Smart Benefits: Healthcare Reform Will Limit Plan Design Choices
Monday, March 11, 2013
For years, employers have been increasing deductibles to reduce premiums, often offering compatible health reimbursement arrangement (HRAs) and health savings accounts (HSAs) to help cushion employees against full deductibles, and sharing in some of these costs. But, depending on plan design, those solutions may no longer be allowed.
Small Employers Face Deductible Limits
Individuals and small group plans that are non-grandfathered (the majority of these plans are) must offer health plans with deductibles that don’t exceed $2,000 per person or $4,000 per family.
It’s still unclear if “small group” will be defined as up to 50 employees or 100, as intended by the original regulations, but more guidance is expected soon. And individual states will need to make these final determinations.
Size Doesn’t Matter When It Comes to Out-Of-Pocket Limits
The HSA out-of-pocket limits of $6,250 per person and $12,500 per family (the current limits) will apply to all non-grandfathered plans. This means that employees’ out-of-pocket expenses -- including deductibles – cannot exceed these amounts. This holds true for all employers whether they are fully or self-insured, and regardless of size.
For employers who have higher out-of-pocket maximums than deductibles, the insurers will have to modify plan designs to meet these requirements. And rolling back the out-of-pocket maximums will likely result in cost increases to employers.
Large Employers Need to Meet Minimum Value
While there’s no formal position yet on deductible limits for large employers, these groups must still meet the 60% minimum value requirement on plan designs that will be imposed in 2014. That means employers must determine if their current plan design covers at least 60% of expected charges of care, which includes deductibles , coinsurance and copays, but not insurance premiums. Current year employer contributions to HRAs and HSAs are included in the minimum value calculation.
What is Minimum Value?
How does an employer determine whether their plans meet the 60% threshold? This week, the government released a proposed calculator at ccio.cms.gov. But it isn’t without flaws. Companies can also turn to benefit advisors, many of whom have their own proprietary modeling tools, and possibly look to the carriers to label their plans as meeting or exceeding minimum value requirements – although it remains to be seen whether insurers will do this.
If a plan doesn’t meet the 60% minimum value requirement, it triggers qualifying employees to elect the state exchange options instead. The alternative? Employers who do not offer 60% minimum value plans may need to add a second plan option to meet these requirements.
The End of Consumerism?
For years, employers have turned to higher deductibles to contain runaway healthcare increases, hoping that passing costs to employees would help them be more mindful of their spending habits when it comes to care. While employers can continue to use these strategies as long as they’re mindful of the new deductible and out-of-pocket limits, costs will still increase as long as consumer behavior doesn’t change. To address these rises, insurers are rolling out new products with narrower networks of providers that steer or provide incentives to consumers who use lower cost/better outcome providers. The key remains the consumer – and how to encourage positive choices.
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