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A TRUSTED INDEPENDENT HEALTH INSURANCE GUIDE SINCE 1994.
There are two different meanings for the term benchmark plan. Both have to do with the Affordable Care Act, although they have very different purposes.
Benchmark plan is the term used to describe the second-lowest-cost Silver plan (SLCSP) available in the exchange/marketplace, and it’s also the term for the plan that each state designates as the standard for essential health benefits (EHBs).
It can be a bit confusing that the ACA designated two entirely different concepts with the same name. But we’ll explain each concept in greater detail below.
The second-lowest-cost Silver plan is important because its price is used to calculate premium subsidies. For an exchange enrollee with income in the subsidy-eligible range (which has been expanded for 2021 through 2025, under the American Rescue Plan and Inflation Reduction Act), the subsidy amount is based on the cost of the second-lowest-cost Silver plan in relation to the percent of the enrollee’s income that they’re expected to pay in after-subsidy premiums.
The second-lowest-cost-Silver plan is thus called a benchmark plan because it’s the plan that the enrollee will be able to purchase for exactly that percentage of their income; the subsidy amount is benchmarked based on that plan’s price. The enrollee can pick a lower-cost plan and pay a smaller amount in premiums, or they can pick a higher-cost plan and pay the difference in additional premiums.
The benchmark plan will vary from one part of a state to another, depending on the rating area and plan availability. And the benchmark plan will vary from one year to the next, sometimes being offered by different insurers in different years. This is because the benchmark plan is determined solely based on price: You look at all of the available plans in a given area, arrange them in order by premiums, and the benchmark plan is whatever plan ends up in the second-lowest-cost spot among all the available Silver plans.
If you’re enrolling in a health plan through the marketplace in your state, the cost of the benchmark plan (SLCSP) will determine how much your premium tax credit will be.
The marketplace will make this calculation for you, determine your advance premium tax credit amount, and then send you Form 1095-A early the following year, showing the amount of the SLCSP, the amount of your plan, how much you paid, and how much was paid on your behalf via the advance premium tax credit.
But if you want to determine the cost of the SLCSP yourself, you can simply use the plan comparison tool on your state’s exchange, order the plans from lowest to highest premium (that’s the default in most states), and then filter to only see the Silver plans. From there, the second-lowest-cost plan on the list will be the SLCSP and its price will be displayed (note that the process is slightly different if you have children and some of the available plans have embedded pediatric dental coverage while others do not).
If you’re trying to determine the SLCSP for a prior year and you don’t have your 1095-A handy, you can use this tool if you’re in one of the states that use HealthCare.gov. If you’re in a state that runs its own marketplace, you may be able to find a similar tool on the exchange website, or you may need to contact the marketplace directly and ask them for assistance.
The ACA created a broad framework for essential health benefits, but left it to states to determine exactly what would need to be covered. EHB requirements apply to individual and small group health plans with effective dates of 2014 or later. These plans are required to cover the essential health benefits, with no dollar cap on out-of-pocket costs.
The essential health benefits, as defined in the ACA, include ten broad categories of care, described in more detail here.
All individual and small group health plans sold since 2014 include coverage for all of these services (with the exception of pediatric dental if stand-alone plans are available for purchase). But the specifics of exactly what is covered vary from state to state.
That’s because the ACA allows each state to select a benchmark plan that will be used as the standard for essential health benefits coverage within the state. States were responsible for picking their own benchmark plan from a list of acceptable options:
Health insurance carriers in the individual and small group markets in each state use the benchmark plan as a guide for creating their own EHB coverage. If the benchmark plan covers a particular service, then all individual and small group plans in the state must also cover that service; this is why the plan is referred to a benchmark.
For 2014 to 2016, the benchmark plan was a plan that was sold in the state in 2012 (plus supplementation if there were any EHBs that weren’t covered by the plan that was chosen as the benchmark). For 2017 through 2019, the benchmark plan was a plan that was sold in the state in 2014. Starting with the 2020 plan year, states could continue to use their existing benchmark plans or make modifications under new guidelines that were designed to give states more flexibility in setting their benchmark plans. Under the updated rules, states could continue to use one of the options described above, or they could:
As was the case with the first round of benchmark plans, a state must supplement the benchmark plan to bring it up to scratch if it’s lacking in any of the essential health benefit categories.
For the 2020 plan year, Illinois made modifications to its benchmark plan, and for the 2021 plan year, South Dakota made modifications to its benchmark plan. For 2022, Michigan, New Mexico, and Oregon made changes to their benchmark plans. For 2023, Colorado made changes to its benchmark plan, and Vermont has made changes to its benchmark plan that will take effect in 2024. You can see each state’s benchmark plan details here.
No, the ACA’s essential health benefits rules do not apply to the large group market (with the exception of preventive care, which applies across the board). But for any essential health benefits that a large group or self-insured plan covers, it cannot have any annual or lifetime caps on how much the plan will pay for those services.