Our last blog post explained the embedded Out-of-Pocket Maximum (OOPM) rule that will take effect in 2016. We had focused on how non High Deductible Health Plans will be affected. Now, let’s shift the focus on how High Deductible Health Plans (HDHPs) plans will be impacted. HDHPs are plans that cannot pay for benefits (except specified preventive benefits) until an individual has met the deductible amount for that year.
These plans must continue to have a “collective” family deductible, to which all covered family members’ qualified expenses apply, as well as the “non-collective” individual OOP maximums. Currently, the OOPM applies to the family as a whole regardless of whether the claims are all incurred by one member or spread amongst the family members. Under the new ACA rule, each covered family member cannot be required to pay more than the ACA OOPM limit of $6,850. For example, currently, a plan with a $4,000 OOPM for self-only coverage and $8,000 OOPM for family coverage would not pay 100% for eligible expenses until the family as a unit had incurred $8,000 in claims. If one family member incurred $7,000 in claims, the individual would continue to have cost-sharing obligations (like deductibles and co-pays) until the family as a whole incurred $8,000 in claims. In 2016, once the individual has met the new ACA OOPM of $6,850, the plan must pay 100% of eligible expenses for that individual. In this example, the family OOPM can still be $8,000, but it will also have to “embed” the individual OOPM of $6,850.
The interesting twist is that the OOP maximums for HDHPs with Health Savings Accounts (HSAs) are lower than the maximums that apply to other types of plans.
So technically, a HDHP participant with self-only coverage could have an OOPM of $6,550 while an individual with family coverage in the same HDHP could have an OOPM of $6,850, assuming the plan is going to use the ACA Maximum limits.
Keep in mind that not all HDHPs will be affected by this new ruling. In-network OOPMs may be lower than the ACA limits. An example would be, a HDHP that has a $3,000 self-only OOPM and a $6,000 family OOPM. The limits would apply as usual, up to the $6,000 aggregate max, for the family because the family $6,000 OOPM is lower than the ACA self-only OOPM ($6,850). In summary, if the HDHP family OOPM is $6,850 or lower, then the plan will continue to operate as it always has with no changes come 2016. Only plans with family limits higher than $6,850 will have to navigate the new dual maximums.
It is important to note that employer funding into a HSA, Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA) does not impact the OOPM provisions. The entire deductible, regardless of employer deductible funding, is taken into consideration when calculating the OOPM.
Next steps: If you sponsor a HDHP, make sure your plan will apply the $6,850 OOPM for each individual, even those that have family coverage, and a family deductible that exceeds $6,850.
It will be very important for employers, with the support of their brokers, to closely review plan designs and confirm how their carrier is going to administer plans that renew in 2016.