Clearing Up Confusion About Health Reform’s Out-of-Pocket Protections

August 13, 2013 at 4:57 pm

Recent media coverage may have sown confusion about health reform’s requirement that health insurance plans cap how much consumers can pay out-of-pocket each year for medical care.  The bottom line: for many plans, the protections will take effect as scheduled in 2014.  Some plans will be able to wait an extra year to fully comply.

The health reform law requires that, starting next year, private insurance plans limit how much in cost-sharing charges — deductibles, copayments, and coinsurance — that people enrolled in a plan must pay each year for covered benefits provided by the plan’s network of health care providers.  (This includes plans offered in the individual market or through employers.  The requirement doesn’t apply to “grandfathered” plans.)  In 2014, this “maximum out-of-pocket limit” will be $6,350 for an individual and $12,700 for a family.

Back in February, the Obama Administration provided an additional year to fully comply with this requirement but only for certain plans offered by employers.

Here are some clarifications about the February policy:

Health insurance plans in the individual market: In 2014, the maximum out-of-pocket limit will apply, as scheduled, to the individual (non-group) health insurance market.  Millions of people are expected to gain coverage in this market in 2014, as health reform’s new improvements and federal subsidies significantly increase access to affordable coverage.

Employer-sponsored health insurance plans: The maximum out-of-pocket limit will also continue to generally apply to non-grandfathered plans offered by employers, including small group, large group, and self-insured plans.  Employer plans that have a single insurer or administrator have to fully comply with the limit next year.

Employer plans that have “separately administered” benefits: The Administration provided the exception in February for these plans, in which an employer has one insurer or administrator for its primary package of health benefits and a different insurer or administrator for discrete benefits, such as prescription drugs.  Because employers and insurers have claimed it will be difficult to coordinate an overall maximum out-of-pocket limit across separately administered benefits, they sought and received the ability to avoid full compliance for one year.

Even those employer plans with “separately administered” benefits that qualify for the delay still must apply some out-of-pocket limits in 2014.  As the February guidance explained, these plans must ensure that their primary package of health benefits has an out-of-pocket limit of no more than $6,350 for individuals and $12,700 for families.  A separately administered benefit, such as prescription drugs, that already has an existing limit on out-of-pocket costs must comply with the limits of $6,350 for individuals and $12,700 for families in 2014.

An employer plan wouldn’t have to add a cap to a separate benefit if the separate benefit currently lacks one.  But this exception shouldn’t be misunderstood as broadly waiving the important out-of-pocket protection that health reform will bring in 2014.

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More About Sarah Lueck

Sarah Lueck

Lueck joined the Center in November 2008 as a Senior Policy Analyst.

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4 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. 1

    Thank you for posting this clarification. I didn’t read blanket deferral in the February guidance!

    Thanks again.

  2. T Gunderson #

    Thank you for clearing up some of this recent media “drama” about out-of-pocket maximum limits.

    I was hoping you’d be able to address an interpretation that our company’s insurer has with regards to this provision. Our company has Medical and Prescription Drug benefits insured under one main carrier, to whom we pay premiums monthly. The carrier is taking the stand that the one-year exemption applies to them because they technically do not “administer” the Rx benefit – they have an agreement with a Pharmacy Benefit Manager. While this may be true, all premium billing and claims administration is done through our insurance carrier.

    It seems that this blog post would indicate that the exemption would NOT apply because the plan is under one insurer. Could you shed some further light on this?

    • B Brodersen #

      The FAQ released by the DOL applies to a “group health plan or group health insurance issuer [that] utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums” The inclusion of gropu health insurance issuer in the FAQ would seem to support the position that your carrier it taking.

  3. Jan Baer, Indiana #

    Thanks for clarifying this point. When I saw the news article yesterday (NYT) I felt dismayed at what seemed yet another concession.

    Last week there was a rumor that the subsidies were to be suspended for another year. I commented to my health insurance agent that this news would surely have been broadly seized by media, and that insurers would be furious, since most of the young people they hope to gain will be assisted by subsidies.

    She also told me that here in Indiana, Anthem (WellPoint) is the only insurer in our federally-operated exchange; it has no “competitors.” That is no surprise, since WellPoint is headquartered in Indianapolis and insures an estimated 70% of our non-Medicare/Medicaid/Veteran residents who have insurance. Yet this also speaks to the folly of “competitive pricing” in health insurance–a concept that anyone with a knowledge of the industry knows is folly. It’s more a case of insurers’ “competitive leveraging” of providers.

    As a result, we’ve had an enormous regrouping of our Indiana hospitals and doctors, into larger, more powerful groups, with greater negotiating power against insurers who are expected to pay less. IU Health, for example, has now swallowed many of our nearby hospitals.

    I appreciate your coverage.

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