HHS Announces 2017 Out-of-Pocket Maximums

Money and gavelThe Department of Health and Human Services (HHS) has announced the 2017 out-of-pocket maximums applicable to self-funded and fully insured employer health plans. The maximums for 2017 have been set as follows:

  • Individual coverage: $7,150
  • Family coverage: $14,300

All non-grandfathered health benefit plans in effect on or after January 1, 2014 are required to comply with the Affordable Care Act’s (ACA) mandate that employer health plans’ annual in-network out-of-pocket maximums not exceed HHS’ established limits. The 2017 limits represent an increase from the current 2016 maximums of $6,850 for individual coverage (an increase of $300), and $13,700 for family coverage (an increase of $600).

The out-of-pocket limits represent the maximum amount that an enrollee must pay for covered essential health benefits through cost-sharing. It typically includes the annual deductible as well as any cost-sharing obligations the enrollee must meet after the deductible has been satisfied. The out-of-pocket maximum does not include premiums, cost sharing associated with of out-of-network services, or the cost of nonessential health benefits.

According to a recent study by United Benefits Advisors (UBA), out-of-pocket costs have increased significantly over the past decade, although median plan limits have remained below HHS’ out-of-pocket maximums. According to UBA, both individual and family coverage plans saw significant increases in median in-network plan out-of-pocket maximums in 2015. It is expected that out-of-network expenses will continue to increase significantly as well, as employers continue to widen the cost-share gap between employer and employee responsibilities.

For solutions to help mitigate employee health benefit plan costs that don’t simply shift costs to valued employees, contact the benefits experts at POMCO today.


More Large Employers Self-funding Pharmacy Benefit Plans

self-funding prescription drug benefit plansAccording to a recent survey conducted by United Benefit Advisors (UBA), more large employers are selecting to self-fund their prescription drug benefit plans. According to the survey, an increasing number of employers are turning to the cost-containment benefits of self-funding to avoid the Affordable Care Act (ACA)’s impact on the cost of fully insured health coverage.

Based on data obtain from over 10,000 survey respondents, self-funded prescription drug benefit plans have increased by approximately one third from 2009 to 2014, while fully insured prescription drug benefit plans have decreased by approximately 3 percent. The data also showed that 66 percent of employers with at least 1,000 employees currently maintain a self-funded pharmacy benefit plan.

Employers across the nation are also more likely to implement a layer of stop loss protection for their prescription drug benefit plan. The increasing trend is the result of both the shift to self-funding, as well such ACA requirements as the removal of annual and lifetime limits on health benefits, which open plans up to greater high dollar claim risk and cost exposure. Another factor leading employers to elect stop loss coverage for their prescription drug benefit plans is the increased cost of expensive specialty medications used to treat complex disease states.

According to UBA’s survey, approximately 95 percent of self-funded pharmacy benefit plans now include specific stop loss coverage, an increase of almost 7 percent compared to the five preceding years. Approximately 77 percent of self-funded pharmacy plans incorporate a layer of aggregate stop loss protection. This trend has grown more rapidly over the same five year period, at a rate of just over 9 percent. In 2014, the average specific stop loss level was $140,235, representing an increase of approximately 14 percent from the four prior years.

For information on how to mitigate overall benefit costs with an integrated health and pharmacy benefit management solution, contact the experts at POMCO today.


A CFO’s Guide to Making Benefit Plan Determinations

What Questions Should You be Asking?

Simplifying AdministrationEmployee benefits are one of the most significant bottom line costs for any organization. Chief financial officers play an essential role in determining what benefit plan solutions not only fit into the organization’s budget, but have the potential for the greatest cost savings. As you plan for the coming year’s expenses and work with your human resources director and benefits consultant to determine the right employee benefit solutions for your employees, ask the following questions:

Is our current health benefit plan at risk for the Affordable Care Act’s (ACA) Cadillac Tax?

The Cadillac Tax is a 40 percent excise tax on employer-sponsored health plans with annual premiums in excess of $10,200 for individual coverage, and $27,500 for family coverage. The mandate is set to go into effect in 2018¹, leaving employers only two full calendar years to make plan changes in order to avoid the tax. For organizations that are collectively bargained in particular, it may be necessary to begin negotiations and planning now, in order to avoid the tax in 2018. To mitigate the risk of the tax, some employers are choosing to restructure benefits, move to narrow networks, or offer a high-deductible health plan (HDHP) in order to reduce overall plan costs and health plan value.

