Cost Sharing Limits for Health Plans

Cost-sharing Limits for Health Plans

April 3, 2014

Beginning in 2014, the Affordable Care Act (ACA) requires certain health plans to comply with cost-sharing limits with respect to their coverage of essential health benefits (EHB). The cost-sharing limits originally included both an out-of-pocket maximum, and an annual deductible limit. However, on Mar. 31, 2014, Congress repealed the annual deductible limit. On Feb. 20, 2013, the Department of Health and Human Services (HHS) issued a final rule that addresses ACA’s cost-sharing limits for health plans.

AFFECTED PLANS

Grandfathered plans are not subject to ACA’s limits on cost sharing. The final rule provides the following guidance on the types of health plans that must comply with the cost-sharing limits:

• Out-of-pocket Maximum: ACA’s out-of-pocket maximum broadly refers to “health plans.” The final rule provides that ACA’s out-of-pocket maximum applies to all non-grandfathered health plans. This would include, for example, self-insured health plans and insured health plans of any size.

COST-SHARING LIMITS

-Out-of-pocket Maximum

Effective for plan years beginning on or after Jan. 1, 2014, ACA places annual limits on total enrollee cost-sharing for essential health benefits. Once the limitation on cost-sharing is reached for the year, the enrollee is not responsible for additional cost-sharing for essential health benefits for the remainder of the year. According to HHS, the annual limit on cost-sharing, or out-of-pocket maximum, ensures that health plans pay for significant health expenses and limits the risk of medical debt or bankruptcy for insured individuals.

Cost-sharing includes any expenditure required by or on behalf of an enrollee with respect to essential health benefits, such as deductibles, co-payments, co-insurance and similar charges. It excludes premiums and spending for non-covered services. Also, for plans using provider networks, the final rule provides that an enrollee’s cost-sharing for out-of-network benefits does not count toward the cost-sharing limit.

ACA’s cost-sharing limit is tied to the enrollee out-of-pocket maximum for HSA-compatible high deductible health plans (HDHPs). There are separate limits for self-only coverage and coverage other than self-only coverage (that is, family coverage). For 2014, the HDHP out-of-pocket maximum cannot exceed $6,350 for self-only coverage and $12,700 for family coverage.

-Transition Relief – Plans with Multiple Service Providers

A set of frequently asked questions (FAQs) issued in conjunction with the final rule address how ACA’s out-of-pocket maximum applies to plans that utilize more than one service provider to help administer benefits (for example, a third-party administrator for major medical coverage, a separate pharmacy benefit manager and a separate managed behavioral health organization). Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants’ expenses against any out-of-pocket maximums. According to the FAQs, these processes will need to be coordinated to comply with the annual out-of-pocket maximum, which may require new regular communications between service providers.

The FAQs provide that, only for the first plan year beginning on or after Jan. 1, 2014, where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual out-of-pocket maximum, the annual limit will be satisfied if both of the following conditions are met:

• The plan complies with the out-of-pocket maximum with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
• To the extent there is an out-of-pocket maximum on coverage that does not consist solely of major medical coverage, this out-of-pocket maximum does not exceed the maximum dollar amount under ACA.

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This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
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