On Dec. 28, 2017, CMS finalized the 2019 actuarial value (AV) calculator methodology, which only contained small changes from the draft calculator reported on in the Nov. 14, 2017, Compliance Corner. The AV calculator is designed by HHS and CMS to help estimate the AV for a given plan design in the individual and small group markets, which is used to categorize such plans into the metal levels of coverage (bronze, silver, gold and platinum). The proposed rules describe the calculator’s methodology and operation, and can be quite technical and complex. The rules primarily provide technical guidance to insurers, but contain general information regarding medical trends.
The calculator is largely unchanged from previous years, which means that individual and small group insurance plan options may stay largely the same in plan design and metal level status. However, one interesting change was that the annual projection factor for medical costs used in 2018 was 3.25 percent, but HHS increased that factor to 5.4 percent for 2019. The projection factor for prescription drugs remains at the higher level of 11.5 percent to account for the expectation that the cost of prescription drugs is to increase at a substantially higher rate than medical costs. For the 2019 AV calculator, the maximum out-of-pocket limit and related functions have been set at $8,000 to account for an estimated 2019 annual limitation on cost sharing. The 2019 annual limitation on cost sharing will be specified in the final 2019 payment notice.
Employers don’t need to take any action in relation to the AV calculator. Large groups aren’t categorized into one of the metal tier categories. The AV of fully insured and small group policies will be determined by the insurer. However, the cost of medical and prescription services is expected to increase significantly over the next two years for all sized plans.
2019 Actuarial Value Calculator Methodology »