Health care reform update Actuarial value, cost-share requirements, essential health benefits, minimum value, preventive care services

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1 Health care reform update Actuarial value, cost-share requirements, essential health benefits, minimum value, preventive care services SUMMARY On February 20, 2013, a new round of rules was released by the Centers of Medicare & Medicaid Services (CMS), the Department of Health and Human Services (HHS) and Department of Labor (DOL), collectively referred to as the Departments. Effective for new and renewing plans on and after January 1, 2014, all non -grandfathered, fully insured small group and individual health plans must meet specific actuarial values (AVs), and cover essential health benefits (EHBs). To try to avoid the risk of penalties, large employers may want to consider offering a plan in 2014 that meets minimum value (MV). These and other topics in the recent release are addressed in this document. Employers should contact their legal and tax advisors with specific questions. DEFINITIONS Actuarial value (AV): the percent of total allowed cost of benefits paid by a health plan. Also referred to as the metal levels bronze (60% AV), silver (70% AV), gold (80% AV) and platinum (90% AV). Note: there is a plus or minus buffer range for each level of two percent (+/- 2%), referred to as de minimis variation, so, for example, a plan with an actuarial value between 68% and 72% would be considered silver. o Percent of total allowed cost of benefits: the anticipated covered medical spending for EHB coverage paid by a health plan; factors in the health plan s cost sharing and divides the cost sharing amount by the total anticipated allowed charges for EHB coverage. The final number is expressed as a percentage. Essential health benefits (or EHB) package: the covered benefits and related limits of a health plan offered by an issuer based on the EHB-benchmark plan; provides at least the ten statutory categories of benefits, limits cost sharing for such coverage, subject to offering catastrophic plans, and provides distinct levels of coverage (the metal levels ) o Base-benchmark plan: the plan selected by a state from (or through the default process) before adjustments are made to meet the benchmark standards. (Details can be found in the Code of Federal Regulations ) o EHB-benchmark plan: the standardized set of EHBs that must be included in all non-grandfathered fullyinsured small group and individual health plans beginning in Failure to provide minimum value (MV): when the share of total allowed costs of benefits provided by a health plan is less than 60 percent of such costs. 3M2 2013_04 Page 1

2 FINAL RULE: EHB PACKAGE State selection: serves as a reference plan and reflects the services and related limits offered by a typical employer plan in that state; applies to at least 2014 and 2015 benefit years. Default base-benchmark plan: states that did not make a benchmark plan selection defaulted to the plan with the most enrollments in the state s small group market. o List of states EHB benchmark plans EHB-benchmark must provide coverage of at least the following categories of benefits: o Ambulatory patient services o Emergency services o Hospitalization o Maternity and newborn care o Mental health and substance use disorder services, including behavioral health treatment o Prescription drugs Must cover the greater of either one drug in every United States Pharmacopeia (USP) category and class, or the same number of prescription drugs in each category and class as the EHBbenchmark plan. Must have procedures in place that allow a member to request clinically appropriate drugs not covered by the health plan Does not require coverage of all drugs in protected classes as defined in Medicare Part D o Rehabilitative and habilitative services and devices The final rule allows states with benchmark plans that do not include coverage for habilitative services to determine which services are included in that category. States that decline to specify habilitative services are required to either provide parity by covering habilitative services benefits that are similar in scope, amount and duration to benefits covered for rehabilitative services, or is determined by the issuer and reported to HHS o Laboratory services o Preventive and wellness services and chronic disease management o Pediatric services, including oral and vision care Pediatric services means services for individuals under the age of 19 Benchmark plans that do not provide coverage for pediatric oral and vision services are required to cover these services from one of the following: The Federal Employees Dental and Vision Insurance Program (FEDVIP) with the largest enrollment Pediatric oral or vision benefits available under a state s separate children s health insurance plan (CHIP) Large group and self-funded (ASO) health plans do not need to offer all 10 categories of essential health benefits, or meet actuarial value requirements that non-grandfathered small group and individual policies have to meet. The rule is still important to large group and self-funded (ASO) plans because they are subject to many rules tied to EHBs such as: The out-of-pocket maximum applies to EHBs EHBs covered by a large group or self-funded (ASO) plan cannot have annual or lifetime dollar limits 3M2 2013_04 Page 2

