California hearing panel sets tight May 7 deadline to revise essential health benefits for 2027

Assemblymember Mia Bonta and Senator Carolyn Menjivar convened a joint informational hearing on Feb. 11 to review options for updating California’s essential health benefits benchmark for the 2027 plan year and to get stakeholder input.

The hearing focused on process and timing: Department of Managed Health Care Director Mary Watanabe and Wakely actuaries explained that federal regulations require the state to submit a complete package to the Centers for Medicare & Medicaid Services (CMS) by early May if any new benefits are to take effect Jan. 1, 2027. "We do need to have an effective date of January 1," Watanabe said, adding the May filing deadline "is a very aggressive timeline, with some tough decisions ahead of us." The department said it aimed to identify a draft package for public comment in mid-February and anticipated two public comment windows before a May submission.

Why it matters: the Affordable Care Act permits states to select a benchmark plan that defines the EHBs for individual and small-group market products, but recent CMS guidance imposes a "typicality test" that places a ceiling on how rich a state’s benchmark can be. Wakely’s pricing runs show the state’s available room to add benefits — the margin between the current benchmark and the federally permitted ceiling — is limited. Wakely summarized that the state could increase benefit richness by roughly 1.0% to 2.2% of total allowed costs; the full slate of benefit options stakeholders requested would exceed that range.

Key details from the hearing

- Current benchmark: California’s EHBs trace to the Kaiser Foundation Health Plan Small Group HMO product as sold in 2014; that product plus any state-added benefits define the baseline EHBs. - Typicality test: federal rules require that a state’s new benchmark not be richer than a typical employer plan drawn from CMS’s 10-plan set; Wakely identified a Kaiser University of California large-group plan as the richest comparator that defines the ceiling. - Actuarial basis: Wakely said it priced "allowed" steady-state costs (plan paid plus enrollee cost sharing) and did not incorporate downstream savings (for example, fewer falls with hearing-aid use) or pent-up demand; those choices are consistent with prior EHB applications. - Process options: officials said California can defer submission and instead file in May 2026 for a 2028 effective date; however, delaying pushes the same decisions into a later cycle and would need fresh analysis if more than roughly 24 months elapse or if federal law changes.

What the committee asked and received

Members questioned how CMS would treat edge cases (for example, benefits historically limited to children) and whether the state could rely on expected downstream savings when arguing to add benefits. Wakely and DMHC staff said CMS review centers on allowed cost estimates and the typicality ceiling; estimates that rely on uncertain future savings would risk pushing the application over the ceiling and complicating review.

Next steps and context

DMHC staff said they will seek committee guidance in the coming two weeks and hold public comment periods on any draft package before a May submission. Covered California and the California Health Benefits Review Program (CHBRP) presented separate premium‑impact analyses during the hearing; those presentations fed the committee’s questions about affordability and marketplace effects. The committee did not take formal votes during the hearing. The administration and Legislature will need to weigh availability of actuarial room, the legal ceiling set by CMS typicality guidance, and the potential premium impacts before deciding whether to submit a revised benchmark package for 2027.

Ending note: Chairs emphasized both urgency and caution — the May 7 deadline is firm for a 2027 start, but the federal review process and the pace of change in health costs counsel careful selection of benefits that fit within the typicality ceiling.