Session 32 OF, Supplemental Health Products: Surviving the ACA Maze Moderator:
Jody Frenette Mistal, FSA, MAAA Presenters:
Annual Meeting &
Exhibit
Session 32 – Open Forum:
Supplemental Health Products – Surviving the ACA Maze
Presenters
Amanda Hug, FSA, MAAA
Actuary, MassMutual Financial Group ahug@massmutual.com
David M. Dillon, FSA, MAAA
Vice President & Principal, Lewis & Ellis, Inc. ddillon@lewisellis.com
Jody Mistal, FSA, MAAA
Disclaimer
• The information in this presentation is general in nature, is not intended to provide specific rating or product development advice, and is not intended to represent any specific company. The information must be validated by a company to arrive at its own opinion.
Overview
• Excepted Benefits in an ACA world • Critical Illness
• Accident • GAP
Supplemental Products
•
Coverage that is NOT designed to be primary
(e.g. not major medical insurance).
What is Driving the Need for
Supplemental Coverage?
• Health Care Reform
Excepted Benefits - CI
• “Excepted” under the Public Health Service Act (PHSA) ‒ 42 USC 300gg-91(c) Excepted Benefits
(3) Benefits not subject to requirements if offered as independent, non-coordinated benefits
Excepted Benefits - Accident
• “Excepted” under the Public Health Service Act (PHSA) ‒ 42 USC 300gg-91(c) Excepted Benefits
(1) Benefits not subject to requirements
Excepted Benefits - GAP
• “Excepted” under the Public Health Service Act (PHSA) ‒ 42 USC 300gg-91(c) Excepted Benefits
Excepted Benefits - HIP
• “Excepted” under the Public Health Service Act (PHSA) ‒ 42 USC 300gg-91(c) Excepted Benefits
(3) Benefits not subject to requirements if offered as independent, non-coordinated benefits
Excepted Benefits – HIP
• Issued January 24, 2013 - Q7: What are the circumstances
under which fixed indemnity coverage constitutes excepted benefits?
• The benefits are provided under a separate policy, certificate, or contract of insurance;
• There is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and
• The benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor.
• The regulations further provide that to be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or
HIP – Group vs. Individual
• Group coverage - The insurance must pay a fixed dollar amount per day (or other period) of hospitalization or illness regardless of the amount of expenses incurred.
• Individual coverage – No longer have the requirement as group, but now has other requirements.
• Applicants must attest that they have minimum essential
health coverage
• Benefits are paid in a fixed dollar amount per period of
hospitalization or illness and/or per service
Critical Illness (CI) Product Overview
• Insurance that pays a lump sum upon diagnosis of a critical illness • Benefit dollars may be used by recipient as he/she sees fit
• Core covered conditions account for over 85% of claims:
• Cancer • Stroke
• Heart Attack • Kidney Failure
• Major Organ Failure
• Carriers may cover up to 20 additional covered conditions • Recurrence benefits are common
• Additional features may include:
• Spouse & Child Coverage • Wellness Benefit
• Waiver of Premium
Federal Regulations to consider
• Health Insurance Portability & Accountability Act (HIPAA) • Portability & Nondiscrimination
• Privacy Rule
HIPAA Portability & Nondiscrimination, ACA
• HIPAA & ACA regulate health care at the federal level with respect to discrimination, renewability, guaranteed availability of
coverage, etc.
• HIPAA & ACA use many of the same definitions, meaning that CI would be treated the same under both.
• Critical Illness (“Specified Disease”) is an “excepted benefit” under
HIPAA’s general provisions and the ACA, so long as:
HIPAA Privacy Rule
• The HIPAA Privacy Rule does not expressly exempt CI.
• The HIPAA Privacy Rule defines 3 “covered entities” to which it applies: • “Health Care Provider” – Straightforward No
• “Health Care Information Clearing House” – Straightforward No • “Health Plan” = “directly provides for health insurance or
provides/pays the cost of medical care” – No, because CI pays a lump sum that is not tied to receipt of care or treatment
To Recap…
The Good: We’ve cleared the ACA hurdle!
