Colorado Division of Insurance Actuarial Value

What is Actuarial Value A measure of how rich a specific design is PPACA describes this as the amount of health care costs paid by the plan 4 tiers (metal levels) Platinum (90% of costs) Gold (80% of costs) Silver (70% of costs) Bronze (60% of costs)

Actuarial Value vs. Essential Benefits Actuarial Value A measure of the out-of-pocket costs faced by consumers One of the biggest determinants of premium Plan specific Essential Benefits Determine what is covered Determine the denominator of the AV calculation Same for the entire market

Calculation of Actuarial Value Actuarial Value 2 broad methods for calculation Plan Specific Individual carriers define the transformations to the standard the Carrier data is used to determine the costs Standard A standard population and costs are used Plan calculation can be more accurate but would result in different AVs for the same plan design

Smaller Provisions Automated processing of actuarial value HSA contributions counted as first dollar Who determines AV if there are contributions Cost Sharing Subsidies Interactions between Large Group/ERISA plans still to be determined

De Minimis Variations The bulletin indicates that all plans inside and outside the Exchange will need to follow the metal levels Plans will need an actuarial value within ±2% of the target For example all silver plans will have an actuarial value between 72% and 68%

Individual Market Plans need to change on a yearly basis to stay within the metal tier (Deductible leveraging) Colorado law makes changing benefits difficult The market will be reset on 1/1/2014 since plans will not fall in de minimis ranges Some additional initial disruptions

Small Group Market Same issues as the individual market Small employers have better existing tools for plan comparison Small employers have additional communications challenges making changes more costly Small employers explain the health plan to employees Small employers have additional requirements

Cost Sharing Subsidy Adjustments to a silver benefit design to reduce the AV for low income members % 94% AV % 87% AV % 73% AV First reduce OOP max Make additional adjustments to lower the AV New plan designs are allowed to use the de minimis variations Initial payments based on rate filings followed by a detailed reconciliation