Delay in ObamaCare's Out-of-Pocket Spending Limits, for Some

August 14, 2013

A key consumer protection provision of the Affordable Care Act ("ObamaCare") has been delayed a year, for some insurers and employers.

This ObamaCare provision, originally to be implemented in 2014, specified there must be an overall limit on consumer's annual out-of-pocket costs for deductibles, co-payments, and co-insurance. The new out-of-pocket annual limits are $6,350/year for individuals and $12,700/year for families.out of pocket health reform

Seems simple enough, right? Enter complications... Many employers offer separate policies, and use more than one benefits administrators to manage different parts of their coverage, such as medical care and pharmacy. This creates complexity in implementation, because current technology does not support benefits administrators to merge the out-of-pocket maximums across plans and management platforms.

Because of this administrative complexity, the administration has delayed the out-of-pocket annual limits for some insurers and employers.

Under this delay, employers and insurers with more than one benefits administrator do not have to combine their members’ out-of-pocket spending into one total until 2015.

  1. The one-year postponement of the consumer out-of-pocket limits applies only to group health plans and only to plans which use multiple independent administrators to handle health insurance benefits.

  2. Individual policies sold in the new marketplaces, or on the private individual market, still must comply by 2014 with the annual limits on out-of-pocket costs.

Here is the exact language presented in the DOL FAQ:

As stated in the preamble to the HHS final regulation on standards related to essential health benefits, the Departments read PHS Act section 2707(b) as requiring all non-grandfathered group health plans to comply with the annual limitation on out-of-pocket maximums described in section 1302(c)(1) of the Affordable Care Act.

The Departments recognize that plans may utilize multiple service providers to help administer benefits (such as one third-party administrator for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization). Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants' expenses against any out-of-pocket maximums. These processes will need to be coordinated under section 1302(c)(1), which may require new regular communications between service providers.

The Departments have determined that, only for the first plan year beginning on or after January 1, 2014, where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums under section 2707(a) or 2707(b), the Departments will consider the annual limitation on out-of-pocket maximums to be satisfied if both of the following conditions are satisfied:

  1. The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and

  2. To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1).

The Departments note, however, that existing regulations implementing Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) prohibit a group health plan (or health insurance coverage offered in connection with a group health plan) from applying a cumulative financial requirement or treatment limitation, such as an out-of-pocket maximum, to mental health or substance use disorder benefits that accumulates separately from any such cumulative financial requirement or treatment limitation established for medical/surgical benefits. Accordingly, under MHPAEA, plans and issuers are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.

Source: US Department of Labor FAQ. 

How does the delay of annual out-of-pocket limits for members impact your clients or employees? Join the discussion in the comments below.

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