3 Q. What if a base-benchmark plan in a state s small group market does not cover one or more of the ten required EHB categories? A. The base-benchmark plan will need to be supplemented by adding a particular category in its entirety from another basebenchmark plan option in that state. Q. Do EHBs need to be included in plans for self-insured or large group plans? A. No. Self-insured and large group plans are not required to cover essential health benefits. However, the plan cannot apply any annual or lifetime dollar limits to any EHB that is covered under such plans, and must count cost sharing on EHBs toward the out-of-pocket maximum. Q. How does the EHB policy affect self-insured group health plans, grandfathered group health plans, and the large group market health plans? A. The health care reform law does not required large group health plans, self-funded (ASO) plans and/or grandfathered health plans to offer EHBs. If those plans do cover a benefit that is an EHB, annual and lifetime dollar limits cannot apply, but nondollar limits like frequency or visit limits can be applied. Non-EHBs can have annual and lifetime dollar limits applied. Q. How would employers sponsoring such plans determine which benefits are EHB when they offer coverage to employees living in more than one State? A. The Departments will work with those plans that make a good faith effort to comply with the rule and do not apply annual or lifetime dollar limits to benefits thought to be EHBs, based on the categories in the rule. Q. How will EHB compliance be determined for self-insured, large group market or grandfathered group plans? A. Large group and self-funded (ASO) employers will be considered compliant with the rule as long as they use an approved definition of EHB coverage. The Departments plan to use their enforcement discretion and work with plans that make a good faith effort to apply an approved definition of EHB to ensure there are no annual or lifetime dollar limits on EHBs. FINAL RULE: COST-SHARING REQUIREMENTS Cannot exceed the following limits allowed by the Affordable Care Act (ACA): o Yearly limit on cost-sharing 2013: $6,250 individual / $12,500 family 2014 forward: increased for cost of medical inflation o Yearly limit on deductibles (applies only to non-grandfathered fully-insured small group plans) 2013: $2,000 individual / $4,000 family 2014 forward: increased for cost of medical inflation Q. Do plans have to apply all covered services toward the out-of-pocket maximum? A. No, but any covered service that is an EHB must be applied to the out-of-pocket maximum. Other non-ehb services may also be applied to the out-of-pocket maximum. Q. Do all cost share types have to be applied to the out-of-pocket maximum? A. Yes. All plan cost shares for in-network services, including plan deductibles, fixed copayments, and coinsurance percentages must be applied to the out-of-pocket maximum. 3M2 2013_04 Page 3

4 Q. Do the cost-sharing requirements combine in- and out-of-network services? A. No, only cost-sharing for in-network services count toward the OOP limit and annual deductible limit. Services from a provider outside of a plan s network do not count toward the annual limit on cost-sharing or to the annual limits on deductibles, except for emergency services. Q. Do the annual limits on deductibles in the small group market also apply to large group and self-funded plans? A. No. The limitation (or cap) on deductibles only applies to non-grandfathered, fully-insured small group plans. Q. To what plans do the out-of-pocket annual limits apply? A. The out-of-pocket annual cost-sharing limits apply to for all non-grandfathered group health plans [small group, large group and self-funded (ASO)]. Q. Is there any transitional relief for group health plans on applying an out-of-pocket annual limit accumulator? A. Yes. It is referred to as the out-of-pocket maximum enforcement safe harbor. Group health plans have until their plan year beginning on or after January 1, 2015 to comply with the regulation. No benefit plan can have an out-of-pocket maximum that exceeds the overall limit on cost-sharing. Q. Does the out-of-pocket maximum enforcement safe harbor mean that group health plans do not have to apply costsharing requirements like copayments and coinsurance, to the OOP maximum in 2014? A. No. All group health plans are required to apply cost shared including copayments and coinsurance toward the out-ofpocket maximum. The enforcement safe harbor means that groups with separate service providers do not have to combine all cost-sharing requirements for all benefits toward one out-of-pocket maximum accumulator until Q. If the enforcement safe harbor does not allow group health plans to postpone applying cost-sharing requirements to the OOP maximum in 2014, what does it do? A. The enforcement safe harbor provides relief for group health plans from having to combine all out-of-pocket cost shares from separate service providers into one accumulator until Beginning in 2015, a member s total out-of-pocket costs cannot exceed $6,450 individual / $12,900 family for all benefits combined. Q. Can separate service providers have a deductible higher than the yearly limit on cost sharing? A. No. Service providers that currently have an out-of-pocket maximum can continue to have a separate OOP maximum for 2014, but no OOP maximum can exceed the yearly limit on cost sharing ($6,450 individual /$12,900 family in 2014). For example, major medical can have an OOP maximum of $6,450, prescription coverage can have an OOP maximum of $6,450, and dental can have an OOP maximum of $6,450 if the plans previously had an OOP maximum. Q. If a group has all their benefits with one service provider, does that mean they need to combine all OOP costsharing requirements toward a single OOP maximum in 2014? A. No. Our understanding is that if a group has all their benefits with us, the pharmacy, vision, and dental benefits are administered by separate service providers from the major medical plan administrator (for example, ESI administers the pharmacy benefits). So those plans would also be eligible for the one-year enforcement safe harbor and would not have to accumulate all benefit cost shares toward one OOP maximum until Additional information will be provided when it is released by the Departments. Q. Is there any provision for the yearly deductible amount for fully-insured small group plans to be more than the $2,000 / $4,000 maximum? 3M2 2013_04 Page 4

