In keeping with the on-going march toward Affordable Care Act compliance in 2014, the Department of Health and Human Services has issued several important pieces of guidance recently, including final Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation.
Essential Health Benefits
Non-grandfathered plans in the individual and small group markets, issued both in – and outside of exchanges (“marketplace”) must cover essential health benefit packages (EHBs), beginning in 2014. Self-insured group health plans, health insurance coverage offered in the large group market, and grandfathered health plans are not required to cover the essential health benefits. However, to the extent that self-funded plans and large insured plans offered outside the marketplace offer EHBs, these essential benefits cannot be subject to annual and lifetime limits.
Coverage for the essential health benefits package must cover 10 specific categories of benefits. The 10 categories are:
- Ambulatory patient services.
- Emergency services.
- 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.
- Pediatric services, including oral and vision care.
Coverage for Mental Health and Substance Abuse Services
Though health plans offered by employers employing fewer than 50 employees are generally not subject to the federal mental health parity laws (Mental Health Parity Act of 1996 (MHPA) and the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), these plans will be required to provide mental health benefits, in accordance with the EHB standards.
Benchmark Plan Designs
States can utilize one of several plan design categories for defining essential benefits (click here for CBIZ Health Reform Bulletin). As of February 25, 2013, twenty-six states have chosen their base-benchmark plans. In states that do not select their own benchmark plan, the default base-benchmark plan will be based on the largest plan and product by enrollment in the State’s small group market.
Additional information on the specific benefits, limits, and prescription drug categories and classes covered by the EHB-benchmark plans, and state-required benefits, is available on the Center for Consumer Information and Insurance Oversight (CCIIO) website.
DEDUCTIBLES. For plan years beginning on or after January 1, 2014, the final regulations clarify that the annual deductible imposed by plans cannot exceed $2,000 for self-only coverage, or $4,000 for coverage other than self-only. These deductible restrictions only apply to individual and small group health plans, and plans offered through the marketplace. These deductible limits do not apply to large group plans offered outside the marketplace or to self-funded plans.
These regulations, while they reserve the right to make modifications, provide that contributions to flexible medical spending arrangements (FSAs) cannot be used to buy down the deductible levels by the amount available under the FSA.
OUT-OF-POCKET LIMITS. The annual out of pocket limits must match those limits applicable to health savings accounts (HSA). While we do not know the HSA limits for 2014 yet (typically, these figures are available in May or early June), the high-deductible health plan annual out-of-pocket limit for self-only coverage in 2013 is $6,250; $12,500 for family coverage. The out of pocket limits apply to all sized plans; though, with the exception of emergency services, these restrictions only apply to in-network services.
For subsequent years, the deductible and out-of-pocket limits may be adjusted annually to reflect cost increases.
Actuarial Valuation Calculation for determining level of coverage
Non-grandfathered health plans offered to individuals and small employer group markets both in and outside an marketplace must meet the bronze, silver, gold, or platinum actuarial levels of benefits and coverage. A bronze plan is required to have an actuarial value (AV) of 60%; a silver plan, 70%; a gold plan, 80%; and a platinum plan, 90%. Actuarial value refers to a percentage measurement of expected health care costs covered by the plan and used to determine an overall measurement of the plan’s generosity.
The CCIIO has released an updated Actuarial Value Calculator, together with an Actuarial Value Calculator Methodology, for purposes of determining whether a plan’s actuarial value is based on a national standard population.
Determining Minimum Value
Under ACA, a plan fails to provide minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs. Determining minimum value is important to employers, particularly those employing 50 or more full-time equivalent employees, in that if the employer plan fails the minimum value test, or is unaffordable, a shared responsibility tax may be triggered (see CBIZ Health Reform Bulletin, Shared Responsibility Guidance, 1/9/13).
For the purposes of determining whether an employer’s group health plan provides a minimum value of benefits, the plan can utilize a minimum value calculator, a designed-based safe harbor checklist to be established by HHS/IRS, or the plan can seek an appropriate actuarial certification. The CCIIO has released Minimum Value Calculator, together with a Minimum Value Calculator Methodology for purposes of determining a plan’s minimum value.
The final regulations provide that employer contributions to health savings accounts (HSA) and first year contributions to health reimbursement arrangements (HRAs) can count toward meeting a plan’s minimum value.
The final regulations also provide for a plus or minus 2% margin, applicable to AV calculations and MV calculations, as well as to deductibles in the small group market, to allow plans a bit of wiggle room for compliance.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.