Computing the value of the SVVSD’s HRA

Average district contribution PMPY to HRA is computed by blending adult only payments and those for families with children, the latter being lower on a per person basis. I used the family mix data for the Nextera group, as it was the only one reported. Accordingly, this is a conservative estimate, because the Nextera population has proportionally more children. Even for adults with the full $750 HRA, the average contribution to the HRA fund is only about $600, an actuarial value that reflects that significant number of members have even lower claims totals than $600. The average comes to $498.

Then , $70 is subtracted from the value of the HRA to account for a 14% share of the HRA attributable to primary care spending subject to deductible by non-members. This offsets the district’s waiver of primary care deductibles for Nextera members. The American Association of Family Physicians has prided itself on persuading a few states to raise the proportion of primary care insurance spend from the range of 5-8% of spend to as high as 12%. To keep my estimate of net HRA value applicable on the conservative side, I assumed 14% of spend of non-Nextera members goes to primary care, about twice the national average and equal to the that in the countries that AAFP regards as having the highest performing systems.

The average cost-sharing difference attributable to the district’s grant of deductible relief to non-Nextera members must, for a fair comparison, be capped by the average amount of deductible paid by Nextera members. That number is a bit harder to know with precision absent Nextera employee OOP data.

But it is a number that can be conservatively estimated with confidence. Estimating an employee’s average liability under deductibles of various types is something health care actuaries do with great regularity. It is key to pricing and valuing insurance. As part of the process for determining actuarial value of insurance plans for metal status determination under the Affordable Care Act, CMS has a publicly available actuarial value calculator with relevant tools and tables. Similarly, Milliman Actuaries use Milliman Health Cost Guidelines (HCGs) based on national statistics; the tools Milliman uses are also sold to analysts. While purchase of an HCG product is beyond our means, Milliman’s report on direct primary care serendipitously gave a glimpse of the HCGs in action, a glimpse that is more than sufficient for our purposes.

For inclusion in its landmark DPC study (Figure 12, line H), the Milliman team used the HCGs to compute the combined value to DPC members of a waiver of two separate deductibles. One applied to the first $150 of claims, the other applied to claims costs between $900 and $1500. Using the HCGs, Milliman estimated the combined value of the two deductibles at $372 PMPY. Necessarily, a single deductible that covered a band from $0 to $750 would have a value of at least $372. The maximum value of a $150 deductible is $150; it follows that the minimum value of the deductible that covered the $600 band from $900 to $1500 was $222. That comes to 44.4 cents on the dollar. But if a deductible in that band comes to 44.4 cents on the dollar, it follows that the minimum value of a deductible covering the band between $750 and $900 exceeds $66. The total of the minima for the three bands that cover the range of $0 to $1500 (and, conservatively, declining to add even a penny of value for the band between $1500 and the SVVSD’s full $2000 deductible) yields a floor of $660 PMPY in average spend subject to deductible for the direct primary care cohort. Accordingly, every bit of the $428 in HRA money for downstream care represents a minimum of costs for which non-Nextera members, but not Nextera members, are reimbursed.

Revisit “too many errors” post.

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