service limits — in a way that is discriminatory against individuals with chronic conditions or disabilities. HHS and state regulators review network adequacy and benefit design together.
Layer 3 — Actuarial value alignment. Coverage must be packaged into a metal tier (Bronze, Silver, Gold, or Platinum) that reflects a defined actuarial value. A Silver plan must cover approximately 70% of expected costs for a standard population (45 C.F.R. § 156.140), meaning EHBs must be covered at a depth that reaches that value threshold, not merely listed as covered categories.
Separately, preventive services under Section 2713 of the Public Health Service Act must be covered without cost-sharing in all non-grandfathered plans — individual, small-group, and large-group alike. This includes USPSTF A/B-rated recommendations, ACIP-recommended immunizations, and HRSA-supported guidelines for women's preventive services (42 U.S.C. § 300gg-13).
Common scenarios
Scenario 1 — Small employer offering a fully insured plan. A company with 48 employees purchasing a fully insured plan in the small-group market must offer EHBs in all ten categories at an actuarial value corresponding to at least the Bronze tier (approximately 60% actuarial value). The insurer bears primary compliance responsibility, but the employer must select a plan that qualifies.
Scenario 2 — Large employer offering a self-funded plan. A self-funded plan sponsored by an employer with 300 employees is exempt from the EHB mandate but must still cover preventive services without cost-sharing, comply with the Mental Health Parity and Addiction Equity Act (MHPAEA) (29 U.S.C. § 1185a), provide maternity coverage, and not impose annual or lifetime dollar limits on services that would qualify as EHBs if the plan were subject to that standard.
Scenario 3 — Grandfathered plan. A plan that maintained grandfathered status under 45 C.F.R. § 147.140 is exempt from EHB requirements and the preventive care mandate but remains subject to other provisions, including the prohibition on pre-existing condition exclusions and rescissions. Grandfathered status is lost if plan design changes exceed defined thresholds, such as a cost-sharing increase greater than 15 percentage points above medical inflation.
Decision boundaries
The critical variable in ACA plan design compliance is market classification, not employer size alone. The table below captures the core distinctions:
| Requirement | Individual/Small-Group (Non-Grandfathered) | Large-Group (Fully Insured) | Self-Funded (Any Size) |
|---|---|---|---|
| EHB (10 categories) | Required | Not required | Not required |
| Annual/lifetime dollar limits on EHBs | Prohibited | Prohibited (on equivalent services) | Prohibited (on equivalent services) |
| Preventive care, no cost-sharing | Required | Required | Required |
| MHPAEA parity | Required | Required | Required |
| Metal tier actuarial value | Required | Not required | Not required |
| Maternity coverage | Required (as EHB) | Required under state law (varies) | Not federally required |
A plan operating on the ACA Marketplace must additionally meet network adequacy standards and receive state regulatory approval of benefit design before offering coverage during open enrollment.
The line between grandfathered and non-grandfathered plans creates another decision boundary. Grandfathered plans have held exemptions from EHBs and several consumer protections since 2010, but every structural benefit change risks triggering a loss of that status. Transitional or "grandmothered" plans in the individual and small-group markets operated under a separate category of relief extended by HHS administrative action rather than statute, with states retaining authority to permit or prohibit such plans within their borders.
Prescription drug coverage under the EHB framework requires plans to cover at least one drug in every United States Pharmacopeia (USP) category and class, as specified in the applicable state benchmark (45 C.F.R. § 156.122). Plans may not count drugs toward the annual deductible if the benchmark plan did not impose such a cost-sharing structure for those drugs.
Mental health and substance use disorder benefits must be covered at parity with medical and surgical benefits under both MHPAEA and the ACA, meaning treatment limitations — including visit caps, prior authorization frequencies, and reimbursement rates — cannot be more restrictive for behavioral health than for comparable medical benefits. The Departments of Labor, HHS, and the Treasury jointly enforce parity requirements across plan types.
References
- 42 U.S.C. § 18022 — Essential Health Benefits (House Office of the Law Revision Counsel)
- 45 C.F.R. Part 156, Subpart B — Health Insurance Issuer Standards Under the ACA (eCFR)
- 42 U.S.C. § 300gg-13 — Coverage of Preventive Health Services (House Office of the Law Revision Counsel)
The law belongs to the people. Georgia v. Public.Resource.Org, 590 U.S. (2020)