What is the cost of our spousal coverage?

According to BenefitsPro, the average cost of providing health care for a family was $16,351 in 2013, a 4 percent increase from the year prior, and employees paid, on average, only $4,565 of that total. As part of a trend to not only reduce overall health care costs, but also as a strategy to further avoid Cadillac Tax implications, a growing number of employers are restricting spousal benefit coverage by implementing a working spouse rule. The rule stipulates that if the spouse of an employee has access to primary health care through his/her own employer, and the employer pays for a designated portion of the single coverage cost, the spouse is not eligible for coverage under your plan. As an alternative, some employers are allowing spouses to remain covered, but are adding a surcharge to the cost for the employee. CFOs should weigh the cost benefits of a working spouse rule against how such a significant change may be viewed by employees. Though bottom line costs are a priority, recruitment and retention of talent must be considered with every benefit decision.

Are we conducting eligibility audits?

One of the largest causes of benefit leakage is outdated or inaccurate coordination of benefits. Employees may inadvertently fail to notify their employer of a change in their dependent’s status, but regardless of the reason, employers have an obligation to protect their health plan by ensuring that claims are not paid to anyone who is not truly eligible for coverage. Eligibility audits are a helpful tool for identifying such scenarios as dependents that have exceeded the plan’s age limit, a change in marital status such as a divorce, or cases when a child is not a legal dependent per the terms of the plan, such as a nephew or grandchild. According to Employee Benefit Advisor, a dependent eligibility audit can provide a typical ROI of nearly 15 percent and millions of dollars in cost savings. Organizations should conduct an eligibility audit at least every four years in order to identify enrollees who, per the plan guidelines, should no longer be eligible for coverage

Have we considered self-funding?

According to the Kaiser Family Foundation’s 2014 Employer Health Benefits Survey, more employers are self-funding their employee benefits, and that number has been on the rise. According to Kaiser, 15 percent of covered employees at small companies with 3-199 employees, and 81 percent of covered employees at larger firms, are enrolled in plans which are either partially or completely self-funded. CFOs should consider the advantages of self-funding, which include a greater flexibility in plan design and benefit options, access to actionable claims data, and lower administrative costs. Self-funding also provides enhanced cash flow options. Unlike fully insured plans that require advanced premium payment, under a self-funded plan, claims can be funded as they are due, which allows employers to keep more money in a bank account where it can earn interest.

For a health benefit plan assessment and customized cost-avoidance solution for your health benefit plan, contact the benefit experts at POMCO today.


¹ After this article was published in December 2015 Congress delayed the Cadillac tax until 2020. Read more here.



2016 Open Enrollment Reminders for Employers

2016 open enrollment checklistOpen enrollment season is already upon us. This year, make sure your health benefit plan is fully-compliant with 2016 regulations, and form a plan to effectively communicate plan changes and open enrollment requirements to your employees.

2016 Benefit Plan Compliance Requirements

As we approach 2016, employers should work with their brokers and benefit plan administrators to ensure their benefit plans are in compliance with the following 2016 regulations:

