Below explains how the tiering process helps lower premium increases while maintaining high quality healthcare services.

Tiering

Every year, health plans submit premium bids to the Group Insurance Board. The Board’s consulting actuary independently assesses the bids relative to the plan’s previous claims experience, market trends, and the plan’s submitted premium cost.

Three Tiers

Health plans are ranked according to three tiers using a formula primarily based on premium cost:

  • Tier 1 plans are the most cost-efficient, typically with lower premiums.
  • Tier 2 plans are those with moderate costs.
  • Tier 3 plans have higher costs.

A health plan’s tier ranking applies across all counties.

Health plans are not compared against each other; rather, the actuary assesses each plan using a formula primarily based on the plan’s premium rate increase. As a cost containment measure, Tier 1 plans are limited to a certain percentage increase. It is, therefore, possible that a health plan’s rank changed to Tier 2 because its premium increased sharply, yet its total premium amount may still be slightly less expensive than a Tier 1 plan.

Benefits of Tiering

Tiering has been found to help keep health premium changes lower over time.

  • Most health plans aim for a Tier 1 ranking, since employees are more likely to choose lower-priced plans.
  • Most members stay enrolled with Tier 1 plans over time, helping keep the plans’ annual rate increases lower.
  • Meanwhile, non-Tier 1 plans tend to retain members who are willing to pay more to receive specialized care with a wider network coverage.

Qualified Health Plan

Health plans are determined to be qualified on a county-by-county basis. At minimum, a qualified health plan must meet one of the two sets of minimum requirements:

Set 1Set 2

In a rural county:

  • A primary care provider within a 20-mile radius
  • A hospital within a 35-mile radius
  • Certain specialists within a 35-mile radius

Urban counties require shorter distances.

  • Five primary care physicians who accept new patients
  • One hospital, if there is one in the county
  • One chiropractor

Certain large cities require more providers.

State Maintenance Plan (SMP)

When there is no qualified Tier 1 plan in a county, the Group Insurance Board designates the State Maintenance Plan (SMP) as the Tier 1 plan for that county.

The SMP is designed to provide a health plan option for members who live or work in areas without adequate access to in-network providers or hospitals.

See SMP for State and Local Employers.

Employer and Employee Contributions

By law, an employer’s contribution to health premiums for most employees is capped at 88% of the average of all qualified Tier 1 plan premiums within the employer’s county (referenced here as “88% maximum amount").

There are two ways that employers determine how health premium contributions are shared with employees:

88% FormulaTiering Method
  • An employer contributes a set dollar amount up to the “88% maximum amount” set for the county. They can contribute less.
  • Employees’ premium cost varies based on the health plan they select (even if on the same tier, since health plans have different total premium amounts).
  • Most local employers choose this premium contribution method.
  • Employees pay a set dollar amount within a tier, regardless of the health plan they select.
  • An employer’s premium cost varies based on the employee’s selected health plan, but will never exceed the “88% maximum amount” set for the county.
  • The state program uses this method to calculate premium contributions.

See 88% Tables & Total Monthly Premium Rates.