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1. Creating Gold, Silver and Bronze
Benefits – Vanilla or Spumoni
I’ve talked to a lot of agents (and other folks) that
believe that the Affordable Care Act requires all
Exchange benefits to be basically the same – Gold,
Silver or Bronze. They believe that these metallic
benefits are highly regulated and will eliminate
“qualified high-deductible health plans” (QHDHP)
which support Health Savings Accounts. They think
that there is virtually no wiggle room in Silver. At
least that is the rumor. Fortunately this is not true,
or at least it doesn’t have to be true.
First a recent counter-example: The California
Health Benefits Marketplace exchange (called
Covered California) announced that they were going
to standardize their metallic plans and require all
health plans offer only those identical plans.
Competition would occur only by way of premiums
and provider panels. Their reasoning was that
consumers needed a true, identical
apples-to-apples comparison to properly shop.
You can see their approved benefit structure here:

2. http://www.coveredca.com/media/10748/Covered
CA-HealthPlanBenefitsComparisonChart.pdf
As you can see, Covered California will not offer
QHDHP’s. Hopefully this will not become the norm
with other state exchanges.
Most exchanges, including the federal marketplace,
will allow health plans the ability to create their own
plans – as long as they meet metallic guidelines and
include required “essential health benefits”. Various
combinations of deductibles, coinsurance,
copayments and out-of-pocket limits will be allowed
– as long as they can be actuarially “scored” as
proper metallic values. If a QHDHP can be created
within the guidelines, they should and often will be
allowed.
METALLIC BENEFITS
The rule for being certified metallic is that the
“actuarial value” (AV) of the benefits comply with
the following chart:
Bronze (60%) – must score between 58% & 62%

3. AV
Silver (70%) – must score between 68% & 72% AV
Gold (80%) – must score between 78% & 82% AV
Platinum (90%) – must score between 88% and
92% AV
Catastrophic (57%) – with specific benefit
requirements
What does actuarial value mean? It is the average
expected payout by the health plan when a large
standard population’s claims are run through the
benefits. So if on “average” a particular health
benefit plan design would pay 70% of the claims,
then that would be considered a Silver plan. As you
can imagine, there are numerous combinations of
benefits (deductibles and copays, etc…) that could
yield Silver benefits. It turns out that even a QHDHP
can garner a Silver (or Bronze or even Gold)
ranking.

4. UNLOCK YOUR INNER ACTUARY
I recently was referred to the government’s
actuarial calculator. It is the exchange’s official
scorekeeper. When an actuary comes up with a
benefit plan, they run it through this calculator to
get the official metallic certification. If the benefits
do not meet the essential health benefit, then the
calculator “fails” the plan and it cannot be sold in
any exchange. If the official AV calculator certifies
the plan’s unique benefits, then they are good to go
in the appropriate metallic band (except in California
of course).
The good news is that I was able to come up with
all kinds of different Silver plans. I started with a
few common plan designs and then, when I got
comfortable with the AV calculator, I went wild. I
thought up all kinds of goofy Silver and Bronze
plans that no one would sell (or would they?!). It
wasn’t too hard to come up with several Bronze and
Silver QHDHP benefit designs. It was a bit more
difficult with Gold, but do-able. Then I got serious
about designing innovative (…or stupid, I’m not
sure yet…) plan designs. It’s nice to be able to think
outside the box, but not have to spend money on

5. actuaries to rate each crazy idea.
If there are any doubts, I really had a blast with
this.
If, like me, you think designing metallic benefits are
a fun pastime (or if you are suffering from insomnia
and want a non-chemical solution) try unleashing
your inner actuary:
No password needed. Have fun!
http://cciio.cms.gov/resources/files/av-calculator-fi
nal-2-20-2013.xlsm
Let me know if you come up with a winning plan
design. We may use it for one of Arches Health
Plans.
EXCHANGE PRODUCTS AND SUBSIDIES
Every health plan within an exchange is required to
offer at least one Silver plan and one Gold plan. If
the plan chooses, they may offer a Platinum plan
and/or a Bronze plan and/or a catastrophic plan
(explained below). Some exchanges, such as

6. Covered California may require plans to offer all
metallic products, not just Gold and Silver. Most
health plans will want to offer Bronze and
Catastrophic plans alongside of the required Gold
and Silver. Most plans will not want to offer
Platinum benefits, believing them to be a magnet
for the really expensive cases.
The subsidy value is based on the premiums of the
second lowest priced Silver plan of those available
in the zip code of the enrollee. The actual subsidy is
based the enrollees income. Once the subsidy is
determined, then the enrollee may choose different
plans, but would be responsible for the incremental
difference in premium (whether higher or lower). It
is possible that in some unique cases, a particular
Bronze plan may actually have zero premiums after
the subsidy.
In addition to a premium subsidy, there are certain
“benefit enhancements” required for Silver plans
chosen by the lowest income families. When
incomes are less than 150% of the federal poverty
level, enrollees are entitled to enhanced “Silver”
benefits. The exchange will assign Silver levels of
73%AV, 87%AV and 94%AV. These enhanced

7. Silver plans are not “sold” but rather assigned by
the exchange based on the enrollees income.
Covered California has published their required
benefits for those enhanced Silver levels:
http://www.coveredca.com/media/10745/Covered
CA_HealthPlanBenefitsSummary.pdf
Another type of exchange product will be the
“Catastrophic Plan”, with a 57% AV. The
Catastrophic benefit structure is pretty well defined
by code. It must include exactly three first dollar
offices visits, but no other first dollar benefits. It is
only sold to those aged 21 through 29 and to some
strange situations where a person does not qualify
for a subsidy, but Silver coverage is technically
“unaffordable”. (This is a quirk where an older
person, who has higher rates than a younger
person, has income just outside the subsidy range
but the Silver plan costs more than 9.5% of their
income – rare but worth mentioning.)
Another required plan benefit design is exclusively
for Native Americans with incomes less than 300%
FPL. Qualified Native Americans are entitled to

8. special benefits with 100% AV. Of course a 100%
AV plan means that there are zero co-payments,
deductibles and co-insurances due from the Native
American enrollee. (Not much plan design work
needed there.)
For all the enhanced benefit plans, the federal
government will reimburse the health plans for any
benefits paid beyond the standard benefits.
CONCLUSION
The bottom line is that the federal actuarial value
calculator has surprisingly few restrictions. Many
thousands of different plan designs are possible.
The only limitations are the imagination of the
health plan, the ability to administer the benefits
and an exchange flexible enough for innovation and
out-of-the-box thinking. In my view, it is
unfortunate that Covered California will only allow
vanilla plan designs. The benefit world is so much
more satisfying with 31 flavors (or more).

9. Arches Health Plan will be benefit design innovators.
Because if Arches Health Plan doesn’t change
things, how is healthcare going to get better?
Media Inquiries-Contact
Director of Marketing, Tricia McGary
http://archeshealth.org
tmcgarry@archeshealth.org
(801) 550-3197
5505S 900E, Ste. 100,
Salt Lake City, UT 84117