States have received further guidance and additional flexibility for the plans sold on their health insurance exchanges, as the U.S. Department of Health and Human Services (HHS) released Friday its first bulletin on the cost-sharing aspects of exchange products.
Under the Affordable Care Act (ACA), plans sold on the exchanges will be labeled based on the actuarial value, or the percentage of health-care costs that a plan is expected to pay for. For example, a plan with an actuarial value of 70 percent would cover 70 percent of a consumer’s health-care costs, while the consumer would pay for the remaining 30 percent. The ACA outlines four tiers of coverage: bronze (actuarial value of 60 percent); silver (70 percent); gold (80 percent); and platinum (90 percent).
Friday’s bulletin featured the department's proposal for determining the actuarial value of a plan. The process would be based on a standard population, derived from analysis of existing claims data and the population expected to enroll in the exchanges in 2014. HHS would develop a national standard as a default, but would also offer individual states the option of creating their own standard populations based on state claims data. States that did not develop their own standard population would use the national model. States would also be grouped into three geographically-based pricing tiers to account for regional differences in health-care costs.
HHS would develop a publicly available calculator to formally determine the actuarial value of plans sold on the exchanges. The calculator’s parameters would be weighted based on the standard population that the state chooses, either state-based or national, and insurers would then input their cost-sharing instruments, such as co-payments and deductibles, to determine the plan’s actuarial value.
The department also proposed minimal variation standards for each plan tier: plus or minus 2 percent. So, for example, a silver plan’s actuarial value could range from 68 to 72 percent.
The ACA also mandates that insurers reduce the cost-sharing burden of silver-level plans for individuals with a household income at 400 percent of the federal poverty level or lower. According to HHS, those reductions should be achieved through decreasing maximum out-of-pocket payments, co-insurance and co-payments. HHS is then required to reimburse insurers for losses from those reductions.
The bulletin outlined HHS’s proposal for implementing the cost-sharing reductions. When individuals apply for coverage through the exchange, their eligibility for cost-sharing reductions would be determined. If they qualify, HHS proposes that their maximum out-of-pocket limits for silver-level plans would be decreased and the plans’ actuarial value be increased. The cost-sharing reductions would vary based on their income. However, the ACA also requires that the actuarial value not exceed certain levels.
This is how it would work: HHS would require that the maximum out-of-pocket limits for people from 100 to 150 percent of the federal poverty level be reduced by 67 percent (from $6,000 to $2,000, for example). The actuarial value of their plans would be increased to 94 percent, but no higher. For 150 to 200 percent of the poverty level, the out-of-pocket limit would be reduced by 67 percent and the actuarial value would be set at 87 percent. The full table of out-of-pocket limits and actuarial values for various income levels can be found in the HHS bulletin below.
According to HHS, the department plans to issue insurers an advanced monthly payment, based on their projected cost-sharing reductions, and adjust that payment at the end of the year based on their actual losses.
Comments on the HHS proposals can be emailed to ActuarialValue@cms.hhs.gov and CostSharingReductions@cms.hhs.gov.
Governing has maintained a record, featured in the map below, of which states have received establishment and innovation grants from HHS to develop their exchanges. States are also divided by whether or not they are participating in a legal challenge to the ACA.
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