Alternative Benefit Plan Coverage

Alternative Benefit Plans (ABPs)

States have the option to provide alternative benefits specifically tailored to meet the needs of certain Medicaid population groups, target residents in certain areas of the state, or provide services through specific delivery systems instead of following the traditional Medicaid benefit plan.

ABP Guidance

ABP Final Rule

A final rule, published on July 15, 2013, entitled, “Medicaid and Children's Health Insurance Programs: Essential Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal Processes, and Premiums and Cost Sharing; Exchanges: Eligibility and Enrollment” (CMS-2334-F) made major changes in the Medicaid Benchmark Requirements.

Key Requirements of the Rule Include:

  • The term 1937 Medicaid Benchmark or Benchmark Equivalent Plan has been retitled to Alternative Benefit Plans.
  • ABPs must cover the 10 Essential Health Benefits (EHB) as described in section 1302(b) of the Affordable Care Act whether the state uses an ABP for Medicaid expansion or coverage of any other groups of individuals.
  • Individuals in the new adult VIII eligibility group will receive benefits through an ABP.

Additional Guidance

ABP Eligibility

Eligibility Group for ABPs

States can generally choose which Eligibility groups of people they will enroll in an ABP. 

New Adult VIII Group

The Affordable Care Act of 2010 expands Medicaid to individuals ages 19 through 64 at or below 133% FPL.  States that elect to expand Medicaid to the new adult group are required to provide benefits through ABPs.  

Medically Frail Populations

The Final Rule modifies the definition of “medically frail” and includes the addition of people with chronic substance use disorders.

Individuals in the new adult group, if determined to be medically frail, will receive the choice of an ABP defined using EHBs or an ABP defined as the state’s approved Medicaid state plan.  Medically frail individuals in eligibility groups other than the ABP must be voluntarily enrolled.

Designing an ABP

Steps for States in Designing Medicaid Alternative Benefit Plans (ABPs) 

Step 1: States must select a coverage option from the choices found in section 1937 of the Act. Four benchmark options that States should choose from:

    1. The Standard Blue Cross/Blue Shield Preferred Provider Option offered through the Federal Employees Health Benefit program.
    2. State employee coverage that is offered and generally available to state employees.
    3. Commercial HMO with the largest insured commercial, non-Medicaid enrollment in the state.
    4. Secretary-approved coverage, a benefit package the Secretary has determined to provide coverage appropriate to meet the needs of the population.

Step 2: States must determine if that coverage option is also one of the base-benchmark plan options identified by the Secretary as an option for defining (Essential Health Benefits) EHBs.

    • If so, the standards for the provision of coverage, including EHBs, would be met, as long as all EHB categories are covered.   
    • If not, states must select one of the base-benchmark plan options identified as defining EHBs identified in Step 3.

Step 3: Select a base benchmark plan to define the EHBs

    1. Any of the three largest small group market health plans by enrollment.
    2. Any of the three largest state employee health benefit plans by enrollment.
    3. Any of the three largest federal employee health benefit plans by aggregate enrollment.
    4. The largest insured commercial non-Medicaid health maintenance organization operating in the state.


If the base benchmark lacks an EHB category, the ABP must be supplemented with the missing category from any other base benchmark.


If the base benchmark includes a benefit not in alignment with state goals, actuarially-equivalent benefit(s) in the same EHB category may be substituted.

Mental Health Parity and Addiction Equity Act

ABPs are required to comport with the Mental Health Parity and Addiction Equity Act (MHPAEA). The enactment of the Affordable Care Act extended MHPAEA application in Medicaid to all coverage of MH/SUD services offered in Alternative Benefit Plans (ABPs), in addition to its application to the Children Health Insurance Plan (CHIP) program, and state Medicaid plan services offered through managed care organizations. Under MHPAEA, treatment limitations and financial requirements applicable to mental health/substance use disorder (MH/SUD) benefits cannot be more restrictive than those applicable to medical/surgical benefits.

    1. The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act: Federal Mental Health Parity Law of 2008
    1. Interim final regulations for implementing the federal mental health parity law of 2008
    1. U.S. Department of Labor Fact Sheet on MHPAEA
    1. U.S. Department of Labor Federal Parity Law Frequently Asked Questions (FAQs)