Wednesday, July 11, 2012

The ACA - Exchanges and coverage levels

Health insurance exchanges 

Section 1311 of the Affordable Care Act calls for each state to set up an American Health Benefit Exchange, with Federal grant money to assist. 

We will not try to explain the health insurance exchanges in detail. The high points are: 
  • The exchanges under the ACA will be run by one or more states. 
  • If a state does not set up an exchange, the Federal government will do it.  
  • The exchanges will not sell or place insurance. Instead, they will coordinate the offering of ACA-compatible coverage with private insurers. 
  • The exchanges will coordinate placement for individuals and for small businesses (under 100 employees). 
  • Each exchange will offer a choice of up to four levels of coverage, called platinum, gold, silver, and bronze. 
  • Michigan is one of a majority of states which have had legislation initializing compliant exchanges introduced but not passed into law. 
Details may be found at 


Coverage levels 

Coverage through the exchanges will be available to individuals who do not receive employer-provided coverage, or for whom the coverage that is available through their employers is not "affordable" under a program to be established by the Department of Health and Human Services (section 1411). A key provision is that exchange-sponsored coverage is divided into four categories, based on how much of the overall cost of health care they cover. Section 1302(d) specifies the four levels: 
  • bronze - 60%
  • silver - 70% 
  • gold - 80% 
  • platinum - 90% 
Each exchange will be required to offer at least silver and gold coverage. (Section 1301) The other two will be optional. Also optional will be a fifth choice, catastrophic coverage only. For some reason, that will only be available to citizens under the age of 30.

Section 1302(d) requires that the plan in each level will provide benefits that are "actuarially equivalent to" the specified percentage of "the full actuarial value of the benefits." Our best guess at what that means is that HHS regulations will direct the health insurers, by using a combination of deductibles, copayments, and coinsurance, to arrive at the specified rate of shared coverage between insurer and insured. One complication with that approach is that deductibles and copays are imposed by insurers, while coinsurance is a function of the employment agreement - many employers require their employees to contribute a certain percentage of the premium for their coverage. It is not clear how those separate concepts are going to be melded into one set of rules regarding "cost-sharing". 

It appears that the expectation is that most insureds will choose coverage at the silver level. The Act itself is designed to encourage the issuance of silver plans. Only enrollees in that level, for example, are eligible for limits on cost-sharing under section 1402. Further, those who earn under approximately $100,000 per year (family of four) and who are thus eligible for the premium assistance credit will receive that credit only based on the silver level of coverage. If they want to choose coverage at the gold or platinum levels, they will have to pay the entirety of the additional premium. But there are also provisions for those in the lower income levels (under $46,000 for a family of four) that will provide the approximate equivalent of the gold or platinum level as a result of a series of requirements on "cost-sharing". 

We hope to have more on the complicated issues surrounding cost-sharing in the next few days. 

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