Federal Rule Delay Impacts States’ and Insurers’ 2020 Plans

State regulators are already working to develop guidance and rules that will determine health insurance plans’ benefits and costs in 2020. However, states lack critical information to make updated calculations because the federal government has not yet released its 2020 Actuarial Value (AV) Calculator.

Why is the AV calculator important?

AV is used to sort plans into metal tiers — from Platinum (90 percent AV) to Bronze (60 percent AV). These metal tier designations are significant, both because they help give consumers some indication of the worth of the coverage they purchase and tax credits used to subsidize coverage are based on the second-lowest cost plan with a Silver designation sold in the state (known as the benchmark plan).

Parameters for the AV calculator are defined in the Annual Notice of Benefit and Payment Parameters rule issued by the US Department of Health and Human Services (HHS), which typically is released between October and December. Many states’ premium rate filing deadlines are approaching in April, creating an urgency for state regulators and insurers who need to make sure the plans they propose meet federal standards, which have not yet been released.

Federal law requires insurers to use the AV calculator to assess the “value” of the plans they will offer through individual or small group markets. State insurance regulators are required to evaluate benefit design, cost-sharing, and other critical elements of the plans that will be offered in 2020 using the federal AV standards. In previous years, the calculator has only made mild adjustments to the federal AV each year, but even small changes can impact to state markets — changing how plans are categorized for consumers and altering assessment of tax credits and cost-sharing reductions available to them.

In some states, health plan rate reviews and their timelines are set by state law, giving them little flexibility to adapt to federal delays. Without the 2020 calculator, states will be forced to make decisions about the parameters the updated calculator will set for their health plans without full knowledge of the “rules of the road” for next year.

Some states may opt to use last year’s calculator in the interim, but if HHS changes the calculator, states will need to reconcile those changes to comply with federal law. This will create duplicative work and added costs as states resolve changes with their regulators, insurers, and for some – marketplace boards. Some states have already delayed initiating their processes, which include meeting with their states’ health insurance marketplace boards to review the standards for plans to be offered through their marketplaces in 2020.

The clock is ticking as states await the federal calculator. The National Academy for State Health Policy (NASHP) will continue to monitor the situation as states develop strategies or contingency plans to address the absence of the 2020 AV calculator.