The new Actuarial Value (AV) regulations from Health Human Services that apply to all health insurers in all states will allow most Health Savings Account-based plans to continue to expand, Consumer Directed Marketing Reports has concluded after analyzing the final proposal.
The new regulations start to apply in just over one year.
Many HSA-eligible High Deductible Healthcare Plans should in theory become more attractive under this change, its editor William Boyles argues.
Congress placed a cap on cost-sharing at 40% of benefit costs per plan (+/- 2%).
That’s the maximum ratio for small groups/individuals.
Boyle argues that approach changes the underwriting parameters from raising cost-sharing to meet double-digit premiums to cutting premiums to the max in order to stay legal.
He also believes that in effect no plan will be able to raise premiums as fast in this environment because the cap on Out-of-Pocket (OOP) cost is also an indirect cap on premiums.
Preferred Provider Option plan benefits (and premiums) are rising faster than OOP costs. That drives AV values lower. HSAs though have low benefits and high OOP costs, giving them a too-low AV score. But their low benefit costs will be more important than their high OOP costs as the market shifts to an environment where flexibility in OOP costs is the key driver.
Historically, the relative importance of co-insurance, copays, deductibles and out-of-pocket maximums has not been resolved in real markets because there were no caps.
But the new AV law forces the market to face up to the fact that there is no logic to the way cost-sharing has evolved over time.
For example, Health Maintenance Options had no cost-sharing or deductibles in their fastest-growing years. Today half of HSA insurance, the fastest-growing product now, has no OOP maximums. Co-insurance varies in many states and plans.