Out-of-pocket maximums may need to change to comply with new guidance

By Amy Ciepluch and Sarah Fowles

According to a new FAQ that the Departments of Labor, Health and Human Services, and the Treasury recently issued, an individual’s cost for in-network essential health benefits must never exceed the Affordable Care Act’s self-only annual limitation on cost-sharing, regardless of whether the individual has single or family coverage and regardless of whether the plan involved is insured or self-insured.

The ACA self-only annual limitation on cost-sharing is going to be $6,850 in 2016 and likely will be adjusted upwards every subsequent year. HSA-compatible HDHPs are subject to lower limitations on cost-sharing: $6,450 in 2015, subject to increases in subsequent years. Based on this FAQ, non-grandfathered group health plans with individual deductibles or individual out-of-pocket maximums that could exceed $6,850 in 2016 (which would include many high-deductible health plans) will need to change their plan design.

Many group health plans require that the plan’s family out-of-pocket maximum deductible be satisfied before the plan pays benefits. For example, a family HDHP might have a 2016 family deductible or out-of-pocket maximum of $8,000 and require that the entire family deductible or out-of-pocket maximum be met before the plan pays benefits, even if the amount is satisfied by a single individual. This type of plan design will no longer be permissible for non-grandfathered group health plans because it could result in an individual member in the plan paying more than $6,850 for essential health benefits before the plan starts paying benefits.

One adjustment that could be made to bring the plan into compliance is to retain the family deductible or out-of-pocket maximum of $8,000, but “embed” individual out-of-pocket maximums that satisfy the new guidance. The plan could embed individual out-of-pocket maximums of $6,850 in 2016. HSA-compatible HDHPs cannot embed an individual deductible that is lower than the statutory minimum family deductible ($2,600 for 2015).

Click here to see a more detailed example of impermissible and permissible plan designs.

Amy Ciepluch is a partner at Milwaukee-based Quarles & Brady LLP, specializing in employee benefits, executive compensation and HIPAA areas. Sarah Fowles is an employee benefits attorney at Quarles & Brady.

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