Aug 11 2014 | Larry Doze                                                                                

Two NFP actuaries, Larry Doze and John Mallows, recently attended the Society of Actuaries (SOA) annual health insurance meeting in San Francisco. A record number of health actuaries were there — the first time ever over 1,000. The place was teeming with actuaries from AON, TW, Mercer, Milliman, CIGNA, AETNA, UHC and all the various Blue Cross Blue Shield (BCBS) organizations.

Here are some takeaways from one of the SOA sessions at the conference – “Post-ACA Medical Benefit Plan Design – Other Benefit Plans” – presented by Earl Hoffman, Optum; Jennifer Gillespie, BCBS MN, and Jim O’Connor, Milliman:

There is renewed speculation that as the definition of small employer moves to 100, self-funding will become increasingly popular. There is also speculation that the definition of small won’t change.

Self-funded Employer Associations:

  • Not required to be within metallic de minimis range. Can do “alloy” plans with, say, 75 percent actuarial value.
  • Employers still need to offer plan with 60 percent or more minimum value (MV) to avoid both “front-end” and “back-end” penalties (more on this below).
  • Group-level underwriting is allowed.
  • Industry “factor” is implicit in underlying experience upon which rates are based.
  • Any age rating curve, or none at all, can be used.

Low-cost “Skinny” Plans:

  • Large groups can avoid the Patient Protection and Affordable Care Act’s (PPACA’s) Section 4980H(a) front-end penalty ($2,000 per year times number of full-time employees in excess of 30) if they offer at least minimum essential coverage (MEC).
  • MEC can be as little as just first-dollar preventative and wellness services (including contraceptives) and chronic disease management.
  • MEC plan must provide 100 percent coverage of the 63 CMS-listed preventative and wellness services.
  • Some state mandates may apply, but not if the low-cost MEC coverage is self-funded.
  • MEC can exclude hospital, office visits and non-preventative prescription coverage; they don’t have to provide 60 percent MV.
  • These are not “excepted benefit” plans by federal regulations.
  • Employer is still liable for the Section 4980H(b) back-end ($3,000 per employee per year) penalty if it does not offer an affordable plan with at least 60 percent MV.
  • If the employer offers a 60 percent MV plan alongside the low-cost MEC plan with “affordable” employee costs as defined by ACA, it can avoid the back-end penalty as well, even if employees seek subsidized exchange coverage.
  • Employer can offer various limited benefit excepted plans (e.g., critical illness) on top of the MEC plan.
  • Not clear if employee escapes individual coverage mandate by purchasing a low-cost MEC plan and not an MV plan. Info sources differ on this point.
  • Large groups offering just the MEC low-cost plan are basically assuming they’ll pay few if any of the $3,000 back-end penalties, or that the penalties they do pay will cost less than providing affordable 60 percent MV coverage.