  • Prepare for 2016 Affordable Care Act (ACA) reporting requirements. The ACA’s Employer Mandate states that applicable large employers (ALEs) that do not offer affordable, minimum value health coverage to the majority of their full-time employees (FT) and their dependent children will be subject to a penalty if any FTs purchase health coverage through the Health Insurance Exchange Marketplace and receive a premium subsidy credit to help pay for coverage. This mandate became effective January 1, 2015. Employers must be prepared to report to the Internal Revenue Service (IRS) whether or not they offered affordable, minimum value health coverage to employees and their dependent children in compliance with ACA regulations. Review the calculation methods available and determine if your plan meets affordability and minimum value requirements. Click here for more information of employer reporting requirements under the ACA.
  • Verify your grandfathered plan status. A grandfathered plan is defined as a plan that was in existence when the ACA was established in 2010. Certain plan changes will result in a loss of grandfathered status which requires compliance with other ACA mandates, such as $0 member cost share for preventive and routine services. Work with your broker or benefits administrator to verify your grandfather status for 2016. Click here for more information on grandfathered and non-grandfathered plan requirements.
  • Verify your out-of-pocket maximum. Effective January 1, 2016 all non-grandfathered health plans’ out-of-pocket maximums for essential health benefits may not exceed $6,850 for individual coverage and $13,700 for family coverage. Check the maximums on your benefits to ensure your plan is compliant.
  • Embed individual out-of-pocket maximums. Effective January 1, 2016 the ACA also requires that for non-grandfathered health plans the out-of-pocket maximum apply to all individuals regardless of whether they are enrolled under a family or individual health plan option. This means that individual out-of-pocket maximums must be embedded in the plan’s family coverage when the family out-of-pocket maximum exceeds the ACA’s out-of-pocket maximum for individual coverage. Speak with your benefits administrator to ensure its claims processing system will accommodate the embedded out-of-pocket requirements. Click here for more information on embedding out-of-pocket maximums.
  • Review your high deductible health plan (HDHP) and health savings account (HSA) limits. For HDHP-compatible HSAs, a plan’s out-of-pocket maximum must be lower than the ACA’s limits of $6,550 for individual coverage and $13,100 for family coverage. Verify that your plans’ limits are in compliance. In addition, verify that your HDHP’s deductible and out-of-pocket maximums comply with the 2016 limits. Click here for more information on 2016 HSA limits.

Employee Communications

Once you have verified that your health plans are compliant for 2016, follow these tips to effectively communicate required information to your employees and eligible plan members:

  • Distribute summary of benefits and coverage documents (SBC). Per ACA regulations, health plans must provide an SBC to applicants and enrollees to help them understand the benefit options available to them and decide in which plan to enroll. Be sure your SBCs are updated to reflect any changes for 2016 and distributed to all eligible employees and their beneficiaries during open enrollment. Click here for more information on SBC regulations.
  • Distribute annual notices. Work with your benefits plan administrator and broker to ensure you distribute all required annual notice to employees, which may include the following:
    • Notice of Patient Protections
    • Notice of Health Insurance Portability and Accountability Act (HIPAA) Special Enrollment Rights
    • Consolidated Omnibus Budget Reconciliation Act (COBRA) Notice
    • Grandfathered Plan Notice
    • Annual Children’s Health Insurance Program Reauthorization Act (CHIPRA) Notice
    • Women’s Health and Cancer Rights Act (WHCRA) Notice
    • Medicare Part D Notices
    • Michelle’s Law Notice

Six Advantages of Self-funding Your Employee Benefit Plan

Professional Man Celebrating Fists in the airAccording to the Kaiser Family Foundation’s 2014 Employer Health Benefits Survey, more employers are self-funding their employee benefits, and that number has been on the rise. According to Kaiser, 15 percent of covered employees at small companies with 3-199 employees, and 81 percent of covered employees at larger firms, are enrolled in plans which are either partially or completely self-funded.  The percent of covered employees enrolled in self-funded plans has increased for large firms since 2004. Both mid- and large-sized employers are learning the advantages inherent in self-funding employee benefits.

As you plan for the coming benefit year, consider the following advantages of self-funding, and whether or not it may be a financial strategy that can help your organization meet its corporate goals:

  1. Cost-Containment. Third party administrators (TPA) that manage self-funded plans have the capability to go beyond strict network discount arrangements on every claim payment to find additional cost savings. With internal claim reviews, fraud and abuse protections, custom claim negotiations, and case management solutions, each claim can be reduced before it is paid to ensure the employer is paying the least amount required.
  1. Greater flexibility. While insurance carriers sell pre-designed, fully insured health and dental plans with restricted benefits and strict plan limitations, under a self-funded arrangement, a TPA can customize a plan design to the exact specifications of the employer at the benefit/cost-share level. This opportunity poses a significant advantage to collectively bargained plans and allows employers to strategically manage the cost of their plan.
  1. Actionable data. Fully insured plans receive minimal experience data from their carriers, which limits an employer’s ability to understand what factors are impacting costs. Strategic TPAs can offer their self-funded plans fully-customized data, data analytic tools, and predictive modeling solutions, that can be used to help guide plan design strategy in an effort to mitigate cost-drivers.
  1. Lower Administrative costs. With a self-funded plan, employers avoid the costs of claim reserves, steep insurance carrier profit margins, risk charges, premium taxes, and contingency margins. They also avoid the Affordable Care Act’s Health Insurance Tax, which is expected to incur $145 billion in revenue.
  1. Enhanced cash flow. Unlike fully-insured plans that require advanced premium payment, under a self-funded plan, claims can be funded as they are due, which allows employers to keep more money in a bank account where it can earn interest.
  1. Strategic Service. TPA client service staff members are highly trained in the intricacies of self-funding. They are benefits experts who work to collaborate with employers and their brokers or consultants to properly manage the plan to optimal efficiency. This engagement and service involvement provides self-funded employers with a trusted partner to assist with escalated member inquiries, plan experience review discussions, compliance resources, and strategic expertise.

