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Designing an Alternative Benefit Plan

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:
    • The Standard Blue Cross/Blue Shield Preferred Provider Option offered through the Federal Employees Health Benefit program.
    • State employee coverage that is offered and generally available to state employees.
    • Commercial HMO with the largest insured commercial, non-Medicaid enrollment in the state.
    • 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
    • Any of the three largest small group market health plans by enrollment.
    • Any of the three largest state employee health benefit plans by enrollment.
    • Any of the three largest federal employee health benefit plans by aggregate enrollment.
    • 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 mental health/substance use disorder (MH/SUD) services offered in 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 MH/SUD benefits cannot be more restrictive than those applicable to medical/surgical benefits.