HHS Rule May Require Embedded Out of pocket Limits

Beginning in 2016, HHS has said the ACA's cost-sharing mandate will require at least some nongrandfathered health plans with family coverage to "embed" an individual out-of-pocket (OOP) limit no greater than the annual statutory limit for self-only coverage. Although the application of this embedded OOP limit to self-insured and large insured group plans is uncertain, employers sponsoring those plans may want to prepare to make this design change to their plans, including estimating the financial impact of the change and identifying written materials that would need updating and, if currently modeling their plans’ value for the 40% excise tax (effective in 2018), to determine if the embedded-limit requirement would increase their potential excise tax exposure.

Revised ACA regulations for a health plan's summary of benefits and coverage (SBC) will be finalized in the "near future," according to a March 30 FAQ issued by regulators. The rules will apply to SBCs for the 2016 plan year (including ones issued during 2015 fall open enrollment). However, required use of the new SBC template and other model materials will first apply for the 2017 plan year (including any SBCs issued during 2016 fall open enrollment). Regulators anticipate finalizing the new SBC template and related materials by January 2016.

Congress returns next week as business groups and labor unions step up their drive to repeal or change the so-called “Cadillac” excise tax on high-cost employer provided health coverage. Republican Congressman Frank Guinta of New Hampshire is sponsoring legislation to eliminate the tax, and Democrats are expected to sign on to the effort. With the tax set to start in 2018, IRS has issued initial guidance (Notice 2015-16) that offers proposals on which health benefits will count in the cost calculation, how employers will determine the cost of coverage (particularly for self-insured plans), and how the various dollar thresholds defining high-cost coverage will operate.

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