For more information on why so many employers are transitioning to self-funding, review the infographic below.


shift to self-funding

Catastrophic Conditions and the Benefits of Stop Loss Protection

Catastrophic Claims and Stop-LossA self-funded employee benefit plan offers customization and flexibility that inherently allow an employer to directly manage the overall costs of its plan. Such elements as case management, proper eligibility and coordination of benefits administration, and custom out-of-network claim negotiations are all elements of a successfully managed self-funded plan that can reduce costs without reducing benefits. Despite the very best plan management, however, no plan can avoid catastrophic claims. There are ways for self-funded plans to mitigate the impact of even these costly impacters, however.

A layer of stop-loss insurance can be added to a self-funded plan to provide this additional financial protection. Stop-loss is a product that provides protection for self-funded plans by serving as a reimbursement mechanism for catastrophic claims exceeding pre-determined levels. Stop-loss insurance can benefit groups that are not large to spread their financial risk across their full populations.

Stop-loss coverage may be purchased in either specific and/or aggregate policies.

  • Specific stop-loss provides protection for the employer against a high claim on any one individual.
  • Aggregate stop-loss provides a maximum limit on the total dollar amount payable for all eligible expenses that an employer would pay during a contract period.

An expert third party administrator (TPA) can work with an employer and/or its broker to review claims history, current diagnoses, and prospective plan costs using sophisticated predictive modeling techniques to determine the most appropriate stop loss protection needed for the plan year. A determination of necessary stop-loss coverage takes into consideration the estimated costs of catastrophic conditions and disease states, among other factors.

A recent report from Sun Life Financial reveals that cancer remains the costliest disease currently impacting self-funded plans in the United States. According to Sun Life Financial, cancer accounted for more than 25 percent of the reimbursements it paid out during a four-year research period. In addition to the high cost of cancer claims, according to Sun Life Financial, end-stage renal disease accounted for 33.5 percent of its total reimbursement costs during the same time period.

The report also identified the financial impact of intravenous medications. According to the report, in 2014 alone, intravenous medications accounted for 13 percent of total paid stop-loss claims, with the top 20 intravenous medications representing 65 percent of the total cost of intravenous medications administered for catastrophic claims conditions, many of which were used to treat cancers.

Patients whose claims exceed $1 million can be hugely impactful to employers of any size. According to the report, cancer, congenital anomalies, and premature births are the conditions that most frequently result in patients exceeding the $1 million claim level.

Self-funded organizations not currently protecting their health plan with stop-loss insurance should speak with their TPA to determine if specific and/or aggregate coverage may be a beneficial element of an overall cost-mitigation strategy. An analysis of current diagnoses and predictive modeling techniques can help to prognosticate the potential impact of such catastrophic conditions as cancers or end stage renal disease and can result in strategic recommendations for maximum protection.


How Integrating Benefits with an Expert Administrator Can Save Significant Dollars

Simplifying AdministrationAs the health care industry continues to be refined by the complexities of the Affordable Care Act (ACA), trends toward narrow networks and accountable care organizations (ACOs), and the pressures of the ever-increasing costs of specialty drugs, there may be a simple solution to streamlining administrative services and reducing costs. The solution lies in the integration and consolidation of benefits with a single administrative partner.

While many employers have already transitioned to a service platform in which one administrator serves as the strategic partner and single point of contact for benefits administration, it is a trend that is escalating, with the potential to grow exponentially over the next several years.

