THINKBYTE: Final HHS Discrimination Rules to the ACA

Section 1557 forbids discrimination by (a) age, (b) race, (c) sex (including orientation), (d) color, (e) religion or  (f) national origin with respect to benefits, benefit-related programs or eligibility thereof.

Programs which are subject to these regulations include  health plans which receive financial assistance such as (a) basic employer-sponsored health plans (DB or DC), (b) Medicare, (c) Medicaid, (d) student health, (e) CHIP, (f) federal or state market-place activities.  The Rules do not apply to health programs administered by departments other than HHS which are affected by ACA but not affected by these new HHS rules.

The Rule requires covered entities to (a) file HHS-provided forms of significant length and complexity assuring  compliance, (b) be proactive with all of the regulators and beneficiaries in enforcement and (c) treat compliance as an ongoing activity. 

The Rules are detailed and complex covering such issues as: (a) language requirements of the notices, (b) details on grievance procedures, (c) how the Rules and the compliance therewith are to be made known to the entire population of affected persons (d), how the Office for Civil Rights (OCR) will assist in compliance processes, (e) required programs to publicize the Rules and of great importance is that penalties for non-compliance are potential issues for any entity which is affected by the Rule.

This Rule, now in place, has the potential for many surprises to many people in many ways for many months.

THINKBYTE: Defined Contribution Health Plans

A Defined Contribution Health Plan (DCHP) is a large and important topic and regularly becoming more so.  With such plans, the predetermined contributions determine the benefits which is the opposite of the traditional defined benefit plan.  The two primary reasons for the growing popularity of this new approach are: (1) plan costs for the sponsor are more controllable and (2) participants are provided needed benefits with options to make the plan better fit their needs.  It is important to understand that a DCHP must have a sponsor.  Without such, it is not a health plan but only a plan strategy.   Numerous key words/terms collectively describe our topic.  Each such is then further discussed as a separate Thinkbyte as follows:

Consumer-Directed Health Plan (CDHP), 
Decision Support Tools, 
Defined Benefit Health Plan (DBHP), 
Defined Contribution Health Plan (DCHP), 
Flexible Spending Account (FSA), 
Fully Insured Health Plan, 
Health Insurance Exchange, 
Health Reimbursement Arrangement (HRA), 
Health Savings Account (HSA), 
High Deductible Health Plan (HDHP), 
Individual Health Policy,
Multi-Carrier Health Insurance Exchange, 
Out-of-Pocket Costs, 
Affordable Care Act, 
Self-Funded Health Plan, 
Single Carrier Health Insurance Exchange, 
Voluntary Benefits and 
Wellness Program.

Attained Age Adjustment Factors

Here is a table that allows the scaling of relative claim dollar totals for attained age bands 0-4, 5-19, 10-14 ... 60-64 (source: Chart 6: Inpatient Facility Costs by Age and Experience Year, "Health Care Costs—From Birth toDeath", Society of Actuaries, Dale H. Yamamoto, 2013).

Age	Factor
0 - 4	5.35
5 - 9	0.47
10 - 14	0.30
15 - 19	0.44
20 - 24	0.45
25 - 29	0.67
30 - 34	0.85
35 - 39	0.82
40 - 44	0.81
45 - 49	1.00
50 - 54	1.36
55 - 59	1.88
60 - 64	2.55

Notes

The Average falls in the 45-49 range.  All the other factors can be thought of as ratios to the cost values in the 45-49 age group.

2016 Million Dollar Claims: 7.1 per 100,000

The Centers for Medicare & Medicaid Services (CMS) Continuance Tables and the CMS Minimum Value calculator are based on a Mean (Average) Inpatient (IP) value of $1,657 (trended to 2016) and a Standard Deviation (SD) of 3.5 times the Mean for all benefit types combined.  If we call the ratio of Mean to SD the "Coefficient of Variance" (CoV), then we can say that it makes sense to use a larger CoV for IP costs and a smaller CoV for the non-IP costs. Since IP costs fluctuate much more than the other benefits,  I will use a CoV of 5.0 for IP costs and 3.0 for non-IP costs.

Based on the HCUP Statistical Brief #180 *, I estimate the estimated frequency of someone aged 0-64 having one or more hospital stays to be .1 (or 1 out of every 10 people).

This allows me to back into a average cost per hospital stay of $16,500 ($1,657/.1, rounded).

Using our internal MCS tool, I assumed a lognormal distribution and simulated 1,000,000 years of possible outcomes for one individual and found that the likelihood of a hospital claim or claims totaling $1,000,000 or more to be approximately 7.1 out of every 100,000 lives.

(Also note that 5.9 trended upward at 6.5% per year from 2014 to 2016 is 5.9 x (1.065) x (1.065) = 6.7 million-dollar claims for 2016 estimated. See 2014 Million Dollar Claims: 5.9 per 100,000.)

* Weiss AJ (Truven Health Analytics), Elixhauser A (AHRQ). Overview of Hospital Stays in the United States, 2012. HCUP Statistical Brief #180. October 2014. Agency for Healthcare Research and Quality, Rockville, MD. http://www.hcup-us.ahrq.gov/reports/statbriefs/sb180-Hospitalizations-United-States-2012.pdf.

2014 Million Dollar Claims: 5.9 per 100,000

HM Insurance Groups has reported that, for the years 2010-2014, "a tripling of claims incidence of $1 million or more, rising from 1.8 to 5.9 per 100,000 employees".

page 48, Ryan A. Siemens, CEBS, Aegis Risk LLC, "Catastrophic Medical Claimants After ACA's Removal of Annual and Lifetime Limits" published by International Society of Certified Employee Benefit Specialists, 4th quarter 2015 issue of BENEFITS QUARTERLY.
Also see "Avoiding Catastrophe"  from The Self-Insurer, November 2015,published by Self-Insurers' Publishing Corp, The Self-Insurer, PO Box 1237, Simpsonville, SC  29681

CMS Continuance Tables - based on allowed total charges

The CMS continuance tables are based on allowed total charges (after any provider discounts but before any member cost-sharing).

See MV Calculator Methodology.

The Impact of Family Structure on Spare Capacity and Health Care Utilization

Click on this link: Spare Capacity article.

THINKBYTE: IRS Notice 2014-69 MV Issue

From: Carlton Harker, April 5, 2016

IRS Notice 2014-69 provides that the so-called Minimum Benefit Plans will fail the Minimum Value Test, unless they provide “substantial” hospital and physician benefits.

An IRS regulation/ruling was to have been issued in 2015 but has not. Until a clarification of the meaning of substantial, the preferred course of action is to mark time. Any non-compliance penalties will be waived during this wait time.