ESSENTIAL HEALTH BENEFITS COULD MAKE AFFORDABLE CARE UNAFFORDABLE

Essential Health Benefits

February 20th, 2013, the Department of Health and Human Services issued a final rule outlining essential health benefits and actuarial value requirements under the Affordable Care Act.

About the Final Rule

Under the ACA (Affordable Care Act), health plans in state health insurance exchanges must provide coverage for 10 broad categories of benefits, such as maternity care, prescription drugs and preventive care. 

The final rule goes beyond what regulators initially proposed and applies to non-grandfathered plans for individual and small group markets inside and outside of the health insurance exchanges.

Most of the rules include benefits that commonly are covered by plans, including:

Ambulatory patient services;
Chronic disease management;
Emergency care;
Hospital services;
Laboratory services;
Maternity and newborn care;
Mental health and substance use disorder services, including behavioral health treatment
Pediatric services, including oral and vision care
Prescription drugs; and
Preventive wellness services

However, some changes represent an expansion of coverage to include rehabilitative care, pediatric dental care and pediatric vision care. Further, the rule expanded coverage and federal parity protections for mental health and substance use disorder services, including behavioral health treatment, to both the individual and the small group market.  The problem is that the more coverage that is added to the "Essential Health Benefit List" the higher the costs will become until eventually "Affordable Care" is anything but affordable.  

The final rule also prohibits insurers from discriminating based on an “individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life or other health conditions”.....but not if you are a smoker.  If you are a smoker, you could be charged up to 50% more in premium.

Benchmark Plan

For 2014 and 2015 each state was to select a base-benchmark plan as the reference for defining EHB in the state.  States could choose 1) the largest plan by enrollment in any of the three largest small group insurance products in the state; 2) any of the largest three state employee health benefit plans; 3) any of the largest three Federal Employees Health Benefits Program plans; or 4) the largest insured non-Medicaid HMO in the state.  For Maryland the  Health Care Reform Coordinating Council selected the CareFirst State of Maryland PPO for State employees to be Maryland’s benchmark plan.


Actuarial Value

Actuarial Value, or AV, is calculated as the percentage of total average costs for covered benefits that a plan will cover. For example, if a plan has an AV of 60 percent, on average, a consumer could expect to be responsible generally for 40 percent of the costs of all covered benefits in that plan.

Starting in 2014 plans in the Individual and Small Group Markets will need to meet certain Actuarial Values.  The Center for Consumer Information and Oversight has posted an Actuarial Value Calculator to help determine if your plan meets those requirements. 

The plans offered (Metals) will consist of the Bronze Plan with an Actuarial Value of 60% of cost, Silver, 70% of cost, Gold at 80% of Cost and Platinum 90% of Cost.  In addition there will be a Catastrophic for those individual who are eligible (under 30 and other metal plans are unaffordable)  This age used to be younger and will only hurt the loss ratio of the exchange even further.


Cost of Coverage

Insurers and some business groups had lobbied the federal government to scale back the scope of mandated coverage categories because of concerns that such coverage would make policies too costly, the Wall Street Journal reports. However, rather than scale back benefits, the rule includes several ways to limit the costs to consumers, such as capping total out-of-pocket costs and limiting the deductible amount for plans offered in the small-group market to about $2,000 for an individual and $4,000 for a family.  Again, adding all of these additional benefits and limiting exposure to the covered person will only add cost to the final product and have the exact opposite effect of what the Affordable Care Act was designed to do, make care more affordable and available to all who need it.

SO WHAT'S IT GOING TO LOOK LIKE?

I know, everyone is on the edge of their seats wondering what the health care environment is going to look like come the big day....January 1, 2014.  The date of the full enactment of the Affordable Care Act (Health Reform) in all its glory.  Well, it's anybody's guess but I'll give you mine.  Carriers will be offering their guaranteed issue Medal Coverage's (bronze, silver, gold, platinum plans) through the Maryland Health Benefit Exchange.  Coverage may be accessed by individuals or groups of up to 50 employees.  Our firm will be able to help you access those coverage options in the same way we do now.  Carriers will also be offering the same coverage directly through them.  So, in a sense, they will be competing against themselves.  

Plans that probably will start to become very popular are the partially self-funded medical plans.  These are plans that look at the medical history of the group and come up with a premium much as plans are now.  However, if you have a good claims year and dollars aren't spent on claims, these will come back to the employer.  If they don't, then your only exposure is what you've already paid in premium, no more. 

 In time, the exchanges become full of unhealthy people and will probably become unattractive to most healthy employer groups and individuals who will purchase on the underwritten private market.  It seems that the exchanges are going to be a death spiral unable to sustain itself.  So in order to keep it breathing those life support dollars will need to come from somewhere.......fines, taxes and penalties.  

In the meantime........................

Employers of all sizes need to:

1. Make sure their plans aren't discriminatory based on income.
2. Not allow waiting periods longer that 90 days
3. Make sure their part-time employees are working 29 or less hours a week on average
4. Notify ALL employees of the existence of the Health Exchanges (was in March now June/July maybe)
5. Issue Summary of Benefits Coverage of medical plans to ALL eligible employees
6. Let employees also know that they will be charged an additional 50% surcharge for medical plans offered through the exchanges if they are smokers.

In addition, those employers over 50 employees:

1. To avoid potential penalties associated with offering "Affordable" "Minimal Essential Coverage" Do a "Pay or Play Calculation".  (We will/have worked with our clients to arrive at these numbers)
2. Show value of health plan for those employers issuing more than 250 W-2's

This is simply a snap-shot of what the health care landscape could look like come 2014 and some areas needing to be addressed to avoid fines or penalties.