For organizations that adopt a single administrative partner model, the tangible and intangible benefits include:

  • A single point of contact for client-level questions and requests
  • Integrated reporting to demonstrate all factors impacting experience costs
  • The convenience of a single member service call center
  • Integrated member communications, such as plan documents, member identification cards, and other notifications
  • Global compliance review of all plan elements
  • A single online/mobile member resource with convenient access to information on all plan elements (medical, dental, prescription drug, consumer-driven health plans, eligibility, population health management, workers’ compensation, and ancillary insured lines of service)
  • Integrated medical management and case management services that incorporate all medical, prescription drug, and wellness data to provide each patient with a comprehensive treatment plan across the wellness continuum
  • Streamlined administrative service billing

In addition to such optimized patient care, member service, and administrative efficiencies, employers that integrate the administration of their medical, dental, vision, prescription drug, and workers’ compensation plans under one administrator can realize significant overall cost savings both as the result of administrative efficiencies, and enhanced quality of integrated patient care.

For example, according to the U.S. Centers for Disease Control and Prevention, the cost of diabetic treatment alone in the United States cost more than $245 billion in 2012. Diabetes can be detected early, however, through a routine eye exam. Through early detection of risk factors, a prediabetic patient can be put on a treatment plan that improves health outcomes and reduces health care claim costs. With an integrated medical plan, medical management program, and vision plan, the most efficient sharing of the prediabetic patient’s health data can be integrated, interpreted, and acted upon in order to address risk factors before they escalate.

Closing gaps in care, encouraging compliance with a prescription drug treatment plan, and monitoring identified risk factors are aspects of an integrated benefit administration model that can support improved health outcomes and lower the overall cost of care. This type of synchronicity can not be as seamlessly or quickly accomplished, however, under an administrative arrangement that utilizes disparate partners for each plan element.

An integrated benefits administration platform also allows for a global analysis of the disease states and risk factors that are most impactful to plan members. An analysis of the global plan populations across the care continuum can lead to the strategic implementation of targeted programs to address those diagnoses with the most potential for adverse and costly health consequences.

By adopting an integrated administrative service model with an expert benefits administration partner, organizations can provide valued employees with a total care solution model as well as reduce overall plan costs, so that available funds can be reinvested back into the organization to further benefit its employees.

For information on POMCO’s integrated service solutions, visit our Benefits Administration Page.


The Cost-Saving Potential of Consumer-Driven Health Plans

Cost-Saving Potential of CDHPsOver the past several years, an increasing number of employers have been adopting consumer-driven health plans (CDHP) as part of a strategy to encourage a behavior of consumerism among enrolled members. CDHPs encourage plan members to use pre-tax dollars for out-of-pocket health care expenses. When coupled with a high deductible health plan (HDHP) that aims to shift a larger up-font out-of-pocket cost to members, CDHPs can offer employers a successful total cost reduction opportunity, while still offering an attractive benefit package to employees.

64 percent of large employers currently offer a CDHP, and that number is expected to increase to 76 percent in the next few years. Truven Health Analytics recently completed a study that confirms the potential savings implications for employers that implement CDHPs. The study, which monitored 183,000 continuously enrolled CDHP members over a period of three years, identified an annual savings of $457 to $532 per member per year – an almost 10 percent cost reduction.

The average savings was attributed to several factors including a reduction in overall benefit utilization, with particular decreases in use of radiology services. Significant savings was also demonstrated within the prescription drug category, as members enrolled in CDHPs increased their use of generic drug substitutions which reduced total plan costs.

While an overall decrease in utilization of services resulted in a positive reduction in employer plan costs, the study also identified that CDHP plan members demonstrated reduced use of preventive and chronic care services. It should be noted that the long-term effects of such a trend could negate some of the overall cost reduction benefits of employers’ CDHP strategies. Preventive services are necessary to identify risk factors so that appropriate treatment measures can be implemented before a health risk results in a catastrophic condition or event. Avoidance of preventive care could result in larger claim costs in the future. Member communications may be able to dissuade this trend, as under the Affordable Care Act (ACA) most non-grandfathered plans offer routine preventive services at no member cost share, therefore, members may need to be informed not to avoid preventive care out of a mistaken belief that it will result in increased out-of-pocket costs.

Similarly, patients who do not properly manage their chronic condition long-term by following a prescribed medical and prescription drug treatment plan may be more likely to sustain a catastrophic event associated with their condition. In the event of a catastrophic health incident, an individual could incur more costs associated with the treatment of the catastrophic event than were avoided in reducing his utilization of necessary maintenance services. For example, a patient with high cholesterol who attempts to reduce his out-of-pocket health expenses by not continuing his use of a costly prescription drug, may end up incurring greater overall costs if he suffers a heart attack and finds himself inpatient at a hospital than he would have spent taking his antihyperlipidemic prescription as prescribed and avoiding the inpatient stay.

