Bronze to Platinum Health Plans: What Will It Mean?
New agency guidance provides insight on how employers and insurance carriers will determine the required minimum (actuarial) values of the four-tiers of health plans specified in healthcare reform: bronze, silver, gold, and platinum.
Insurance carrier rules:
Health and Human Services guidance on actuarial values specifically applies to insurance companies issuing individual plans and small market plans (for employers under 100 employees) that are not grandfathered. The details of the essential benefits package should be released shortly as well.
Employer plan rules (“large” and “self-funded”):
IRS guidance provides a similar standard for employer-sponsored plans sponsored by employers subject to the play-or-pay mandate – simplified as employers with 50 or more full-time employees on business days in the preceding calendar year. These employers must offer the so-called "minimum value" plan or pay a penalty. The rules for these plans are similar to for insurance carriers — the 60% standard represents the baseline for compliance with an array of health care reform obligations, including the employer mandate.
There is some overlap between these rules based on employer size because of how the law is worded. Presumably, carriers will offer compliant plans to employers in all size ranges.
Valuation of Insured Small Group Market Plans
Insurance companies offering smaller group plans:
Insured plans for employers with one through 100 employees must meet a certain standard; based on Health and Human Services guidance.
Please note that this guidance will apply to insurance policies and products purchased by employers subject to the mandate at 50 employees – even though there are some overlapping employer plan standards from the IRS (*below). The agencies still need to coordinate how their standards will operate together or whether one set of rules will control at the 50-100 employee size range where the overlap occurs.
The federal government will release an on-line calculator for determining actuarial value; rather than allowing carriers to work from a set of actual claims data or tables based on aggregated data based on individual claims.
This so-called “Actuarial Value Calculator” will represent the entire, mandated list of the new essential health benefits – which applies to these smaller plans.
The primary goal of the Actuarial Value Calculator is to make comparing plans easier; insured plans with the same cost sharing should have the same (or very similar) value, represented inside the same tier within the bronze to platinum spectrum.
Valuation of Insured Large Group Market Plans
To be treated as a compliant (or qualified plan) – which is necessary to avoid penalties under health reform – an employer with more than 50 employees must offer a policy or plan that provides a minimum value; which in turn means “the plan’s share of the total allowed costs of benefits provided under the plan” cannot be “less than 60% of such costs.” For the sake of simplicity, the plan is similar to the typical so-called 60/40 plans, where copays – and/or coinsurance – result in participants paying roughly 40% of the cost and the plan paying 60%. However, the federal government will also take into account other out-of-pocket costs, and total plan value, so a traditional 60/40 plan may or may not qualify.
The federal agencies note that 98% of people in employer-sponsored plans already have qualified coverage.
The IRS guidance (*notice 2012-31) does not have the force of regulations but describes three ways they likely will approach minimum value, then asks for input on these three approaches.
An Actuarial Value Calculator and a Minimum Value Calculator will be made available by the Department of Health and Human Services as well as the IRS. These calculators permit an employer-sponsored plan (or likely its carrier if insured) to enter information about the plan’s benefits, coverage of services, and cost-sharing (deductibles, copays, and maximum out-of-pocket costs, etc.) for the following four factors:
- Physician and mid-level practitioner care
- Hospital and emergency room services
- Pharmacy benefits
- Laboratory and imaging services
Credit is given for contributions by the employer to Health Savings Accounts and Health Reimbursement Accounts, which is great news for employers making such contributions. The calculator would then determine whether the plan provides minimum value. The Minimum Value Calculator would be designed for use by employer-sponsored self-funded plans and insured large group plans. The data built into the Minimum Value Calculator likely will contain claims data reflecting typical self-insured employer plans. In other words, the typical plan offered currently would serve as a baseline.
An array of design-based safe harbors in the form of checklists would provide a way to ascertain if employer-sponsored plans provide minimum value without the need to perform any calculations or obtain the assistance of an actuary. As with the calculators, employers will need to complete the checklists using cost-sharing information, and would also need to consider the factors of coverage (*listed above).