5 A. Yes, health insurance coverage may be more than the yearly deductible limit if the plan cannot reasonably reach a given level of coverage (actuarial value or metal tier) without exceeding the deductible limit. FINAL RULE: ACTUARIAL VALUE Allows fully-insured, small group issuers to exceed the annual deductible limits in order to meet and offer coverage at a particular metal level Clarifies that the out-of-pocket maximum applies only to in-network providers With regard to HSAs and other account-based plans, annual employer contributions count toward total anticipated medical spending and will be accounted for as part of the calculation, but employee contributions do not In 2014, the AV calculator uses a standard population o For plan years 2015 and after, states will be allowed to submit state-specific claim distributions for use in the calculator Q. What data was used to create the AV calculator? A. To provide information on utilization and cost sharing for a standard population of enrollees, HHS began with claims data from the Health Intelligence Company, LLC (HIC) database for calendar year Q. What population was used when creating the AV calculator? A. The HIC database is a commercial database that includes detailed enrollment and claims information for individuals who are members of several regional insurers and covers over 54 million individuals enrolled in individual and group health plans. Q. What variables were used in creating the AV calculator? A. Cost sharing variables, including copayments, coinsurance and deductibles from the claims data were used to figure out the member and plan shares of the total spending, since descriptions of the plan benefit design characteristics are not par t of the database. Q. Were demographics considered when creating the AV calculator? A. Yes. Spending, demographic and enrollment information at the member level, including age, sex, family structure, preexisting conditions, enrollment, spending and number of claims. Q. Were enrollees grouped by plan type? A. Yes. Enrollees are grouped into Product Client Contracts (PCCs) defined by plan type like PPO, HMO, etc., and benefits design. The AV calculator treats each PCC as a separate health plan since each represents a uniform benefit structure under a contract or group. Q. What claims information was used? A. Spending and claims information is provided in the database for total services and for each of the following medical and drug service categories: Emergency room services All inpatient hospital services (including mental health and substance abuse services) Primary care visits to treat an injury or illness (not including preventive care, well-child visits, or x-rays) Specialist visits Mental/behavioral health and substance abuse disorder outpatient services Imaging, including CT / PET scans and MRIs Rehabilitative speech therapy 3M2 2013_04 Page 5

6 Rehabilitative occupational and rehabilitative physical therapy Preventive care, screenings and immunizations Laboratory outpatient and professional services X-rays and diagnostic imaging Skilled nursing facility Outpatient facility fee like an ambulatory surgery center Outpatient surgery including physician and surgical services Drug categories, including generic, preferred brand, non-preferred brand, and specialty drugs FINAL RULE: MINIMUM VALUE An employer may incur penalties unless it offers affordable coverage that meets minimum value to at least 95% of its full-time employees (and their dependents). An employer-sponsored plan provides minimum value (MV) if the percentage of the total allowed cost of benefits provided under the plan is no less than 60 percent. An employer-sponsored plan can use one of the following methods to determine whether the plan meets the MV standard: The MV calculator; Any safe harbor established by HHS and the IRS (not yet released); Certification to determine MV if the plan contains non-standard features not suitable for the MV calculator by an actuary who is a member of the American Academy of Actuaries; or Any plan available in the small group market that meets any of the metal-level coverage levels Q. Is the MV calculator available now? A. Yes. The calculator combined with the user guide is available on the Center for Consumer Information and Insurance Oversight webpage. Q. What data was used to create the MV calculator? A. To provide information on utilization and cost sharing for a standard population of enrollees, HHS began with claims data from the MarketScan Commercial Claims and Encounters Database, identified for self-insured employer plans. The database consists of employer- and health plan-sourced data containing information on enrollment and medical and prescription services use for a large sample of individuals in employer-provided health plans, including employees, their spouses, and dependents. The plans covered include a variety of service modes such as PPOs and HMOs. Q. Were demographics considered when creating the MV calculator? A. Yes. Spending, demographic and enrollment information at the member level, including age, sex, family structure, enrollment, spending, member cost-sharing, and number of claims from contract year Q. What claims information was used? A. Spending and claims information is provided in the database for total services and for each of the following medical and drug service categories: Emergency room services All inpatient hospital services (including mental health and substance abuse services) Primary care visits to treat an injury or illness (not including preventive care, well-child visits, or x-rays) Specialist visits Mental/behavioral health and substance abuse disorder outpatient services Imaging, including CT / PET scans and MRIs 3M2 2013_04 Page 6

