The U.S. Department of Health and Human Services (HHS) has issued a final rule setting forth the future health insurance exchange (“Exchange”) and insurance issuer standards related to coverage of essential health benefits (EHB) and actuarial value. In addition, the final rule establishes a timeline for when qualified health plans (QHPs) should be accredited in federally facilitated Exchanges.

Starting January 1, 2014, non-grandfathered insurance plans in the individual and small group market and those in the Exchanges will be required to provide coverage of benefits or services in 10 separate categories that reflect the scope of benefits covered by a typical employer plan. A QHP is one that provides a benefits package that covers EHB, includes cost-sharing limits, and meets minimum value requirements.

Essential Health Benefits

With respect to the scope of EHB, each state will be permitted to identify a single EHB-benchmark plan – defined as the standardized set of essential health benefits that must be met by a QHP – from the following four choices:

1. Small group market health plan, defined as the largest health plan by enrollment in any of the three largest small group insurance products by enrollment in the state’s small group market;
2. State employee health benefit plan, which is any of the largest three employee health benefit plan options by enrollment offered and generally available to state employees;
3. Any of the largest three national Federal Employees Health Benefits Program (FEHBP) plan options by aggregate enrollment that is offered to all health benefits eligible federal employees; or
4. The coverage plan with the largest insured commercial non-Medicaid enrollment offered by a health maintenance organization (HMO) operating in the state.

If a state does not make a selection, the default base-benchmark plan will be the first option discussed above. A benchmark plan that does not provide the requisite coverage in each of the 10 categories (ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care) must be supplemented using the process outlined in the rule.

A multi-state plan must meet benchmark standards set by the U.S. Office of Personnel Management (OPM). Additional information on EHB benchmark plans can be found here.

Actuarial Value

The Affordable Care Act creates four tiers of health plans available for purchase through the Exchanges. Each tier is defined by its actuarial value (AV), or percent paid by a health plan of the percentage of the total allowed costs of benefits. Specifically, a bronze health plan is a health plan that has an AV of 60 percent; a silver health plan has an AV of 70 percent; a gold health plan has an AV of 80 percent; and a platinum health plan has as an AV of 90 percent. The value may vary by plus or minus 2 percent. The purpose of establishing these “metal” levels is to help participants and potential enrollees compare various health plans. The HHS has created an AV calculator to assist in determining a plan’s metal level.

The HHS explains in the rule’s summary of regulatory changes that in order to count towards the AV calculation:

[E]mployer contributions to health savings accounts (HSAs) and amounts made newly available under integrated Health Reimbursement Arrangements (HRAs) that may only be used for cost sharing must be known to the issuer when the plan is purchased. Whether other types of integrated HRAs might count towards AV is being given further consideration. In this case, guidance on the treatment of HRAs will be issued and this regulation will be amended as necessary.

Minimum Value

An employer-sponsored plan is deemed to provide minimum value (MV) if the percentage of the total allowed costs of benefits provided under the plan is no less than 60 percent. In order to determine whether a plan provides minimum value, an employer-sponsored plan may use the MV calculator provided by the HHS and the Internal Revenue Service, or avail itself of “an array of design-based safe-harbors published by HHS and the Internal Revenue Service in the form of checklists to determine whether the plan provides MV.” The MV Calculator will have similar functionality to the AV Calculator but based on claims data that better reflects typical employer-sponsored plans. Alternatively, a group health plan may seek certification by an actuary to determine MV if the plan contains non-standard features that do not lend themselves to either of these determination methods.

Annual Limits

HHS explains that it interprets the health care law as requiring all group health plans to comply with the annual limitation on cost-sharing, while only plans and issuers in the small group market are subject to the Act’s deductible limits.

Deductible Limitations

For 2014, the deductible limit for self-only coverage is set at $2,000; and at $4,000 for coverage other than self-only. Guidance issued by the Department of Labor’s Employee Benefits Security Administration (EBSA) explains that small group market health insurance coverage may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without exceeding the deductible limit.

With respect to self-insured and large group health plans, the agencies responsible for implementing the ACA plan to issue a rule to implement §2707(b) of the Public Health Service (PHS) Act, which was added by the ACA, providing that a group health plan must ensure that any annual cost-sharing does not exceed the ACA’s limits on out-of-pocket maximums and deductibles for employer-sponsored plans. As discussed in the guidance, the agencies

continue to believe that only plans and issuers in the small group market are required to comply with the deductible limit described in section 1302(c)(2) [of the ACA]. Public input is welcome in advance of a future rulemaking, which will implement that only plans and issuers in the small group market will be subject to the deductible limit. Please send comments by April 22, 2013 to e.ohpsca-2707.ebsa@dol.gov.

A self-insured or large group health plan will be permitted to rely on the agencies’ stated intent to apply the deductible limits only on plans and issuers in the small group market until such regulations are issued.

Cost Sharing

As for the annual limit on out-of-pocket maximums, the HHS states that all non-grandfathered group health plans (including large group insured plans and self-insured plans) must comply with the annual limitation on out-of-pocket maximums set forth in §1302(c)(1) of the ACA, which ties the annual limitation on cost sharing for plan years beginning in 2014 to the enrollee out-of-pocket limit for high deductible health plans (HDHP).

The EBSA guidance acknowledges, however, that plans might use multiple services providers to administer benefits, which in turn might impose different levels of out-of-picket maximums. To this end, the agencies are providing some leeway for the first plan year beginning after January 1, 2014 for group health plans or group health insurance issuers that use more than one service provider. Specifically, a plan’s annual limitation on out-of-pocket maximums will be considered satisfied if:

• The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
• To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1).

Pursuant to the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), however, plans and issuers “are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.”

Accreditation

With respect to a timeframe, the rule states that the future Exchanges will be required to establish a uniform period within which a QHP issuer that is not already accredited must become accredited. The OPM will establish the accreditation period for multi-state plans. The rule outlines a multi-year accreditation timeline applicable for federally-facilitated Exchanges.

These regulations are slated to take effect 60 days after publication in the Federal Register, which is scheduled for Monday, February 25, 2013.

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