The actuarial value of a health insurance policy is the percentage of the total covered expenses that the plan covers, on average for a typical population. [Age & Zip Code] For example, a plan with a 70% Silver actuarial value means that consumers would on average pay 30% of the cost of health care expenses through features like deductibles and coinsurance. The amount that each enrollee pays will vary substantially by the amount of services they use.
The health reform law specifies a benchmark level of coverage for the purposes of premium subsidies using actuarial values. Premium subsidies will be tied to Silver plans, which have an actuarial value of 70%. Additional subsidies for people making between 100 and 250% of the poverty level limit cost sharing and raise the actuarial value of Silver plans. Our calculator also illustrates premiums and subsidies for Bronze plans, which have an actuarial value of 60%. Bronze plans represent the minimum level of coverage most people are required to maintain under health reform, and these plans will have higher cost sharing on average. Regardless of the level of actuarial value, insurers will have to cover a defined set of health care services and cap the total amount of cost sharing required of consumers at defined levels, but can generally otherwise vary the structure and degree of cost sharing so long as minimum actuarial value thresholds are met.
Actuarial Value – Video
Proposed Changes to CFR Code of Federal Regulations
Section 2707(a) of the PHS Act and section 1302 of the Affordable Care Act direct issuers of non-grandfathered individual and small group health insurance plans, including QHPs, to ensure that these plans adhere to the levels of coverage specified in section 1302(d)(1) of the Affordable Care Act. A plan’s coverage level, or actuarial value (AV), is determined based on its coverage of the EHB for a standard population. Section 1302(d)(1) of the Affordable Care Act requires a bronze plan to have an AV of 60 percent, a silver plan to have an AV of 70 percent; a gold plan to have an AV of 80 percent; and a platinum plan to have an AV of 90 percent. Section 1302(d)(2) of the Affordable Care Act directs the Secretary to issue regulations on the calculation of AV and its application to the levels of coverage. Section 1302(d)(3) of the Affordable Care Act authorizes the Secretary to develop 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.
In the EHB Rule, at §156.140(c), HHS established that the allowable variation in the AV of a health plan that does not result in a material difference in the true dollar value of the health plan is +/ ?2 percentage points. As finalized in the 2018 Payment Notice, §156.140(c) permits a de minimis variation of +/ ? 2 percentage points, except if a bronze health plan either covers and pays for at least one major service, other than preventive services, before the deductible or meets the requirements to be a high deductible health plan within the meaning of 26 U.S.C. 223(c)(2), the allowable variation in AV for such plan is ?2 percentage points and +5 percentage points. We established this additional flexibility for certain bronze plans in the 2018 Payment Notice to provide a balanced approach to ensure that a variety of bronze plans can be offered, including high deductible health plans, while ensuring that bronze plans can remain at least as generous as catastrophic plans. As discussed in the EHB Rule, our intention with the de minimis variation of +/?2 percentage points was to give issuers the flexibility to set cost-sharing rates that are simple and competitive while ensuring consumers can easily compare plans of similar generosity. While the de minimis range is intended to allow plans to float within a reasonable range and is not intended to freeze plan designs preventing innovation in the market, it was also intended to mitigate the need for annual plan redesign, allowing plans to retain the same plan design year to year while remaining at the same metal level.
At this time, we believe that further flexibility is needed for the AV de minimis range for metal levels to help issuers design new plans for future plan years, thereby promoting competition in the market. In addition, we believe that changing the de minimis range will allow more plans to keep their cost sharing the same from year to year. Although the AV Calculator is not a pricing tool, changing the de minimis range could also put downward pressure on premiums. Thus, we anticipate that this flexibility could encourage healthier consumers to enroll in coverage, improving the risk pool and increasing market stability. For these reasons, we believe that changing the AV de minimis range would help retain and attract issuers to the nongrandfathered individual and small group markets, which would increase competition and help consumers. Therefore, we propose amending the definition of de minimis included in §156.140(c), to a variation of – 4/+2 percentage points, rather than +/- 2 percentage points for all non-grandfathered individual and small group market plans that are required to comply with AV. Under the proposed standard, for example, a silver plan could have an AV between 66 and 72 percent. We believe that a de minimis amount of -4/+2 percentage points would provide the necessary flexibility to issuers in designing plans while striking the right balance between ensuring comparability of plans within each metal level and allowing plans the flexibility to use convenient and competitive cost-sharing metrics.
