Healthcare Reform School, Lesson #15 - Out of Pocket Spending Limits - Law change

Hi students,
Welcome back to class.  Summer is nearly over and it really feels like fall here in Chicago.  The winds of change are also sweeping through the Patient Protection and Affordable Care Act (ACA)!

I had planned on writing about the Small Business Health Options Program (SHOP) part of the Marketplace this week, however I am going to delay that until next week.  If you were waiting on pins and needles to find out about it, then click on the acronym to go the their website.  The federal government dropped another bomb this week regarding the maximum out of pocket spending for qualified insurance plans and I want to explain that this week.

Built into the ACA are many form of patient protection.  One of which is a maximum limit on out of pocket spending that a patient must pay towards their overall medical care each year. This provision, originally to be implemented in 2014, specified there must be an overall limit on consumer's annual out-of-pocket costs for deductibles, co-payments, and co-insurance. The new out-of-pocket annual limits were set at $6,350/year for individuals and $12,700/year for families.  There will be some insurance plans that have lower limits on out of pocket spending, but to be a qualified plan under the ACA, this was a maximum.
But the Department of Health and Human Service (HHS) Has delayed the Out of Pocket Spending Limits.

Image courtesy of digitalphoto.net  Michelle Meiklejohn

 

Under this delay, employers and insurers with more than one benefits administrator do not have to combine their members’ out-of-pocket spending into one total until 2015.

1. The one-year postponement of the consumer out-of-pocket limits applies only to group health plans and only to plans which use multiple independent administrators to handle health insurance benefits.
   
2. Individual policies sold in the new marketplaces, or on the private individual market, still must comply by 2014 with the annual limits on out-of-pocket costs.
   

A little bit of explanation is in order. For SOME employer provided plans, this limit has been removed, but only for CERTAIN TYPES of LARGE employer sponsored plans.  This revision does not affect small groups or individuals purchasing their own insurance on the Individual Marketplace.  To re-iterate this very important point, for individuals and small groups, the limit on out of pocket spending on deductibles, co-payments and co-insurance is still $6,350/year for individuals and $12,700/year for families.

Who does this affect.  
 The group plans that are affected by this are only those plans that "offer separate policies, and use more than one benefits administrators to manage different parts of their coverage, such as medical care and pharmacy." This creates complexity in implementation, because current technology does not support benefits administrators to merge the out-of-pocket maximums across plans and management platforms.  And complexity in the reporting of this mandate is the reason for the 1 year delay.  Does that make sense?  Only a little, but complexity in reporting was also the reason given for delaying the mandate for large employers (with over 50 full time employees) to provide health insurance.

What are the new limits for this affected group?
There are not actually new limits set in place, the excerpt below is taken directly form the DOL FAQ the change in law states that as long a plan meets the following it is compliant.

1. The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
   
2. To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1).
    
   

This could be interpreted so that the out of pocket maximum is essentially doubled, because the medical portion will have that financial cap and the pharmacy or other benefit provider would also have the same financial cap.

The law it is a changing.  Stay tuned for the next change. Keep in mind that using an agent/broker right now will help put you in a good position for 2014.