Friday's proposal from Health and Human Services Secretary Kathleen Sebelius allows states to retain some leeway. Private insurance traditionally has been regulated at the state level, and many state officials don't like having to answer to Washington.
The proposed rules, which will take months to finalize, eventually could affect nearly 70 million people. That includes people who would gain private insurance thanks to the health care law, as well as many more currently enrolled in employer and individual plans.
The proposal would let states pick a benefits package from several federally approved options. They range from benefits offered to federal and state employees to the most popular small business plans in the state and to a large health maintenance organization, or HMO.
"Our approach will protect consumers and give states the flexibility to design coverage options that meet their unique needs," Sebelius said.
If a state doesn't want to pick, the default will be the package available through the largest small business plan in that state.
Starting in 2014, millions of people now uninsured can buy private coverage in new state markets; taxpayer subsidies would help with premiums.
Insurers wanting to participate in the new state health insurance exchanges will have to offer at least the federally approved "essential benefits package."
Business groups and consumer advocates are watching closely because they expect the federal government's decisions to set new national standards for health insurance.
Under the law, the benefits package must include such fundamentals as inpatient and outpatient care, emergency services, maternity and childhood care, prescription drugs, preventive screenings and labs.
It must cover mental health and substance abuse treatment, as well as rehabilitation for physical and cognitive disorders. Such add-ons are often not fully covered by frugal plans that are now the best that many small businesses can afford.
Traditionally regulated by the states, private insurance benefits vary widely across the country. Large companies can opt out of most state rules.
Consumer advocates had hoped Obama would set a robust standard for the nation as a whole. But his administration only met them part way.
"The essential health benefits package will for the first time define a minimum standard for health insurance coverage," said Stephen Finan of the American Cancer Society Cancer Action Network. "We urge states to choose a benchmark plan that provides the best care for someone at risk of a life-threatening chronic disease such as cancer."