Actuary for nonstandard plans:
For plans with non-standard features that preclude the use of the calculators without adjustments, an appropriate certification by a certified actuary would be required (resulting in an additional plan expense). The actuary would make that determination in accordance with prescribed continuance tables, recognized actuarial standards, and other conditions. The issue then becomes: What is “nonstandard?” The term is not defined completely, but plans with “quantitative limits” (numerical limits) on any of the four factors of coverage (*listed above) would be non-standard — for example, if the plan limits the number of physician visits or the number of in-patient days.
No need to cover all essential benefits:
Employers with over 50 full-time employees – and those employers with self-funded plans – will not be required to cover all of the essential health benefits; though as a practical matter, the “typical” plan that sets the standards above generally includes most, if not all, of those benefits. For example, some “optional” benefits for these plans might be: durable medical equipment, rehabilitative services (non-substance-abuse), acupuncture/chiropractic services, and home health services.
Additional key points…
The theme throughout the guidance is the need for consumers to be able to make simple comparisons when shopping on the exchanges in 2014. The government does not want people to be confused why two plans that appear to have the same cost structure ( or other similar attributes) have substantially different values (or vice versa).
For example, the guidance is intended to prevent a bronze plan from looking too similar to a silver plan without a readily apparent reason or accompanying explanation.
(*This concept seems to carry over the rationale underscoring the new Summary of Benefit Coverage, or “mini-SPD.” HHS has published a template with a look similar to a food nutrition label, so consumers may more easily compare two different plans together and identify cost and coverage differences.)
Another government goal is to create rules that bunch together plans with similar cost sharing into uniform tiers. The HHS guidance says programs: "with the same cost-sharing would have the same actuarial value.” In other words, similar plans with similar co-payments – and other cost-related design features – would appear inside the same tier (bronze, silver, gold, or platinum). A leveling of the playing field with greater uniformity is thus the other main theme, and seems to apply in concept to larger employer-sponsored plans as well.
Glimpse at a possible innovative plan design:
Health and Human Services promotes the idea of innovative plan designs such as “Value-Based Insurance Designs” that vary the copayment or coinsurance based on expected value to the consumer. While regulators seem to appreciate the idea behind the following plan design, they are still determining how to make the calculator work to value such a plan.
One idea for a plan would be one with a $1,000 deductible, 20% co-payment (up to $2,000 out-of-pocket), then a 40% co-payment (up to a $6,000 out-of-pocket maximum).
Offering such a plan may require the employer or carrier to obtain an actuarial opinion.
Carriers and employers are being given flexibility to develop various cost-sharing structures, so long as taken as a whole the program meets the required value of 60% to 90%. What does this mean? Plans will not have to satisfy a specific co-payment or co-insurance structure.
Basis as single set of national assumptions:
Insurance carriers will not be permitted to take into account “plan-specific” data on utilization; meaning experience – or how their products have fared for the covered individuals in the current claims environment. Instead, a single set of data and assumptions for population, utilization, and healthcare pricing will apply in the individual and small group markets. The federal government will create a "national standard population" and allow states to account for variation. Accurate execution by the states will be critically important, as geographic cost variations are significant. Moreover, as carriers can adjust for local price and utilization at the back end, the standard population becomes a bit less standard. Insured plans (and self-funded plans) can vary as to premium, quality rating, provider network, and customer service. In addition, carriers theoretically have the added incentive of marketing plans or policies that are successful in managing utilization and controlling costs because they will stand out as attractively priced in each tier. Similarly, larger employer plans competing for membership against the exchange need to make sure their plan is competitively priced, as price likely will be a deciding factor for someone choosing between an employer plan and an exchange offering.
Assumption on network utilization:
The federal model is based on an assumption that only in-network services will be used, since only a small percentage of utilization occurs out-of-network.
Although we agree that the out-of-network utilization percentage is low, the cost can be high depending on the diagnosis; carriers and others will educate the regulators on that point.
Assignment of states:
States will be assigned to one of three tiers, and then the states can adjust from there. State-to-state variation is "expected to have limited impact" on which tier a plan falls in.