Despite some initial confusion, regulators have informally confirmed that self-insured and large-group insured plans must embed individual in-network out-of-pocket (OOP) limits in family coverage.
The ACA limits a nongrandfathered group health plan’s annual cost sharing for essential health benefits obtained in-network to specified dollar levels. For plan years beginning in 2016, the OOP limits are $6,850 for self-only coverage and $13,700 for other coverage tiers. The preamble to HHS’s final 2016 Notice of Benefit and Payment Parameters provides that the ACA’s annual in-network OOP statutory limit for self-only coverage applies to all individuals whether they have selected self-only coverage or some other coverage tier (e.g., family coverage).
For coverage tiers other than self-only, this provision requires applicable health plans, with plan years starting on or after January 1, 2016, to embed an OOP limit no greater than the indexed statutory self-only limit for each individual enrolled. If a plan’s self-only tier OOP limit is lower than the statutory limit, it appears that the embedded limit could still be set at the higher statutory level.
Here’s an example. The Maguire Industries group health plan has two coverage tiers in its benefit plan — self-only and family. It has in-network OOP limits of $5,000 for self-only and $10,000 for family coverage in 2016. Jennifer works for Maguire Industries, and she and her daughter are covered under the plan’s family tier. If Jennifer incurs a $20,000 expense due to a hospital stay, she would only be responsible for paying cost sharing up to the annual statutory OOP limit for self-only coverage for that year (e.g., $6,850 in 2016), not the $10,000 family limit nor the plan’s $5,000 self-only OOP limit.
Placing a limit on employees’ out-of-pocket spending is a way of providing individual financial protection. OOP maximums are rising along with other forms of cost-sharing. The legal limit in 2014 on employee OOP spending in an HSA-eligible plan was $6,350 for an individual and $12,700 for a family. The median maximum amounts for employers with 500 or more employees, according to Mercer’s National Survey of Employer-Sponsored Health Plans, were $3,500 for self-only coverage in-network and $7,000 for family coverage. Median out-of-network maximums were $6,000 and $12,000 for individuals and families, respectively.
Given that the median in-network OOP maximum amounts set by employers were about half the federal limit in 2014, we anticipate that employers will carefully weigh setting the 2016 embedded individual OOP maximum at the $6,850 statutory limit instead of at the self-only OOP maximum. Employer decisions will come down to financial and administrative considerations. Employers should begin calculating the financial impact of the change and confirming whether the embedded individual OOP maximum can be set at a higher limit than the plan’s self-only OOP maximum, as illustrated in the example above.