Health Plan Update on Out-of-Pocket Limitations

The Affordable Care Act (the “ACA”) established limitations on the annual out-of-pocket costs that a health plan may impose on a participant.  The U.S. Department of Health and Human Services, Department of Labor and the Treasury recently issued guidance clarifying how out-of-pocket limits apply for coverage that is not self-only coverage (e.g., family coverage) effective for 2016 plan years.  Specifically, the employee-only annual out-of-pocket limit will apply to individuals enrolled in family coverage or other coverage that is not employee-only coverage under a group health plan where the plan’s overall out-of-pocket maximum exceeds the ACA out-of-pocket limit for employee-only coverage.  The limits apply to all non-grandfathered plans, including high deductible health plans (HDHP) regardless of the number or employees covered and method of funding. 

This means that once a person who is enrolled in family coverage reaches the individual (employee-only coverage) out-of-pocket limit, the plan must pay 100% of all covered expenses for that person, even when the family out-of-pocket limit has not yet been satisfied.  Once the family out-of-pocket limit is reached, the plan must pay 100% of all covered expenses regardless of whether each covered person has reached the individual out-of-pocket limit.

Employers that sponsor self-funded health plans may need to amend their plan(s) effective as of the 2016 plan year to reflect the new guidance.  Health plan claims administrators may need to adjust benefit payment procedures to coordinate with this out-of-pocket limit requirement.

Note, for 2016 plan years, the ACA out-of-pocket maximum limitation is $6,850 for self-only coverage and $13,700 for family coverage.  The out-of-pocket maximums for HSA compatible HDHPs are $6,550 for self-only coverage and $13,100 for family coverage.

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