States given flexibility on health-law benefits

WASHINGTON - Seeking to defuse a potential showdown over a key part of the new health-care law, the Obama administration moved Friday to let states, rather than the federal government, define which medical benefits insurance companies will have to offer consumers starting in 2014.

That allows state leaders to retain more control of health insurance even as the law extends a new federal guarantee that all Americans can get coverage, even if they are sick.

"This is significantly more state-flexible and friendly than many would have expected," said Alan Weil, head of the National Academy for State Heath Policy.

It remains unclear whether the administration's efforts to shift responsibility for a critical part of the law to states will ease its implementation or control rising costs, a major threat to the overhaul.

The law creates Internet-based insurance exchanges in 2014 through which Americans lacking job-based coverage will be able to buy health insurance much as they now comparison-shop for airline tickets.

Insurers selling plans in the state-based exchanges must cover a basic set of benefits, including hospitalizations, emergency care, newborn and maternity care, and pediatric services. The law authorized the Department of Health and Human Services to decide how generous those benefits should be.

That has fueled an intense debate between consumer advocates, who are pushing for more extensive coverage, and employers and insurers, which worry that too many benefit mandates will push up costs.

More than 30 million Americans, including many who work for small businesses, are expected to ultimately use these exchanges to obtain a health plan. Many will qualify for federal aid to help them buy their plans.

By giving states authority to define the scope of covered benefits, the administration potentially sidestepped an ugly showdown between consumer and business groups in the run-up to the presidential election. Administration officials also may have undercut an allegation from opponents of the law that the federal government is usurping state authority.