Impact of PPACA on Rates Being Analyzed

We also have begun to run small group rates for Oct. 1, 2010 effective dates. In trying to balance client requests for early renewals with the absence of guidance from the Department of Health and Human Services and our state Department of Insurance around new benefit provisions, we are developing a template that we will share with accounts to help them anticipate the potential impact of PPACA on their rates.

While we continue to focus on the immediate provisions of PPACA, we are also organizing activity around those longer-term provisions with effective dates in 2014 and beyond. One such provision is the establishment of a risk adjustment system for plans in the individual and small group markets beginning in 2014. (Risk Adjustment is a tool/process used to calibrate payments to health plans based on the relative health of the at-risk populations.)

HHS Releases Fact Sheet on PPACA Rules Concerning “Grandfathered” Health Plans
The Departments of Health and Human Services, Labor, and Treasury released Monday interim final rules providing guidance on grandfathered status of health plans under the Patient Protection and Affordable Care Act of 2010 (PPACA). It also provides details on what could cause a plan to lose grandfathered status.

HHS has released a Fact Sheet outlining for the general public what changes could cause a plan to lose grandfathered status.

Compared to their policies in effect on March 23, 2010, HHS reports that grandfathered plans:

• Cannot Significantly Cut or Reduce Benefits. For example, if a plan decides to no longer cover care for people with diabetes, cystic fibrosis or HIV/AIDS.
• Cannot Raise Coinsurance Charges. Typically, coinsurance requires a patient to pay a fixed percentage of a charge (for example, 20 percent of a hospital bill).
• Cannot Significantly Raise Copayment Charges. Frequently, plans require patients to pay a fixed-dollar amount for doctor’s office visits and other services. Compared with the copayments in effect on March 23, 2010, grandfathered plans will be able to increase those copays by no more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points. For example, if a plan raises its copayment from $30 to $50 over the next two years, it will lose its grandfathered status.
• Cannot Significantly Raise Deductibles. Many plans require patients to pay the first bills they receive each year (for example, the first $500, $1,000, or $1,500 a year). Compared with the deductible required as of March 23, 2010, grandfathered plans can only increase these deductibles by a percentage equal to medical inflation plus 15 percentage points. In recent years, medical costs have risen an average of 4 percent to 5 percent, so this formula would allow deductibles to go up, for example, by 19 percent to 20 percent between 2010 and 2011, or by 23 percent to 25 percent between 2010 and 2012. For a family with a $1,000 annual deductible, this would mean if they had a hike of $190 or $200 from 2010 to 2011, their plan could then increase the deductible again by another $50 the following year.
• Cannot Significantly Lower Employer Contributions. Many employers pay a portion of their employees’ premium for insurance and this is usually deducted from their paychecks. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points (for example, decrease their own share and increase the workers’ share of premium from 15 percent to 25 percent).
• Cannot Add or Tighten an Annual Limit on What the Insurer Pays. Some insurers cap the amount that they will pay for covered services each year. If they want to retain their status as grandfathered plans, plans cannot tighten any annual dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees).
• Cannot Change Insurance Companies. If an employer decides to buy insurance for its workers from a different insurance company, this new insurer will not be considered a grandfathered plan. This does not apply when employers that provide their own insurance to their workers switch plan administrators or to collective bargaining agreements.

The 100-plus page Interim Final Rules is being analyzed in relation to Blue Cross and Blue Shield of Illinois (BCBSIL) previous working assumptions. Until that review has been completed, BCBSIL cannot provide group-specific analysis of benefit changes for existing business or specific benefit changes due to PPACA for new business proposals. We will continue using our working assumptions in quoting and developing benefits designs, so we will continue to tell groups that benefits and rates may change due to PPACA after their plan effective date. As a reminder, ASO accounts should consult their legal counsel to determine the impact of the grandfathering regulations on their group health plans.”