ACA News & Publications

ACA Pathways: HHS Proposes Benefit and Payment Parameters for 2016

December 4, 2014

Summary

On November 21, 2014, the Department of Health and Human Services (HHS) released its 2016 Notice of Benefit and Payment Parameters Proposed Rule. The proposed rule describes benefit and payment parameters applicable to the 2016 benefit year, including standards relating to the:

  • Reinsurance program's annual contribution rate;
  • Open enrollment period for 2016; and
  • Annual limitations on cost-sharing.

HHS may make changes to the proposed rule before finalizing it. However, the proposed rule is a good indicator of the benefit and payment parameters that HHS may adopt for 2016. Key provisions of the proposed rule are described below.

Contributions to Reinsurance Program

The Affordable Care Act (ACA) created a transitional reinsurance program to help stabilize premiums for coverage in the individual market during the first three years of Marketplace operation (2014 through 2016). The program imposes a fee on health insurance issuers and self-insured group health plans. The reinsurance program's fees are based on a national contribution rate, which HHS announces annually.

HHS is proposing the transitional reinsurance fee payment amount for 2016 (the last year it will be required) to be $27.00 per enrollee (versus $63.00 in 2014 and $44.00 for 2015). As for 2014 and 2015, it can be paid in either one or two installments. If two installments are made, $21.60 will need to be remitted by January 15, 2017, and $5.40 per enrollee would need to be remitted by November 15, 2017:

Year

Total Annual Contribution Rate

Annual Contribution Rate- 1st Installment

Payment Deadline (1st Installment or combined)

Annual Contribution Rate- 2nd Installment

Payment Deadline (2nd Installment)

2014

$63.00 per enrollee

$52.50 per enrollee

January 15, 2015

$10.50 per enrollee

November 15, 2015

2015

$44.00 per enrollee

$33.00 per enrollee

January 15, 2016

$11.00 per enrollee

November 15, 2016

2016

$27.00 per enrollee (proposed)

$21.60 per enrollee (proposed)

January 15, 2017

$5.40 per enrollee (proposed)

November 15, 2017

Open Enrollment Period for 2016

The proposed rule also identifies the annual open enrollment period for non-grandfathered policies in the individual market, inside and outside of the Marketplace for the 2016 benefit year and beyond. Under the proposed rule, the annual open enrollment period would begin on October 1 and run through December 15 of the year prior to the benefit year. Thus, under the proposed guidance, the open enrollment period for 2016 would begin on October 1, 2015, and run through December 15, 2015.

The proposed rule does not change the schedule for the Marketplace's open enrollment period for 2015, which began on November 15, 2014, and goes until February 15, 2015.

Annual Limitations on Cost-sharing

Effective for plan years beginning on or after January 1, 2014, the ACA requires non-grandfathered health plans to comply with an overall annual limit, or an out-of-pocket maximum, on essential health benefits. The ACA also requires that the out-of-pocket maximum be updated annually based on the percent increase in average premiums per person for health insurance coverage.

  • For 2015, the out-of-pocket maximum is $6,600 for self-only coverage and $13,200 for family coverage.
  • For 2016, the out-of-pocket maximum would increase to $6,850 for self-only coverage and $13,700 for family coverage.

HHS also clarifies in the proposed rule that the out-of-pocket maximum applies for the plan year and not the calendar year for non-calendar year plans. Furthermore, plans and issuers are permitted, but not required, to count out-of-network cost-sharing against the annual out-of-pocket maximum.

Minimum Value-loophole Closed for Low-cost Employer Plans

Under the ACA, minimum value (MV) of an employer-sponsored plan is significant for a number of purposes. Beginning in 2015, certain large employers may be penalized if the health plans they offer do not provide MV of at least 60 percent. Also, an individual who is offered employer-sponsored coverage that is affordable and provides MV may not receive a subsidy for coverage through the Marketplace. HHS and the Internal Revenue Service (IRS) have provided four methods for determining the MV of a plan, including use of an online MV Calculator.

On November 4, 2014, the IRS issued Notice 2014-69 to clarify that plans that do not provide inpatient hospitalizations or physician services (referred to as Non-hospital/Non-physician Services Plans) do not provide the MV intended by the ACA. Consistent with Notice 2014-69, the proposed rule provides that, in order to provide MV, a plan must not only cover a predicted 60 percent of the allowed costs under the plan, but it must also provide a benefits package that reflects benefits historically provided under "major medical" employer coverage. Specifically, to satisfy the MV requirement, coverage must include substantial coverage of both inpatient hospital services and physician services.

Individual Mandate: Affordability Exemption

Under the ACA, individuals who lack access to affordable minimum essential coverage (MEC) are exempt from the individual mandate. For purposes of this exemption, coverage is affordable for an employee if the required contribution for the lowest-cost, self-only coverage does not exceed eight (8) percent of household income. This required contribution percentage is adjusted annually after 2014.

For 2015, coverage is unaffordable for purposes of the individual mandate exemption if it exceeds 8.05 percent of household income. For 2016, the proposed rule provides that, if an individual must pay more than 8.13 percent of his or her household income for MEC, the individual is exempt from the individual mandate penalty.

Medical Loss Ratio Rebates to Subscribers of Group Plans Not Subject to ERISA

The ACA's medical loss ratio (MLR) rules require health insurance issuers to spend 80 to 85 percent of their premium dollars on medical care and health care quality improvement activities, or pay rebates. The proposed rule would require that subscribers of nonfederal governmental or other group health plans not subject to ERISA receive the benefit of MLR rebates within three months of receipt of the rebate by their group policyholder, just as subscribers of group health plans subject to ERISA do. In addition, the proposed rule includes technical clarifications to ensure that issuers correctly exclude from MLR and rebate calculations the federal and state employment taxes, as well as the cost-sharing reduction payments issuers receive from HHS.

Small Business Health Options Program (SHOP)

This proposed rule includes several provisions to streamline the administration of the SHOP, including (1) permitting SHOPs to assist employers in the administration of COBRA enrolled in through a SHOP; (2) permitting a SHOP to elect to renew an employer's offer of coverage in certain situations; (3) modifying the calculation of minimum participation rates in the SHOP to align with the current practice of issuers in many states and to include other types of coverage in the calculation of the group's rate; and (4) specifying that a qualified employer that fails to pay its premium for federally facilitated SHOP coverage in a timely manner can be reinstated in its prior coverage only once per calendar year.

For More Information

For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits
949.833.2983
inquiries@burnhambenefits.com


This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.

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