Large, Self-Insured Employers Must Hew To ACA Out-Of-Pocket Limits

Health InsuranceSource: Inside Health Policy


The Obama administration has decided that the ACA's limits on how much employees can pay out-of-pocket annually for their health coverage applies not just to small group market plans but also to large employers and those that self-insure, though for 2014 those employers have an enforcement safe harbor that could potentially result in separate out-of-pocket maximums for different benefits.


As a part of the transitional policy for next year, the Labor Department states in recent guidance that if an employer-sponsored plan uses multiple service providers to administer benefits, the plan must comply with the health law's annual limitation on out-of-pocket maximums for its major medical coverage. However, for the benefits that might be carved out because they are administered by a different entity -- such as prescription drugs and pediatric dental coverage -- a plan would only have to impose the ACA's limitations on out-of-pocket maximums if it already has an out-of-pocket maximum on that coverage, and sources say this would be separate from the maximum that applies for major medical coverage.


The DOL move came as a surprise to an employer lobbyist, who says employers didn't think the ACA's out-of-pocket limits would apply to large employers and self-insured plans. When CMS previously made clear that the law's deductible limits only applied to the small group market, that spurred questions about the law's out-of-pocket maximum provisions and which plans the provisions applied to.


As a result of the temporary policy, non-major medical coverage that is administered separately and does not have an out-of-pocket maximum already does not need to have one in place next year. But the Labor Department's transition policy is only in place for 2014, after which employers will have to impose a coordinated out-of-pocket maximum for their plans across all benefits.


A consumer advocate tells Inside Health Policy that the new transitional policy could be problematic because it might result in several out-of-pocket maximums for employees, and the idea behind the out-of-pocket maximum was to impose a hard cap across all benefits, not separate pieces. However, the advocate is pleased that the Labor Department stated the maximums apply to all employers, not just the small group market.


The limits on how much individuals can pay out-of-pocket annually will be based on the amounts allowed for high-deductible health plans coordinated with health savings accounts. In 2013, those amounts are $6,250 for individual coverage and $12,500 for family coverage. For 2014, the IRS has not officially published figures but CMS has estimated in guidance that the limits would be $6,400 for self-only and $12,800 for family coverage.


The large group market in particular has health benefits administered by different entities, especially on prescription drug coverage, the employer lobbyist notes. For the most part, out-of-pocket maximums currently are not common for low deductible plans with low cost-sharing. Typically they are associated with high deductible health plans and associated health savings accounts, the source says.


The employer lobbyist adds that one of the unresolved questions that the administration will have to clarify -- now that it has made clear that large group and self-insured plans also have to abide by the annual limits on out-of-pocket maximums -- is whether the limits apply to all benefits offered by an employer-sponsored plan or just essential health benefits. While essential health benefits are only required to be included in plans sold on the individual and small group markets, if large group market plans cover essential benefits they cannot impose any dollar limits on them.


In the FAQ document, the Labor Department says it would issue additional regulations implementing the law's provisions on limits to annual cost-sharing and deductibles for employer-sponsored plans.


There is little concern about out-of-pocket maximums being triggered by people with low deductible, low cost-sharing plans, the employer lobbyist says. Previously, pharmacy benefit managers, employers and third-party administrators had worried that they would have to scramble to put a coordinated out-of-pocket maximum in place for 2014 when contracts had already been negotiated and employers were finalizing what their plans would look like, the source adds, but the transitional policy somewhat assuages those concerns.