HHS Issues Final Rule on Essential Benefits

The Dept. of Health and Human Services (HHS) issued a final rule that implements five key consumer protections from the Affordable Care Act:
• Guaranteed Availability – Nearly all health insurance companies offering coverage to individuals and employers must sell health insurance policies to all consumers. No one can be denied health insurance because of a current or previous illness.
• Fair Health Insurance Premiums – Health insurance companies that offer coverage to individuals and small employers will only be allowed to vary premiums based on age, tobacco use, family size, and geography. Factors that are no longer permitted in 2014 include health status, past insurance claims, gender, occupation, how long an individual has held a policy, or size of the small employer.
• Guaranteed Renewability – Health insurance companies will no longer be able to refuse to renew coverage because an individual or an employee has become sick.
• Single Risk Pool – Health insurance companies will no longer be able to charge higher premiums by moving higher-cost enrollees into separate risk pools.  Insurers must maintain a single statewide risk pool for the individual market and single statewide risk pool for the small group market.
 Catastrophic Plans – Young adults and people for whom coverage would otherwise be unaffordable will have access to a catastrophic plan in the individual market. Catastrophic plans will generally  have lower premiums, protect against high out-of-pocket costs, and cover recommended preventive services without cost sharing.

For more information visit: http://cciio.cms.gov/resources/factsheets/marketreforms-2-22-2013.html

America’s Health Insurance Plans (AHIP) issued a statement warning that the imposition of richer benefit packages will result in less affordable coverage for small employers, individuals and families by forcing them to buy up to coverage they may not want or need. AHIP noted that Jonathan Gruber, a prominent health economist and policy expert, says that a 10% rise in the cost of the Essential Health Benefits package would increase the federal government’s cost by 14.5%, or $67 billion, and reduce the rate of the insured by 4.5%, or 1.5 million, through 2019.

Many state departments of insurance and state exchange boards have begun requesting formal actuarial and economic forecasts of the effect of the ACA insurance reforms on their state. These independent studies have found that some provisions, including the Essential-Health Benefits and actuarial value requirements, will result in higher premiums.

AHIP is also concerned that the ACA requires the HHS Secretary to ensure that benefits under the Essential Health Benefits package be equal to what’s provided under a “typical employer plan.” While the term “typical employer plan” is not explicitly defined in the statute, it is vitally important for the benefit package be comparable to benefits purchased by small employers since small businesses and individuals will be the primary customers of exchange plan coverage.

AHIP notes that research has shown that workers and families who get health insurance coverage in the individual and small group markets are especially price sensitive. They tend to pay a larger share of the premium. A benefit package that’s modeled after coverage offered by very large employers would significantly increase premiums for small employers and families, thereby making coverage less affordable.

Under the ACA, most individuals will be required to have insurance at least equal to the “bronze” level of coverage. There is evidence to suggest that the minimum actuarial value of 60% may exceed the average value of a policy in a state’s market, particularly for individually purchased plans. For example, the non-partisan Congressional Budget Office (CBO) estimates that the average actuarial value of health insurance in the individual market ranges from 55%to 60%.

Also, researchers have found that the average actuarial value for non-group policies purchased in California was 55% (with a range of 32% to 85%. The California Healthcare Foundation has found that 62% of the 32 individual market plans available in Los Angeles County had actuarial values below the 60% minimum required under the ACA.

AHIP says that lowering the actuarial value for bronze coverage to 55% or 50% could help avoid disruptions in coverage and ensure that premiums stay affordable, especially for price-sensitive, younger individuals who get coverage in the non-group market. Also, policies that help ensure that younger, healthier subscribers remain in the marketplace can help promote a more stable risk pool and make coverage more affordable for everyone.

The ACA establishes limits on deductibles for health insurance plans in the small group market at $2,000 for individuals and $4,000 for families—effective January 1, 2014. In order to meet these new limits, many small group plans, particularly high-deductible/HSA plans, would have to lower deductibles substantially, thereby increasing the cost of coverage. By requiring many plans to lower deductibles, these caps could price many small employers out of the market and limit access to affordable coverage options for small business workers and their families. These caps could be especially problematic for small business employees who enroll in high-deductible/HSA plans—where the average deductible for single coverage ($2,814 in 2010) already exceeds the ACA limits. Eliminating these caps on deductibles can help ensure that affordable health insurance options are available to workers and their families and that small businesses can continue to offer coverage to their employees.

The ACA states that the HHS Secretary “may” include the amount of the annual employer HSA contributions toward the actuarial value calculation. However, in a bulletin issued in February 2012, HHS declared its intention to only include a portion of employer HSA contributions when determining actuarial value. AHIP says that including employer HSA contributions in the actuarial value calculation significantly increases the likelihood that HSA plans will be able to meet the minimum requirement and will help ensure that consumers continue to have access to high-quality, affordable coverage.

AHIP notes that total enrollment in HSA/HDHPs has grown to 13.5 million people (increasing by 2.2 million over the past year alone). Counting all employer contributions toward the HSA/HDHP actuarial value would help ensure that these affordable products remain available to businesses and their workers.

AHIP offers the following recommendations:
• Make the scope of the Essential Health Benefits comparable to the scope of benefits provided under a typical plan purchased by small businesses.
• Lower the minimum actuarial value for health insurance coverage under the ACA to ensure availability of affordable health insurance options and avoid disruptions in coverage.
• Eliminate caps on deductibles in the small group market to ensure affordability of coverage for small businesses and families.
• Require that all employer contributions toward employees’ health savings accounts (HSAs) are considered when determining a plan’s actuarial value.

For more information, visit www.ahip.org.

Last Updated 06/29/2022

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