H&W: Clarifying Out-of-Pocket Limits for 2014

Out-of-Pocket Limits for 2014: There have been recent reports in the media about a delay in imposing the maximum amount of cost sharing that participant’s must pay when they are enrolled in a non-grandfathered health plan. This amount is typically referred to as the out-of-pocket (OOP) maximum and includes plan deductibles, copayments, and co-insurance. The ACA established an (OOP) maximum of $6,350 (for an individual) and $12,700 (for a family) for plan years beginning on or after January 1, 2014.

Some employers use different vendors to administer different benefits. For example, one vendor may administer the employer’s medical benefits and another may administer its pharmacy benefits. The law requires, however, that the OOP costs of all benefits subject to the ACA be added together and not exceed the established maximum.  These employers expressed concern over their ability to connect the separate vendors’ systems and implement a single OOP maximum for all benefits within the stated timeframe.

In February of this year, the Administration gave these employers (and only these employers) an additional year to fully comply with this requirement.

Listed below is a review of the provisions that will become effective for non-grandfathered group health plans with plan years on or after January 1, 2014:

Single Administrator: If an employer’s benefits are handled by a single administrator (or insurer), its plan must have an OOP limit no greater than $6,350 (individual) and $12,700 (family).

Multiple Administrators With Current OOP Maximums: If an employer’s separate benefits are handled by separate administrators, each separately administered benefit must have an OOP maximum no greater than $6,350 (individual) and $12,700 (family), if the benefit had an OOP maximum in the prior plan year. For example, if medical and pharmacy benefits are administered separately, an individual would have a $6,350 OOP maximum for medical benefits and a $6,350 OOP maximum for pharmacy benefits.

Multiple Administrators Without Current OOP Maximums: If a separately administered benefit does not have an OOP maximum, the employer will not have to implement an OOP maximum for that benefit during the 2014 transition year. For example, if medical and pharmacy benefits are administered separately, the medical benefit has an OOP maximum, but the pharmacy benefit does not, an individual would have a $6,350 OOP maximum for medical benefits and no OOP maximum for pharmacy benefits.

For plan years beginning on or after January 1, 2015, all employer group health plans subject to the ACA must have a single OOP maximum for all benefits offered under that plans, regardless of whether the benefits are administered by multiple vendors.

Please also note that non-grandfathered plans offered in the small group market must have deductible limits that cannot exceed $2,000 for a plan covering a single individual or $4,000 for any other plan. These limits are effective for plan years beginning on or after January 1, 2014.