By Pension and Benefits Editorial Staff
The Centers for Medicare and Medicaid Services (CMS) has released information on the final 2020 actuarial value (AV) calculator. The AV calculator must be used each year by issuers of non-grandfathered health insurance plans offered in the individual and small group markets (both inside and outside of the affordable insurance exchanges) to determine levels of coverage. Under the Patient Protection and Affordable Care Act (ACA), §1302(d)(2)(A), AV must be calculated based on the provision of essential health benefits (EHB) to a standard population, and health plans are grouped into four tiers: bronze, with an AV of 60 percent; silver, with an AV of 70 percent; gold, with an AV of 80 percent; and platinum, with an AV of 90 percent. CMS explains: (1) the data and methods used in constructing the continuance tables that are used to calculate actuarial value (AV) in combination with the user inputs, and (2) the AV calculator interface and the calculation of AV based on the interface and the continuance tables.
2019 v. 2020 calculator. The 2020 AV Calculator remains unlocked, as in previous years, allowing users to view the source code for the AV Calculator algorithm. However, key differences exist between the 2019 AV Calculator and the 2020 AV Calculator, including:
- the claims projection factor is for two years in the 2020 calculator–from 2019 to 2020.
- maximum out-of-pocket (MOOP) estimated limit is increased to $8,250.
CMS notes that the 2020 AV Calculator does not affect any 2019 plans and will apply to 2020 plans only.
Data sources and methods. According to the CMS, the AV Calculator represents an estimate of the AV calculated in a way that provides a close approximation to the actual average spending by a wide range of consumers in a standard population. AV calculation inputs that CMS used are information on utilization, cost sharing, and total costs for health services for a population of health plan enrollees like those who are likely to be covered by individual and small group market health insurance in 2020. Continuance tables are created from the information that describe the distribution of claims spending for a population of health insurance users, referred to as the standard population.
Nine steps. Nine steps exist in the calculation of AV for the various plan structures that may be specified by the user:
- Set the metal tier (by identifying the continuance tables on which the calculation will be based).
- Calculate average expenses over all enrollees (by identifying the denominator of the AV calculation, the average cost over all enrollees for a plan of the specified metal level).
- Calculate expenses covered by employer contributions to health savings accounts (HSA) and health reimbursement arrangements (HRAs), if applicable.
- Calculate plan-covered expenses for spending before the deductible is met.
- Determine applicable enrollee spending level for maximum out of pocket (MOOP).
- Calculate plan-covered expenses for spending between the deductible and the MOOP (in the coinsurance range).
- Calculate plan-covered expenses for spending above the MOOP.
- Apply tiered network, if applicable (to calculate AV in Tier 2).
- Calculate AV and corresponding metal tier (to assign AV and metal tier).
In the final ninth step, the AV Calculator computes the final AV amount, classifies the plan by metal tier, and determines whether the metal tier matches the desired metal tier input by the user. To compute the AV, the AV Calculator divides the numerator by the denominator and if the AV is outside of the ranges corresponding to each metal tier, the AV Calculator outputs the AV. The user also receives a message—Error: Result is outside of [-4, +2] percent de minimis variation.
ACA variation. Users may select an option to determine whether the plan design satisfies the ACA (§1402) cost sharing reduction (CSR) plan variation requirements or the expanded bronze plan AV de minimis range, -4 percentage points and +5 percentage points, rather than -4/+2 percentage points.
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