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Some Prefer Bronze

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The health savings account (HSA) community is trying to persuade the Centers for Medicare & Medicaid Services (CMS) to make the final minimum medical loss ratio (MLR) regulations friendlier to HSA-compatible health insurance plans.

If CMS and its parent, the U.S. Department of Health and Human Services, do not find a way to accommodate HSA-compatible insurance plans and other “bronze” level, low-MLR plans, “the likely result is a future market dominated by more expensive plans,” J. Kevin McKechnie, executive director of the HSA Council, an arm of the American Bankers Association, Washington, writes on behalf of the council.

Shutting out bronze-level plans would hurt the higher income consumers who will have to pay the full cost of individual coverage in 2014, when the individual coverage ownership mandate in the Patient Protection and Affordable Care Act of 2010 (PPACA) is set to take effect.

Shutting out bronze-level plans also could lead to a significant increase in the amount of subsidies the federal government would have to pay to help low-income and moderate-income consumers buy coverage through the new health insurance exchange system, McKechnie says.


States are challenging PPACA at the U.S. Supreme Court, and Republicans are working in Congress to repeal the act.

If PPACA takes effect on schedule and works as drafters expect, PPACA will require health insurers to sell coverage on a guaranteed-issue, mostly community-rated basis; require most individuals to have coverage and most large and midsize employers to provide coverage; and give individuals and small groups the ability to use tax subsidies to buy coverage through new health insurance exchanges.

PPACA already requires carriers to spend 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts.

PPACA tries to bring some standardization to the market and make plans easier to compare by calling for the exchanges to sell platinum, gold, silver and bronze plans. A plan would be classified according to actuarial value, or the percentage of the cost of a standard “essential health benefits” package that the plan covers.

An older federal law that created the HSA program offers tax breaks for consumers who use HSAs together with high-deductible insurance plans that meet federal HSA program requirements.

Today, the minimum HSA plan deductible is $1,200 for individual coverage and $2,400 for family coverage.

Congress created the HSA program to give individuals a financial incentive to save enough to pay for some of their own health care expenses and to encourage consumers to help hold down costs by doing more to improve their own health and shop carefully for care.

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In the new final MLR rule, HHS has created special adjustment rules for very small plans with low actuarial value, but larger carriers also need help, according to Roy Ramthun of the Council for Affordable Health Insurance (CAHI), Alexandria, Va.

Even though HHS has described the MLR rule as a final rule, it provided a 30-day comment period.


Consultants in the Brookfield, Wis., office of Milliman Inc. write in an analysis prepared for the HSA Council that the high-deductible plans used with HSAs and other types of personal health accounts, such as health reimbursement arrangements, tend to have a low apparent actuarial value because the policyholders use their health accounts to pay for everyday medical expenses.

The percentage of high-deductible plan holders who file claims in a year is usually small, but, when the plan holders do file claims, the typical claim amounts are higher than at ordinary plans, the consultants say.

“This lower-frequency/higher-average-cost scenario creates more variability in experience,” the consultants say.

That variability increases the odds that a high-deductible plan will fall below the 80% MLR threshold for individual and small group coverage and end up having to pay rebates, the consultants say.

During the early years, carriers will have almost no experience with using the MLR formula, and that will make keeping MLR levels on track especially difficult, the consultants say.

One way to make the high-deductible plans somewhat easier to compare with ordinary plans would be to include the medical care payments that come out of consumers’ HSAs and HRAs in in the MLR formula, the consultants say.

Grace-Marie Turner, president of the Galen Insitute, Alexandria, who testified on the topic at a House subcommittee hearing in December 2011, wrote to say she believes HHS is discriminating against HSAs.

“Indiana argued that some carriers would be forced to stop selling policies in the state if they were not given relief from the rules,” Turner says. “This would lead to less competition and higher prices for consumers.”