Proposed HHS Rules Address Essential Health Benefits, Actuarial Value and More | Practical Law

Proposed HHS Rules Address Essential Health Benefits, Actuarial Value and More | Practical Law

The Department of Health and Human Services (HHS) recently issued proposed regulations addressing, among other things, standards for the coverage of essential health benefits and the determination of actuarial value under the Affordable Care Act (ACA). The proposed regulations include an application for entities that want to accredit insurers offering coverage under the ACA insurance exchanges.

Proposed HHS Rules Address Essential Health Benefits, Actuarial Value and More

Practical Law Legal Update 8-522-5477 (Approx. 5 pages)

Proposed HHS Rules Address Essential Health Benefits, Actuarial Value and More

by PLC Employee Benefits & Executive Compensation
Published on 27 Nov 2012 • USA (National/Federal)
The Department of Health and Human Services (HHS) recently issued proposed regulations addressing, among other things, standards for the coverage of essential health benefits and the determination of actuarial value under the Affordable Care Act (ACA). The proposed regulations include an application for entities that want to accredit insurers offering coverage under the ACA insurance exchanges.
On November 20, 2012, HHS issued proposed regulations addressing, among other things, the coverage of essential health benefits (EHB) and actuarial value (AV) determinations under the Affordable Care Act (ACA). Beginning in 2014, all non-grandfathered health plans in the small group and individual markets must cover EHB, which generally includes ten minimum benefit categories (for example, hospitalization, emergency services, and maternity and newborn care). Health plans must also satisfy certain AV standards that:
  • Generally measure the generosity of a plan's benefits.
  • Are calculated as the percentage of total average costs for covered benefits covered under a plan. For example, a plan having an AV of 70% means that a participant generally is responsible for 30% of the cost of all covered benefits.
  • Are keyed to "metal levels" reflecting minimal AV percentages, and that require plans to be a bronze (60% AV), silver (70% AV), gold (80% AV) or platinum (90% AV) plan.
Over the past year, HHS has issued a series of preliminary bulletins and other guidance addressing EHB and AV. In that preliminary guidance, HHS outlined an approach under which:
  • The definition of EHB would be keyed to state-specific benchmark plans that include the largest small group health plan in a state.
  • A state would choose its benchmark plan from several options.
For more information, see Legal Updates:
In an appendix to the proposed regulations, HHS lists the proposed EHB benchmark plans for the states and District of Columbia.

Standards for Establishing Exchanges

The proposed regulations address numerous issues involving the level of benefits to be offered under the exchanges, including state-required benefits. For example, the proposed regulations expand on the rule that if a state requires insurers to cover benefits in excess of EHB, the state must pay for the costs of these benefits in qualified health plans (that is, plans that are certified to be offered in an exchange and that offer an EHB package). Under the proposed regulations, state-required benefits enacted on or before December 31, 2011, would be considered EHB for purposes of this rule.
In addition, HHS proposed that the exchanges identify which additional state-required benefits are in excess of EHB, using a reference tool that lists state-required benefits (to be published by HHS). QHP insurers would then calculate the cost of these additional benefits, based on actuarial analysis.

Exchange Standards Involving Health Insurers

The proposed regulations provide a number of structural rules involving EHB and benchmarking, which include rules that apply to health insurers. The proposed regulations address:
  • How states will select a "base-benchmark plan," which:
    • is chosen from a list of alternatives that includes the largest health plan in any of the three largest small group insurance products in the state's small group market; and
    • may require substantive additions to cover the ten EHB benefit categories required under the ACA.
  • Standards for supplementing base-benchmark plans. A base-benchmark plan may require substantive additions to cover the ten required EHB benefit categories. After these adjustments are made, the plan is referred to as an "EHB-benchmark plan," which:
    • will serve as a reference plan for QHP insurers; and
    • reflects the scope of services and limits offered by a typical employer in the state.
  • A prohibition on discriminatory benefit designs in EHB-benchmark plans (for example, on the basis of an individual's medical conditions).
  • Permitted methods of benefits substitution for plans that offer EHB, subject to certain safeguards (for example, that the substituted benefit is actuarially equivalent to the benefit being replaced).
  • Minimum EHB standards for offering prescription drug benefits.

Required Cost-sharing

Beginning in 2014, the ACA imposes annual limits on cost sharing, such as deductibles, coinsurance or copayments (see Practice Note, Cost-Sharing Restrictions Under the ACA). The proposed regulations specify:
  • Annual dollar limits for self-only and non-self-only coverage for 2014 calendar years and after.
  • Annual dollar limits on deductibles for plans in the small group market.
  • Special rules applicable to individuals in network plans.
Also, HHS requests comments on whether maximum deductible limits can be increased by amounts available to employees under flexible spending accounts.

Actuarial Value Calculations

The proposed regulations include an approach for insurers to calculate AV, which includes an AV calculator that:
  • Is available for both formal and informal calculations and to assist in health plan design.
  • Uses national claims data reflecting plans of varying levels of generosity.
The proposed regulations also include:

Minimum Value Calculations

In general, under the ACA, an employer-sponsored health plan fails to provide minimum value (MV) if the plan's share of total allowed costs of benefits is less than 60% of the costs. Addressing MV, the proposed regulations provide that:
  • MV for employer-sponsored self-insured group health plans and insured large group health plans will be determined using a standard population based on large self-insured group health plans.
  • Employer contributions to HSAs and amounts newly made available under HRAs will be taken into account in determining MV, using the principles applied for determining AV.
HHS and IRS intend to make available an MV calculator for use by employer-sponsored self-insured and self-insured large group health plans.

Accreditation Entities

In a separate notice, HHS announced the recognition of the National Committee for Quality Assurance (NCQA) and URAC as accrediting entities for purposes of QHP certification. The proposed regulations also establish a process for adding other accrediting entities. HHS plans to expand its existing recognition process and may include additional criteria for already-recognized accrediting entities.

Practical Impact

HHS' approach in these proposed regulations reflects a policy decision to provide greater design flexibility to insurers in a given state. An alternative approach, which HHS rejected, would have applied one national definition of EHB that would have imposed a uniform list of benefits on applicable insurers. Also, in an important tie-in to another ACA requirement, the proposed regulations state that a plan does not provide EHB unless it provides all preventive services described in Section 2713 of the Public Health Services Act (see Practice Note, Coverage of Preventive Health Services Under the ACA).