The U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) have issued a set of Frequently Asked Questions (FAQs) clarifying the limitations on cost sharing under the Affordable Care Act.
HHS published final regulations on February 27, 2015, setting forth the 2016 annual cost-sharing limitations under qualified health plans sold on the Health Insurance Marketplaces and insured plans in general (see 2016 Notice of Benefit and Payment Parameters, 80 FR 10750) (the final regulations). In the preamble to these final regulations, HHS proposed to clarify that the maximum annual limitation on cost sharing for self-only coverage under the Affordable Care Act ($6,850 for 2016) should apply to all individuals regardless of whether the individual is covered by a self-only plan or is covered by a plan that is other than self-only (e.g., a family plan or employee-plus-one plan). Otherwise stated, an individual’s cost sharing for essential health benefits may not exceed the self-only annual limitation on cost sharing, even if such individual is covered under a family plan. As this guidance was contained in the preamble to the final regulations, the applicability of the clarification to large and self-funded group health plans was not clear. On May 8, 2015, HHS released a question and answer guidance document confirming that the embedded self-only annual limitation on cost sharing applies to insured group health plans; however, this guidance did not specifically address whether the rule also applied to self-funded group health plans. On May 26, 2015, the Departments clarified the applicability of this new rule in FAQs about Affordable Care Act Implementation (Part XXVII).
The FAQ guidance provides the following:
- All non-grandfathered group health plans, including non-grandfathered self-insured and large group health plans, are subject to the clarification that the self-only maximum annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or in coverage other than self-only.
- The clarification is applicable to plan or policy years that begin on or after January 1, 2016.
- The clarification also applies to non-grandfathered high-deductible health plans.
Example Illustrating Guidance
For plan or policy years beginning in 2016, the maximum annual limitation on cost sharing is $6,850 for self-only coverage and $13,700 for other than self-only coverage. Assume a family of four individuals enrolls in family coverage under a group health plan with an aggregate annual limitation on cost sharing of $13,000. The following chart illustrates the party responsible for the out-of-pocket (OOP) costs under the clarified rule:
Click here to view the table.
In the example above, note that the family’s total OOP costs ($12,850) are below the $13,000 plan maximum. Thus, this example shows how the clarification could result in the plan paying a slightly higher share of the cost than it would have under previous guidance ($3,150 versus $3,000).
Employers should review their 2016 welfare plan design to ensure compliance with the clarified embedded maximum OOP rule. Plan documents and employee communications describing the out-of-pocket maximum should also be updated to reflect the new requirements.