Actuarial value defined
July 9, 2012
On February 24, 2012, the Department of Health and Human Services issued a bulletin on actuarial value and cost sharing reductions.
Beginning with plan years starting on or after January 1, 2014, the Affordable Care Act will require non-grandfathered individual and small group market plans offered on and off the Exchange to provide coverage at specific actuarial value categories.
How are actuarial value categories defined?
Categories are defined by the average share of total health spending on essential benefits paid for by the plan. The ACA identifies specific actuarial value categories as "metal levels" specified as bronze, silver, gold and platinum. Bronze plans have the least generous cost coverage, and platinum plans have the most generous cost coverage.
Coverage levels are as follows:
- Bronze = 60 percent of the actuarial value with respect to essential benefits
- Silver = 70 percent of the actuarial value with respect to essential benefits
- Gold = 80 percent of the actuarial value with respect to essential benefits
- Platinum = 90 percent of the actuarial value with respect to essential benefits
Are non-essential benefits included in actuarial value calculation?
Benefits and services not included in the definition of essential benefits will not be included in the actuarial value calculation. The ACA provides 10 statutory essential health benefit categories:
- 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 and chronic disease management
- Pediatric service, including oral and vision care
Who is developing the actuarial value guidelines?
HHS is charged with developing guidelines to provide for a de minimis variation in the actuarial valuations used in determining the level of coverage of a plan to account for differences in actuarial estimates. HHS proposed allowing for an actuarial value de minimis variation of 2%. For example, a gold plan [80% actuarial value] could have an actuarial value of 78% to 82%.
States will have the option to use a national standard population, or to develop their own standard population based on state claims data. States would also have the option to modify the national standard population using demographic and other adjustors in accordance with sound actuarial practices.
Are HSA contributions included in the actuarial value calculation?
For group health plans, employer contributions to a health savings account will be included in the actuarial value determination. HSA contributions paid directly by the individual would not count towards actuarial value.
Employer contributions to a health reimbursement arrangement also impact actuarial value. Per IRS rules, employees cannot contribute to an HRA.
Is there a publicly available calculator?
HHS intends to develop a standard calculator that would be publicly available for issuers to use to determine the actuarial value of their products. The actuarial value calculator developed by HHS would allow for issuers to input cost-sharing factors in order to determine the actuarial value of a product.
What are the most important parameters for determining actuarial value?
According the HHS guidance, the factors that impact actuarial value the most include: deductible, co-insurance, maximum out-of-pocket, and, to a lesser extent, specific cost sharing on ER visits, inpatient admissions, pharmacy benefits, laboratory services, and diagnostic imaging.
Does actuarial value equal plan design?
Plans with the same actuarial value will rarely have the same plan design. In the context of the ACA, actuarial value is determined as if the plan were provided to a standard population, without regard to the population that actually receives benefits from the plan.
What is BCBSM doing?
By 2014, all small group and individual BCBSM plans sold on and off the Exchange must incorporate the actuarial value requirements.
Where can I find more information?
Additional guidance is pending.
The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.