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March 4, 2014

Additional Guidance on the Affordable Care Act's Rules for Out-of-Pocket Maximums and Preventive Services Requirements

As discussed in this Capital Checkup, under the Affordable Care Act, non-grandfathered group health plans must comply with a new annual limit on cost sharing, also known as an out-of-pocket maximum. The out-of-pocket maximums that will apply for the 2015 plan year have been announced. The maximum will be $6,600 for an individual, up from $6,350 this year, and $13,200 for other than self-only coverage (e.g., a family), up from $12,700 this year. The out-of-pocket maximum is no longer tied to Health Savings Account maximums, but is calculated based on a percentage increase from the previous year. The percentage increase used this year was 4.2 percent (rounded). This information was published as part of a final rule on the Affordable Care Act’s transitional reinsurance program that was published on March 11, 2014.

The federal agencies responsible for implementing the Affordable Care Act have published additional guidance on the law’s rules for non-grandfathered plans on out-of-pocket limits and required preventive services. That guidance is discussed in Sibson Consulting’s June 11, 2014 Capital Checkup.

The Departments of Treasury, Labor, and Health and Human Services (HHS), which are responsible for implementing the Affordable Care Act1 (collectively, the “Departments”), recently published new answers to a set of frequently asked questions (FAQs).2 Most significant to group health plan sponsors are answers to the FAQs that address two of the law’s requirements for non-grandfathered plans: the new rules applicable to out-of-pocket maximums and the preventive services requirement.

This Capital Checkup summarizes this guidance, which will help plan sponsors understand the law’s requirements, especially as they begin the process of considering benefit changes for the 2015 plan year.

Out-of-Pocket Maximums

Effective with the plan year beginning on or after January 1, 2014, non-grandfathered group health plans must comply with a new annual limit on cost sharing, also known as an out-of-pocket maximum.3 For the 2014 plan year, the maximum is $6,350 for an individual and $12,700 for a family. A special transition rule applies to the 2014 plan year if the plan uses multiple service providers to administer the plan’s benefits. That transition rule applies the maximum to the plan’s major medical benefit. If the plan’s other separately-administered benefits (e.g., prescription drugs) apply an out-of-pocket maximum, that maximum also cannot exceed the allowed amount.

Several FAQs about the out-of-pocket maximum rules were answered. The answers clarify the following:

  • Plan sponsors may have separate out-of-pocket maximums on different categories of benefits (e.g., medical and prescription drugs) as long as the combined amount of all such limits does not exceed the allowed amount. For plan sponsors relying on the transition rule for 2014, this flexibility would apply starting in 2015.
  • The out-of-pocket maximum applies to in-network expenses. Out-of-network expenses are not required to be counted toward the in-network out-of-pocket maximum.
  • Cost sharing includes deductibles, copayments or similar charges, as well as any other expenditure required of an individual for covered essential health benefits. Cost sharing does not include premiums, balance billing amounts for non-network providers, or spending for non-covered items or services. A plan sponsor is not required to count expenses for non-covered items or services toward the out-of-pocket maximum.

Preventive Services

Non-grandfathered plans must provide certain preventive services without imposing any cost sharing when those services are obtained from in-network providers. One category of preventive services which must be provided is services that have an “A” or “B” rating from the U.S. Preventive Services Task Force (USPSTF).4 When the USPSTF adds or updates a recommendation, that recommendation becomes a plan requirement effective with the plan year beginning one year after the USPSTF issues the new or updated recommendation.

On September 24, 2013, the USPSTF revised its “B” recommendation regarding medications for risk reduction of breast cancer in women who are at increased risk for breast cancer and at low risk for adverse medication effects. The revised recommendation is that “clinicians should offer to prescribe risk-reducing medications, such as tamoxifen or raloxifene.”5 Consequently, non-grandfathered group health plans must cover risk-reducing medications, such as tamoxifen or raloxifene, for women without cost sharing subject to reasonable medical management. This rule applies to the plan year beginning on or after September 24, 2014 (i.e., January 1, 2015 for a calendar-year plan).

Implications

Plan sponsors of non-grandfathered health plans should review the rules concerning out-of-pocket maximums and their coverage for preventive services to assure that they are consistent with the new guidance in answers to FAQs.

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As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the new guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with employers and their attorneys on compliance issues.

 

1 The answers to this set of FAQs are available on the Department of Labor (DOL) website. (Return to the Capital Checkup.)

2 The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)

3 For background information on this requirement and the transition rule for the first year of applicability, see Sibson Consulting’s May 10, 2013 Capital Checkup, “Guidance on Out-of-Pocket Maximums in 2014 for Non-Grandfathered Health Plans.” (Return to the Capital Checkup.)

4 The USPSTF A and B Recommendations are on the Task Force’s website. (Return to the Capital Checkup.)

5 See the September 2013 item in the list of recommendations by date on the Task Force’s website. (Return to the Capital Checkup.)