The ACA statute requires that Exchange coverage comply with set deductible and out-of-pocket (OOP) maximum limits and extends these requirements to certain individual and group coverage. However, the statute’s language was somewhat murky as to exactly which non-Exchange plans (insured, self-funded, small, large) had to comply. Particularly for high deductible health plans that pair with health savings accounts (HSAs), this was a significant issue as these plans—and their HSAs—could be obsolete if deductible limits were imposed. We answer several questions related to these requirements below.
What is the new deductible limit and to what types of plans does it apply?
Starting 2014, the ACA requires that Exchange plans comply with a deductible limit of $2,000 for individuals and $4,000 for families (which will be indexed going forward). The FAQ clarifies that this requirement only applies to insured coverage in the small group market (except grandfathered plans). It does not apply to self-funded coverage or large group insurance coverage. (So, for the most part, high deductible health plans that are paired with HSAs will be able to continue.)
What is the new OOP maximum and to what types of plans does it apply?
The allowed OOP maximum under the ACA is based on the maximum out-of-pocket limit for HSA-compatible high deductible health plans. The IRS issues these amounts each year by June 1st. While the 2014 amounts have not yet been announced, the 2013 limits are $6,250 for self and $12,500 for family coverage.
The FAQ clarifies that the requirement related to OOP maximums applies to all group health plans, except grandfathered plans. This would include small and large insured or self-funded plans. The requirement also applies to individual coverage.
Our plan has separate OOP maximums for medical and prescription drug coverage. Can we calculate the OOP limit separately for each?
The FAQ provides that a group health plan only may have one OOP maximum. The FAQ says that the agencies recognize that plans may utilize multiple service providers, such as major medical TPAs and pharmacy benefit managers, which may impose different levels of cost-sharing. The Q&A says that these limits will need to be coordinated into one OOP maximum, which may require "new regular communications" between service providers.
However, the Q&A provides some relief for the first year of implementation and says that, for the first year only (2014 plan year), where the plan uses more than one service provider, the agencies will consider the OOP maximum requirement met if the following two conditions are satisfied:
1. The plan complies with the OOP maximum for major medical; and
2. To the extent that there are OOP maximums on other coverage (such as prescription), these additional OOP maximums do not exceed the allowed dollar amounts for OOP maximums.
The Q&A does note that during the 2014 transition period, the plan may need to consider other laws, such as mental health parity, when determining whether and how to apply OOP maximums to benefits in different categories. For example, the plan may violate the mental health parity rules if it imposes a separate OOP maximum for mental health benefits versus major medical benefits.
The FAQs can be found at www.dol.gov.ebsa (ACA FAQs Part VII, Q&As- 1 and 2). Plans will need to consider these deductible and OOP limit requirements, as applicable, when designing benefits and adopting amendments for 2014. In addition, plans that have more than one service provider will need to start the process of coordinating among services providers for 2015 in order to calculate OOP limits across all benefits. Plans also will need to watch for future guidance or regulations on what types of expenses must be counted toward the OOP maximum.
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Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.