7 Rehabilitative speech therapy Rehabilitative occupational and rehabilitative physical therapy Preventive care, screenings and immunizations Laboratory outpatient and professional services X-rays and diagnostic imaging Skilled nursing facility Outpatient facility fee like an ambulatory surgery center Outpatient surgery including physician and surgical services Drug categories, including generic, preferred brand, non-preferred brand, and specialty drugs Q. Does the MV calculator allow plan benefit features to be entered? A. Yes. Plan design structures are characterized by cost-sharing features that determine the division of expenses between the plan and the insured. Deductibles, general rates for coinsurance, and out-of-pocket maximums generally have a significant effect on utilization and the share of plan-covered expenses. The MV calculator allows the user to specify coinsurance rates, copayments, and other plan details. Q. Does the MV calculator provide for separate and combined deductibles? A. Yes. The MV calculator allows the user to specify either a combined deductible that applies to both medical and prescription expenses or separate deductibles for each type of spending. Q. Does the MV calculator provide for in-network and out-of-network cost-sharing structures? A. No. the calculator provides estimates of actuarial value based only on in-network use and only allows entry of in-network cost shares. Q. Can the MV calculator accommodate more than one coverage tier? A. Yes. Plans with two-tiers may be accommodated. The resulting actuarial value is a blend of the minimum value figure for the two tiers combined. PREVENTIVE CARE SERVICES In addition to the preventive services already covered, the guidance issued on February 20, 2013, now specifies that if a health insurer or group health plan does not have an in-network provider who can provide a particular preventive service, the insurer or plan must cover the service out-of-network at 100%. The guidance further states that non-grandfathered health plans and issuers must provide coverage for the following items at 100%, including the treatment or item prescribed (not just the counseling service as previously indicated): Only when prescribed by a health care provider: o Screening for iron deficiency anemia in pregnant women o Folic acid supplementation for women planning to become pregnant; this can be a folic acid supplement or a multivitamin o Use of aspirin for the reduction of myocardial infarction or ischemic strokes o Tobacco use counseling and nicotine replacement therapy, including gum and lozenges o OTC contraceptive items for women only, such as sponges and spermicides Breast cancer (BRCA) testing, if appropriate, in conjunction with genetic counseling and evaluation Preventive services for high-risk populations as determined by the attending health care provider, based on clinical expertise. Priority populations, as defined by the Agency for Healthcare Research and Quality (AHRQ) include: 3M2 2013_04 Page 7

8 o Women o Children o Racial and ethnic minorities o Populations with special health care needs (chronic illness, disabilities, and end of life care needs) o Elderly o Low-income o Inner-city o Rural Polyp removal during a colonoscopy screening All FDA-approved contraceptive methods, including OTC items for women, if prescribed by a health care provider. o Insurers and plans can impose cost-sharing for branded drugs o Services related to follow-up, management of side effects, counseling for continued adherence and device removal are included in the Health Resources and Services Administration (HRSA) guidelines and are to be administered without cost-sharing, subject to reasonable medical management. Q. Do the updates to the HRSA guidelines encourage multiple visits for separate services? A. No. The law allows plans and issuers to use reasonable medical management techniques to determine the frequency, method, treatment, or setting for a recommended preventive item or service. Even though the guidelines list the services separately, there is no requirement that each service be provided in a separate visit. Efficient care delivery and the delivery of multiple prevention and screening services at a single visit is a reasonable medical management technique. Q. Is more than one well-woman visit per year now allowed? A. Yes. The HRSA guidelines recommend at least one well-woman preventive care visit for adult women to obtain the recommended preventive services that are age- and developmentally-appropriate, including preconception and prenatal care. HHS understands that additional well-woman visits covered at 100% without cost-sharing may be need to obtain all necessary recommended preventive services, depending on a woman s health status, health needs, and other risk factors. Q. When should HPV DNA tests be administered?? A. The HRSA guidelines recommend that women 30 years old and older with no history of abnormal pap smear results should have an HPV DNA test every three years. Q. What does the recommendation for annual HIV counseling and screening for all sexually active women in the HRSA guidelines mean? A. In this context, screening means testing for HIV. Q. Can a plan or issuer cover only oral contraceptives? A. No. The HRSA guidelines give women access to the full range of FDA-approved contraceptive methods including but not limited to, barrier methods, hormonal methods, implanted devices, and patient education and counseling. Cost-sharing can be imposed when a generic equivalent is available. If a generic version is not available, or is not medically appropriate for a woman prescribed a brand name contraceptive, the plan or issuer must provide coverage for the brand name drug without cost-sharing. Q. Do the HRSA guidelines include OTC contraceptive methods? A. Only if the method is both FDA-approved, and prescribed for a woman by her health care provider. The guidelines do not include contraception for men. 3M2 2013_04 Page 8

