The Center for Consumer Information and Insurance Oversight (CCIIO) has issued a bulletin that could affect the ability of personal health account programs to continue to operate after Jan. 1, 2014.
Officials at CCIIO, an arm of the U.S. Department of Health and Human Services (HHS), say in the Actuarial Value and Cost-Sharing Reductions Bulletin that they plan to include employer health savings account (HSA) annual contributions and health reimbursement arrangement (HRA) contributions in actuarial value calculations, if the accounts are linked to high-deductible health plans (HDHPs).
CCIIO is thinking of leaving an individual's contributions to an HDHP-linked HSA out the actuarial value calculations for that plan.
The CCIIO officials issued the bulletin to talk about the approach HHS might take when implementing Section 1302(d)(2) of the Patient Protection and Affordable Care Act of 2010 (PPACA).
If PPACA takes effect as written and works as drafters expect, it will set up a new system of state-supervised health insurance distribution exchanges starting in 2014. Individuals and small groups are supposed to be able to use new federal tax subsidies to buy standardized coverage through the exchanges.
To help consumers compare plans on an apples-to-apples basis, the exchanges are supposed to classify the products in bronze, silver, gold and platinum levels, based on the percentage of the cost of a standard plan that a product covers.
Each product is supposed to cover at least 60% of the actuarial value of the essential health benefits package.
Sellers and users of HSA and HRA programs have complained that the actuarial value approach could shut HRA and HSA programs out, because the health accounts themselves are supposed to cover a high percentage of the holders' costs.
PPACA Section 1302(d)(2)(B) directs the secretary of the U.S. Department of Health and Human Services (HHS) to issue regulations that will incorporate employer HSA contributions in HSA program actuarial value calculations.
Officials at CCIIO say leaving employer contributions out of actuarial value calculations could understate the value of coverage.
"Yet accounting for the total coverage provided by the combination of the HDHP and the full value of the HSA or HRA could overstate the [actuarial value] because, empirically, only a portion of these accounts are used toward health in a given year," officials say.
CCIIO officials say they intend to propose the following approach to calculating the actuarial value of an employer health benefit plan: The annual employer contribution to an employee’s HSA will be treated as being part of the health plan benefit design.
Similarly, at an HRA-based program, the "amount made available for the first time in a given year" will be treated as being part of the plan design.
CCIIO would assume that the annual HSA contribution or the initial HRA amount made available will be used by the employee to pay for cost-sharing, officials say.
"For example, if a HDHP with a $3,000 deductible has an [actuarial value] of 55% and the employer provides an HSA contribution of $1,000, that contribution would be applied towards the numerator of the [actuarial value] calculation," officials say. "However, because generally only a portion of an HSA is used in a year for health services, HSA contributions would be adjusted so that the employer receives the same credit for HSA contributions in the numerator of the [actuarial value] calculation as it would receive for the same amount of first-dollar insurance coverage."
The same rule would apply to HRA amounts.
In the individual market, however, an individual's HSA contributions would not be part of the actuarial value calculations, officials say.