A couple of years ago, if you asked an employer health plan sponsor to tell you their plan’s actuarial value, you might have been met with a blank stare. No longer! Under the employer shared responsibility requirements of the ACA, employers must offer an affordable plan with an actuarial value of 60% — meaning that the plan must pay for at least 60% of eligible expenses — and we’re now so familiar with the concept that we refer to actuarial value by the acronym “AV.”
As it turned out, relatively few employers overall — just 13% — had to make changes to meet the minimum plan value rule. The exception was employers in hospitality businesses. In a survey of more than 750 employers conducted earlier this year, 45% of the survey respondents in this sector said they would need to make a change to meet the requirement. Hospitality and retail employers were the most likely to offer “mini-meds” — or limited medical plans — which had low deductibles but typically limited benefit payments to no more than $50,000 annually (and in some cases much less). These plans were disallowed under the ACA.
Overall, the average actuarial value of the medical plans offered by survey respondents was well above the ACA minimum of 60%. Among those offering just one plan, the average value was 79%. Even among employers offering multiple plans, the average values were 83% for the highest-value plan and 77% for the lowest-value plan. Few employers — just 11% — offer a medical plan with an actuarial value near the ACA minimum of 60%. This includes employers that offer multiple plan options.
The fact that most employers have room to reduce plan value is fueling the interest in private health care exchanges. While the typical range of plan value in employer medical plans today is from 75% to 85%, in Mercer’s own private exchange, Mercer Marketplace, it is considerably broader — from 61% to 92%. An analysis of data from the first employers to adopt Mercer Marketplace found that, when given a range of plans to choose from, employees tended to select a lower level of coverage than they formerly had. The result was that the average actuarial value of their elections fell from 80.4% pre-Mercer Marketplace to 71.9% in Mercer Marketplace — a saving of about $800 per employee, which was shared between the employer and employees.
Some employers are also thinking about providing employees with the option of a “skinny plan” — a medical plan that provides minimum essential coverage but doesn’t meet the minimum value requirement. While just 8% of survey respondents currently offer a plan option with an actuarial value of less than 60%, a surprisingly high 18% were considering it. When offered alongside a plan that meets the minimum value requirement, a skinny plan is an inexpensive option for employees who want to comply with the individual mandate at the lowest possible cost. It may just become the “mini-med” plan of the reform era.