9 Q. Are intrauterine devices (IUD) and implanted contraceptive methods under the HRSA guidelines and required to be covered at 100%? A. Yes, if approved by the FDA and prescribed for a woman by her health care provider. Q. Breastfeeding counseling is already a recommended covered service under the USPSTF. Why is it now part of the HRSA guidelines? A. The USPSTF recommends support during pregnancy and after birth to promote and encourage breastfeeding. The HRSA guidelines specifically incorporate comprehensive prenatal and postnatal lactation support, counseling, and equipment rental, all covered without cost-sharing (subject to reasonable medical management, which may include equipment purchase instead of rental). Q. How long after birth is a woman eligible for lactation counseling? A. The plan or issuer can use reasonable medical management techniques to determine duration. Q. Are breastfeeding supplies and equipment unlimited? A. The plan or issuer can use reasonable medical management techniques to determine frequency, method and duration. This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers. The Anthem National Accounts business unit serves members of: Anthem Blue Cross Life and Health Insurance Company and Blue Cross of California using the trade name Anthem Blue Cross in California; using the trade name of Anthem Blue Cross and Blue Shield for the following companies in: Colorado Rocky Mountain Hospital and Medical Service, Inc. HMO products underwritten by HMO Colorado, Inc. Connecticut: Anthem Health Plans, Inc.; Georgia: Blue Cross and Blue Shield of Georgia, Inc. and Blue Cross Blue Shield Healthcare Plan of Georgia, Inc.; Indiana: Anthem Insurance Companies, Inc.; Kentucky: Anthem Health Plans of Kentucky, Inc.; Maine: Anthem Health Plans of Maine, Inc.; Missouri (excluding 30 counties in the Kansas City area): RightCHOICE Managed Care, Inc. (RIT), Healthy Alliance Life Insurance Company (HALIC), and HMO Missouri, Inc. RIT and certain affiliates administer non-hmo benefits underwritten by HALIC and HMO benefits underwritten by HMO Missouri, Inc. RIT and certain affiliates only provide administrative services for self-funded plans and do not underwrite benefits; Nevada: Rocky Mountain Hospital and Medical Service, Inc. HMO products underwritten by HMO Colorado, Inc., dba HMO Nevada.; New Hampshire: Anthem Health Plans of New Hampshire, Inc.; Ohio: Community Insurance Company; Virginia: Anthem Health Plans of Virginia, Inc. trades as Anthem Blue Cross and Blue Shield in Virginia, and its service area is all of Virginia except for the City of Fairfax, the Town of Vienna, and the area east of State Route 123.; Wisconsin: Blue Cross Blue Shield of Wisconsin (BCBSWi), which underwrites or administers the PPO and indemnity policies; Compcare Health Services Insurance Corporation (Compcare), which underwrites or administers the HMO policies; and Compcare and BCBSWi collectively, which underwrite or administer the POS policies. In 28 eastern and southeastern counties in New York, Empire Blue Cross Blue Shield, the trade name of Empire HealthChoice Assurance, Inc., underwrites and/or admin isters the PPO, EPO, POS and indemnity policies. Independent licensees of the Blue Cross and Blue Shield Association. ANTHEM is a registered trademark of Anthem Insurance Companies Inc. The Blue Cross and Blue Shield names and symbols are registered marks of the Blue Cross and Blue Shield Association. 3M2 2013_04 Page 9