We also note that as established at §156.135(a), to calculate the AV of a health plan, the issuer must use the AV Calculator developed and made available by HHS for the given benefit year. The AV Calculator represents an empirical estimate of the AV calculated in a manner that provides a close approximation to the actual average spending by a wide range of consumers in a standard population. For the 2018 AV Calculator, we made several key updates to the AV Calculator, including updating the claims data underlying the continuance tables that represent the standard population to reflect more current claims data. For example, all previous versions of the AV Calculator had been using 2010 (pre-Affordable Care Act) claims data and the 2018 AV Calculator is using 2015 (post-Affordable Care Act) claims data. As discussed in the 2018 AV Calculator Methodology, due to the scope and number of updates in the 2018 AV Calculator, the impact on current plans’ AVs will vary.13 Indeed, issuers have reported that the AV of 2017 plans have varied in unexpected ways when entered into the 2018 AV Calculator. Therefore, the proposed flexibility in the de minimis range is also intended to help provide some stability to those plans that are being impacted by the updates to the AV Calculator.
We are proposing to provide the increased flexibility in the de minimis range starting with the 2018 AV Calculator. We seek comment on whether making the change effective for the 2019 plan year would be preferable, given the lead time issuers require to design plans.
While we are proposing to modify the de minimis range for the metal level plans (bronze, silver, gold, and platinum), we are not proposing to modify the de minimis range for the silver plan variations (the plans with an AV of 73, 87 and 94 percent) under §§156.400 and 156.420 at this time. The de minimis variation for a silver plan variation of a single percentage point would still apply. In the Actuarial Value and Cost-Sharing Reductions Bulletin we issued on February
24, 2012,14 we explained why we did not intend to require issuers to offer a cost-sharing
13 2018 AV Calculator Methodology is available at https://www.cms.gov/cciio/resources/regulations-andguidance/#Plan.
14 Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/Av-csr-bulletin.pdf.
reduction plan variation with an AV of 70. However, given our proposal, we also are considering whether the ability for an issuer to offer a standard silver level plan at an AV of 66 would require a plan variation to be offered at an AV of 70 or some other mechanism to provide for cost-sharing reductions for eligible individuals with household incomes that are more than
250 percent but not more than 400 percent of the poverty line for a family of the size involved.
We also would maintain the bronze plan de minimis range policy finalized in the 2018 Payment Notice at §156.140(c) with one modification. We propose to change the de minimis range for the expanded bronze plans from +5/-2 percentage points to +5/-4 percentage points to align with the policy in this rule. Therefore, for those bronze plans that either cover and pay for at least one major service, other than preventive services, before the deductible or meet the requirements to be a high deductible health plan within the meaning of 26 U.S.C. 223(c)(2), we are proposing the allowable variation in AV would be ?4 percentage points and +5 percentage
We seek comment on this proposal, including on the appropriate de minimis values for metal level plans and silver plan variations, and whether those values should differ when increasing or decreasing AV.
To implement the amended AV de minimis range in this proposed rule, we would update the 2018 AV Calculator in accordance with this policy.
7. Section 156.140 is amended by revising paragraph (c) to read as follows:
§156.140 Levels of coverage.
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(c) De minimis variation. The allowable variation in the AV of a health plan that does not result in a material difference in the true dollar value of the health plan is – 4 percentage points and + 2 percentage points, except if a health plan under paragraph (b)(1) of this section (a bronze health plan) either covers and pays for at least one major service, other than preventive services, before the deductible or meets the requirements to be a high deductible health plan within the meaning of 26 U.S.C. 223(c)(2), in which case the allowable variation in AV for such plan is ?4 percentage points and +5 percentage points.
Related Pages in the Metal Levels – Platinum, Gold, Bronze – Silver & Enhanced »
80% Medical Loss Ratio (MLR) » CA Rate Regulation Section
Donald Care on Market Stabilzation – Actuaril Value
Steve’s Explanation of MLR Medical Loss Ratio
Kaiser Health News – Medical Loss Ratio
Department of Managed Health Care on MLR in Affordable Care Act
Our Webpage on MLR