On Monday, the New York Times published an article proclaiming that limits on consumer costs under the Patient Protection and Affordable Care Act had been delayed, shedding light on another apparent setback for the Obama Administration in the implementation of the President’s signature healthcare overhaul. After the New York Times article was published, word of this “delay” spread like wildfire throughout various national media outlets – Forbes, the Wall Street Journal (subscription required), CBS Evening News, Bloomberg News, and The Hill Healthwatch Blog have all reported on this topic, along with a bevvy of other news outlets.
These reports have created some confusion among both the employer and consumer communities. The “delay” arises out of one of many FAQs jointly issued by the U.S. Department of Labor (DOL), IRS, and U.S. Department of Health and Human Services back in February of 2013. This particular set of FAQs addresses limitations on cost-sharing under healthcare reform. The FAQ clarifies that the deductible limits of $2,000 only apply to employers in the small group market. Specifically, non-grandfathered group health plans and qualified group health plans in the small group market must implement the $2,000 deductible limit for the first plan year beginning on or after January 1, 2014. However, the DOL will allow qualified health plans in the small group market to exceed the $2,000 deductible limit if the plan cannot reasonably achieve a given actuarial value without increasing the deductible. For example, a qualified group health plan in the small group market may have to increase the deductible to $4,00o or $5,000 to meet the minimum 60% “Bronze” metal level.
The second part of the out-of-pocket cost regulations contained in PPACA relates to a plan’s out-of-pocket limits. The DOL clarified that the out-of-pocket maximums provided in Section 1302(c)(1) of PPACA apply to all non-grandfathered employer group health plans under PHSA Section 2707(b), regardless of the employer’s size. For 2014, these out-of-pocket maximums are set at $6,350 for individuals and $12,700 for families. The “delay” recent news articles reference is an acknowledgment by the DOL that many “plans may utilize multiple service providers to help administer benefits (such as one third-party administrator for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization).” Different service providers may impose different out-of-pocket maximums for the benefits provided under each separate policy. Coordinating the accrual of amounts toward these out-of-pocket maximums between separate insurers comes with additional communication challenges. Recognizing this additional compliance challenge, the Departments will consider the out-of-pocket maximum requirement to be met if each individual separate policy complies. This transitional relief is only available for the first plan year beginning on or after January 1, 2014.
Many employers use the same insurance carrier for their medical and pharmacy benefits, for example. As a result, for most employer group health plans, these requirements will continue as-is and will be implemented for the first plan year beginning on or after January 1, 2014. Employees are not likley to feel much of a change if the employer already has separate component benefits in place. If the employer has certain benefits with the same provider, the employees will benefit from these out-of-pocket maximums in 2014 as initially provided in the regulations. Employees of small employers and individuals purchasing coverage through the Marketplaces may see increased costs intially as Marketplace plans may have deductibles higher than $2,000.
