Thu Oct 6, 2011 8:45pm EDT (Reuters) - An advisory group urged U.S. officials to formulate a set of essential health benefits under President Barack Obama's health care overhaul that is in line with cost of insurance in a typical small employer plan.

The Institute of Medicine report issued last week also recommended the Department of Health and Human Services be as specific as possible in deciding what health benefits should be required in individual and small group plans as the reform rolls out in 2014.

The IOM, one of the national academies of science that advises U.S. policymakers, did not address any specific types of benefits, in keeping with its assigned task.

Obama's Affordable Care Act was passed last year and is designed to extend health care coverage to an estimated 32 million Americans who are now uninsured.

Insurers, states, employers, and health providers now turn their attention to HHS for its proposal on essential benefits, which will impact the entire small-group and individual insurance market.

"We're in a marathon. What we've just gotten today is the first leg," said Paul Keckley, executive director of the Deloitte Center for Health Solutions.

IOM recommended that HHS produce its essential benefits list by May of 2012.

The institute said policymakers should ensure the benefits get routinely re-evaluated to stay in step with inflation and medical advances, and suggested creating a National Benefits Advisory Council.

Insurers and employers seemed relieved that the report did not recommend a large scope of coverage and reflected their call to balance costs and benefits.

"We agree that this balance is critical to ensuring that individuals, working families and small employers can afford health insurance," said Karen Ignagni, the president and chief executive of America's Health Insurance Plans.

Ignagni's industry group represents many U.S. health insurers, including major providers such as Aetna Inc, Humana Inc, WellPoint Inc and UnitedHealth.

IOM encouraged HHS to seek as much input from the industry, employers and consumers as possible in drafting the essential health benefit package.

"The big takeaway (from the report) is the need to take seriously the affordability and comprehensiveness," said Dr. Elizabeth McGlynn, a member of the IOM committee that worked on the report and a director of Kaiser Permanente's Center for Effectiveness and Safety Research in Pasadena, California.

The IOM report was originally expected on Friday.

It is available on the Internet at: www.iom.edu/EHB

(Reporting by Alina Selyukh in Washington D.C.; Editing by Tim Dobbyn)

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