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Illinois Amends Act that Contradicted Federal Law

Illinois amended its Managed Care Reform and Patient Rights Act to correct an issue with the law’s provisions contradicting federal law.

In its first installment, the Act required health plans to “apply any payments, financial assistance, discount, product vouchers, or any other reduction in out-of-pocket expenses” toward cost-sharing requirements like deductibles, co-pays, or out-of-pocket maximums. However, the Act inadvertently hurt individuals enrolled in a high deductible health plan (HDHP) from contributing to their health savings accounts (HSAs). By mandating that reductions in out-of-pocket expenses be applied towards deductibles, co-pays, or out-of-pocket maximums, the law accidentally disqualified individuals from contributing to their HSA because they now have disqualified “first dollar coverage.” “First dollar coverage” is insurance that provides payment for the full amount with no deductibles.

The Center for Medicare and Medicaid Services (CMS) confirmed to the Illinois Department of Insurance that any discounted prescriptions for non-preventive care items would disqualify individuals from HSA participation if applied before the individual met their deductible requirement. Illinois rectified its mistake by amending the Act. The amendment keeps the same requirement as the original, however, to preserve HSA eligibility, it now applies to HSA-qualified HDHPs only after the individual has met the statutory HDHP deductible. Discounts for preventative care items still must be immediately applied to deductibles, co-pays, or out-of-pocket maximums, regardless of what type of group health plan the individual is enrolled in.

If you have any questions about this amendment, contact your OneDigital consultant.