The Bad: We aren’t out of the woods yet…
State Regulations to consider
• No Interstate Compact 50 State Filing • NAIC Model Law 170-1
• 22 states have adopted it
• Includes: AR, CT, DE, FL, ID, IL, IA, ME, MA, NH, NJ, NY, OK, PA, RI, SC, TX, UT, VT, VA, WA, WV
• Some state adoptions include additional restrictions
Navigating the States
• Seek “lowest common denominators” during product development
• Pre-existing condition limitation
• Waiting period
• Separation period between occurrences and recurrences
• Considerations along the way
• Preferred Product Design
• Risk Mitigation Features
Watch out for…
• Loss Ratio Requirements – vary from 50-75%
• Benefit Reductions – prohibited by CT, MA, NJ, NY • New York – Insured must provide evidence of major
Accident & GAP Plans
Premium Growth Pattern
Accident Plans
• Covers loss due to an accident only (no sickness) • Disclosures required
• Benefit Design
• Expense Incurred (accident-only Major Medical) • Indemnity (accident-only Hospital Indemnity)
• No or Limited Age Bands • Unisex
• No underwriting • Low Cost
Accident Plan Designs - Indemnity
Benefits Common Ranges Accidental Death $25,000 - $100,000 Accidental Dismemberment $2,500 - $50,000
Varies by eye(s), hand(s) etc. Ambulance: Air/Ground $500 - $2,000 / $100 - $500
Burns $50 - $20,000
Varies by degree and size Dislocation / Fracture $1,000 - $10,000
Varies by location and severity Surgery $500 - $2,500
Hospital Admission Benefit $250 - $2,500 (increments of $250) Hospital Confinement Benefit per day $50 - $500 (increments of $50)
Accident Plan Designs – Expense Incurred
Characteristics Off-the-job vs 24 Hour Maximums: $500 - $50,000
ER Benefit: $0 - $100 deductible applies Follow Up Care: 3 – 5 max visits Ambulance: 5 – 15% of overall max
Rx: IP only
Diagnostic Exams: Within 14 days 10 – 25% of overall max
Accident – Plan Designs
Enhancements
• Dependent coverage equal to insured vs reduced • Portability
• No age reduction at upper ages • Ages over 65
GAP Plans
• Coverage is NOT designed to be primary
• Pays Deductibles, Co-pays, and Co-insurance only
• Accident & Sickness, or Accident-only
• Past CMS bulletin considered these as excepted benefit if:
• In a completely separate policy from the underlying coverage, and • Are priced no higher than 15% of the cost of the underlying
coverage.
• Typically sold by different entity than Major Med
• Guarantee Issue
• Typically pays off of the underlying major med EOB
Key Issues Impacting GAP Market
Key Issues Impacting GAP Market
GAP Plan Designs
• Supplemental Deductible and Co-Insurance
• May have separate supplemental deductible and
co-insurance per insured
• Typical Deductible Options
• $250 to $3,000
• Typical Co-Insurance Options
• 0%, 90/10%, 80/20%, 70/30%, 75/25%, 50/50% • From $0 to $10,000 Out-of-Pocket
• Benefits for Hospital and Outpatient Expenses
• Typically pays the amount applied to major medical
GAP Plan Designs
• Covers the same expenses as major medical plan, Except:
• Charges for professional fees in a doctor's office or medical clinic; or
• Charges for outpatient prescription drugs.
• Maximum Benefit Amounts
• Typically range from $1,000 to $9,500 per person per
calendar year
• Enhancements
GAP – Actuarial Issues
• Rates depend on the employer’s underlying plan: The higher the deductible, copays, OOP limit, the higher the rate for the gap plan.
• Rates may vary by employer subsidy level, group size, and number of enrolled employees (rates decreasing as each of these increase).
• The premium limit (15% of cost of underlying
employer plan) could pose a significant problem: As the underlying plan’s deductible and OOP limit
Hospital Indemnity – Plan Design
• Pays a set daily benefit for each day confined to a hospital. • May pay additional benefits for other inpatient care.
• Newer designs often include outpatient benefits.
• Modular Design
Hospital Indemnity – Risk Selection
• Practices can vary by target market
• In worksite, a reasonable spread of risk can be achieved with appropriate participation rates. • Guarantee issue is becoming more common in
worksite. Relies heavily on value of “actively at work” requirement and participation.
• Maternity coverage materially impacts costs.
Hospital Indemnity – Rating Aspects
• Target market
• Degree of underwriting
• Group size and participation
• Risk Mitigation techniques included in the product design
• Bracketed policy form language
• Treatment of maternity related claims • Waiting periods
Hospital Indemnity –
State
Considerations
• Minimum Loss Ratio Standards • Actuarial Filing Materials
For questions, contact:
Amanda Hug, FSA, MAAA
For questions, contact:
David Dillon, FSA, MAAA
Vice President & Principal Lewis & Ellis, Inc.
For questions, contact:
Jody Mistal, FSA, MAAA
Consulting Actuary Milliman
