Source: Warner Pacific/NAHU. Click here.
February 22, 2013 (NAHU Washington Update) - HHS released a final rule on Wednesday, February 20 that covers the definition of essential health benefits (EHBs) and the determination of actuarial value for the individual and small group markets. The new rule also sets the minimum value of coverage that large employers need to meet to avoid the health reform law’s employer mandate excise tax penalties. HHS released calculators for determining actuarial value in individual and small group plans and minimum value for employer plans subject to the responsibility requirements. If some of these documents looks familiar to you that is because the final rule is extremely similar to the proposed version that was issued in November 2012.
We still have affordability concerns with regard to the EHB and actuarial value requirements and this final rule is by no means perfect. But a few places where the final rule differs from the proposed version are key, and we are pleased to say a number of changes requested by NAHU in our formal comment letter were granted. First of all, with regard to the minimum value standard, NAHU members have been privately communicating to HHS that employers who have to buy small group market coverage, but also have to comply with the employer mandate provisions of the law, should not have to do any additional verification of their plan’s actuarial value for over a year. We made this point again in official comments on the proposed rule, noting that requiring small employers to meet both standards would be “duplicative, unnecessary and overly burdensome.” Fortunately, HHS took our recommendation seriously and created the exact safe harbor we requested for small employer plans.
The final rule also stipulates that the EHB requirements will apply to individual plans on a plan year basis, not on January 1, 2014. This change was requested by NAHU specifically, since many individual policies renew at other times of the year and the idea of significant benefit and policy changes hitting all of these policies and consumers mid plan-year scared us. Or, as we put it to HHS, “created significant consumer protection and education concerns.”
Another important clarification was made in the final regulatory language that employer contributions to a health savings account (HSA) and amounts newly made available under an integrated health reimbursement account (HRA) that may be used only for cost sharing will be taken into account for determining a plan’s minimum and actuarial value. In addition, the final rule gives health plans an out with regard to the law’s small group $2000/$4000 deductible limit if they think it will prevent them from offering bronze level coverage options. We are still waiting for sub-regulatory guidance about how exactly that out will work, but it is good news nonetheless.
Finally, HHS granted a NAHU request regarding stand-alone dental plans, allowing them to be sold in combination with a QHP outside of state-based exchanges in order to satisfy the pediatric dental EHB requirement. Previously it was only clear that stand-alone plans could be used in conjunction with a QHP in exchange-based plans.
The final rule is a quick read—just 149 pages! But if you are pressed for time, courtesy of our retained council Ernst and Young, key provisions of the rules are highlighted below.
Minimum value, actuarial value
The rule does not make major changes to minimum value ted provisions laid out in a proposed rule from HHS published in the November 26, 2012, Federal Register, and in Treasury Notice 2012-31. The rule outlined a number of ways to determine whether employer-sponsored self-insured group health plans and insured large group health plans meet the MV standard:
MV calculator. The rule states that employers will be able to determine whether a plan meets the MV standard by using an MV calculator, which HHS and the Internal Revenue Service posted online today. The calculator is similar to an actuarial value (AV) calculator that HHS also released today for use in the individual and small group markets. However, the MV calculator relies on continuance tables and a standard population reflecting claims data of self-insured employer plans, while the AV calculator has been developed using a set of claims data weighted to reflect the standard population projected to enroll in the individual and small group markets for the identified year of enrollment.
Design-based safe harbors. The proposed rule states that employers also can determine whether a plan meets the MV standard by using an array of design-based safe harbors published by HHS and IRS in the form of a checklist. As outlined in the November 26, 2012, proposed rule, each checklist would describe the cost-sharing attributes of a plan that apply to the following four categories of benefits and services:
- Physician and mid-level practitioner care
- Hospital and emergency room services
- Pharmacy benefits
- Laboratory and imaging services
HHS has stated that the four categories of benefits and services comprise the majority of group health plan spending.
Certified actuary. Employers could use a certified actuary to determine whether an employer-sponsored plan meets the MV standard only if the plan contains non-standard features and neither the MV calculator nor the design-based checklists applies to the plan.
Small group market metal categories. The final rule states that any plan in the small group market that provides the bronze, silver, gold or platinum level of coverage based on an actuarial value test will be considered to satisfy the MV requirement.
The final rule clarifies that employer contributions to a health savings account (HSA) and amounts newly made available under an integrated health reimbursement account (HRA) that may be used only for cost sharing will be taken into account for determining MV. An accompanying Minimum Value Calculator Methodology document explains that the MV calculator treats such contributions as covered “first-dollar” spending for covered services (see page 8 of “Minimum Value Calculator Methodology”). In addition, the final rule’s preamble states that the Administration is giving “further consideration” to the question of whether other integrated HRAs might be counted toward MV.
HHS asks that technical issues and operational concerns about the MV calculator be sent to minimumvalue@cms.hhs.gov.
Essential health benefits
Large group plans and grandfathered plans are not required to cover the 10 benefit categories that the ACA requires EHBs to include; however, such plans may not impose lifetime or annual limits on any essential health benefit that they do offer. Plans offered in the individual and small group markets, whether inside or outside state-based Exchanges, must cover EHBs beginning in 2014. To define EHBs, HHS proposed that states select a benchmark plan from the following four options:
The largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market;
Any of the largest three State employee health benefit plans by enrollment;
Any of the largest three national Federal Employee Health Benefits Program plan options by enrollment; or
The largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the State.
Twenty-six states selected their own benchmark plan from the above options, and HHS designated the largest small-group product in the state as the default benchmark in the remaining states.
The rule requires qualified health plans (QHPs) in an Exchange to cover either one drug in each class or as many drugs as are covered in the state benchmark plan, whichever is greater. The November 26, 2012, proposed rule would have required QHPs to cover just one drug per class. HHS will issue future guidance directing plans to include procedures to allow individuals to gain access to clinically appropriate drugs.
Stand-alone dental coverage. With regard to the pediatric dental coverage category of EHB, the final rule states that stand-alone dental plans will be subject to a “reasonable” out-of-pocket maximum separate from the out-of-pocket maximum for the rest of the EHBs covered by QHPs in an Exchange. Exchanges will determine what constitutes a “reasonable” out-of-pocket maximum.
In addition, the final rule recognizes that the actuarial value calculator available for QHPs “would be inappropriate for stand-alone dental plans” and provides for stand-alone dental plans to be categorized as “high” (actuarial value of at least 85%) or “low” (actuarial value of at least 70%, reduced from 75% in the November 26, 2012, proposed rule). The rule requires the above actuarial values to be certified by a member of the American Academy of Actuaries using generally accepted actuarial principles.
The final rule also states that plans outside of the Exchange may sell products that do not include pediatric dental coverage if they are “reasonably assured” that such coverage is sold only to individuals who purchase Exchange certified stand-alone dental plans.