High-Deductible Health Plans Must Ensure Maximum Out-of-Pocket Amounts are ACA-Compliant

On May 26, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury issued an FAQ regarding limits on out-of-pocket cost-sharing for participants of high-deductible health plans (HDHPs). Every Affordable Care Act (ACA)-compliant HDHP must cap participant cost-sharing to a specified maximum out-of-pocket (MOOP) amount, as specified in section 1302(c)(1) of the ACA. The MOOP amount is the maximum amount a beneficiary is required to pay out-of-pocket in cost-sharing charges (like copays and coinsurance) before the plan begins to pay 100% of the cost of claims.

When employees covered by a HDHP have the option to choose between self-only or family coverage, self-only coverage typically comes with a lower MOOP amount, while the family MOOP amount is higher. The maximum legally allowable MOOP amount is updated annually; in 2015, the self-only MOOP cannot exceed $6,600 and the family MOOP amount cannot exceed $13,700.

In the past, for family coverage, the plan would typically not begin to pay claims at 100 percent until the family MOOP was met. For example, imagine Alice and her dependent spouse Ben are both covered by Alice’s employer group health plan, which has a self-only MOOP limit of $6,600 and a family MOOP limit of $13,700. Alice pays for $10,000 in out-of-pocket cost-sharing, while Ben does not incur any out-of-pocket cost-sharing. Even though Alice has exceeded the self-only MOOP limit, the plan will only pay claims 100 percent after Alice and Ben’s combined out-of-pocket cost-sharing exceeds $13,700. In other words, Alice and Ben both have to keep paying copays and coinsurance until their combined out-of-pocket expenses reach $13,700.

However, the DOL, HHS, and the Treasury have now stated that this type of plan design isn’t compliant with the Affordable Care Act. Instead, the self-only MOOP amount should be applied individually to each person covered by the family plan—an “embedded MOOP.” In this scenario, when Alice incurs $10,000 in charges, the self-only MOOP limit of $6,600 applies. Alice pays $6,600, and the plan will pay 100 percent for the remaining $3,400 in charges. Alice does not pay cost-sharing charges for the remainder of the plan year, even though the family MOOP of $13,700 has not been met. If Ben incurs claims, he will pay up to $3,700 in cost-sharing, after which the family MOOP of $13,700 is met and Ben does not pay cost-sharing charges for the remainder of the plan year. Even though this scenario results in higher expenses for the plan, the FAQ states that “the plan must bear the difference.”

More details on the requirements can be found in the ACA HHS Notice of Benefit and Payment Parameters for 2016. The clarification will apply to plan years beginning on or after January 1, 2016.

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