While CDHPs are a strategic solution that can benefit both employers and employees reduce costs, the Truven Health study demonstrates the importance of member education in the implementation of a CDHP strategy. For example, members may benefit from communications that stress the importance of obtaining preventive and routine care, especially if it is offered at no cost share. In addition, members who are first time enrollees in a CDHP plan may benefit from guidance on how much of their own pre-tax dollars to set aside in order to pay for anticipated medical, dental, and prescription drug costs for the year. With proper communications, members will be prepared to maximize their CDHP funds in coordination with their health benefits, and obtain optimal care throughout the year.


Final ACA Regulations: Summary of Benefits and Coverage and Uniform Glossary

ACA changesOne of the primary goals of the Affordable Care Act (ACA) was to improve access to affordable health care for all Americans. As a strategy to achieve this goal, the Federal Government acknowledged that it would be necessary to educate Americans on the health coverage plan options available to them in order to enable them to choose the plan option that best suits their needs and the needs of their dependents. To this end, in 2012, the ACA implemented the summary of benefits and coverage (SBC) mandate, which required all health plans to make available a document that would help individuals eligible to enroll in coverage to understand and compare available health coverage options. Each SBC is required to include the uniform glossary, a government-issued list of commonly used health care terms and definitions.

SBCs must be provided by all health plans and insurance carriers in a standard format as defined by the ACA, and may only be different based on the specific benefits offered by the plan. Recently, the Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Department of the Treasury (collectively, The Departments) have issued final regulations regarding the SBC and uniform glossary that clarify the original regulations. Key among the clarified regulations are the following provisions:


Provision to Require Online Access to Plan or Policy Information

The final regulations clarify that issuers must include an Internet web address where a copy of the master plan document or individual coverage policy can be reviewed and obtained. The final regulations require these documents to be easily available to individuals, plan sponsors, and participants and beneficiaries shopping for coverage prior to submitting an application for coverage. The final regulations also clarify that all plans and issuers must include in the SBC contact information for questions.


Provisions to Reduce Unnecessary Duplication

The final regulations help to prevent unnecessary duplication of materials. The 2012 regulations stated that if either the plan administrator or the insurance carrier or third party administrator (TPA) provides the SBC to a participant or beneficiary in accordance with the timing and content requirements, both will have satisfied their SBC obligations. The final regulations apply this same rule in the following situations:

  • A group health plan has a binding contractual arrangement where another party assumes responsibility to provide the SBC
  • A group health plan uses two or more insurance products provided by separate issuers to insure benefits with respect to a single group health plan
  • An SBC for student health insurance coverage is provided by another party (such as an institution of higher education).


Provision Regarding Formatting and Content Changes

The original ACA regulations limited the SBC to four double-sided pages. Since then however, some plans have expressed concern regarding the ability to include all required information in this amount of space. The final regulations clarified that the new template and associated documents that will be released will address specific issues related to formatting all of the required information into the four-page, double-sided template.


Effective Dates

For group health plans, the final regulations generally apply to coverage that begins on or after September 1, 2015.

Please be advised that the SBC’s are not a substitute for a complete listing of benefits which are found in the Summary Plan Documents.


Remember to Embed Your Out-of-Pocket-Maximums for 2016

Affordable Care Act (ACA), Out-of-Pocket-MaximumsSix years after the Affordable Care Act (ACA) was passed into law, employers are still addressing ACA requirements by modifying their benefit plan to meet pending mandates. Employers preparing for the 2016 benefit plan year should take into consideration their health plan’s out-of-pocket maximums. The ACA requires that health benefit plans limit the annual maximum cost sharing imposed on plan enrollees for out-of-pocket costs associated with essential health benefits. For plan years beginning in 2016, the maximum out-of-pocket cost limits will be:

  • $6,850 for individual coverage
  • $13,700 for family (or all forms of non-self-only) coverage

On February 27, 2015, The Department of Health and Human Service (HHS) mandated that the $6,850 maximum limit on individual coverage will apply to each individual irrespective of whether that individual is enrolled in self-only coverage or family coverage. Based on this requirement, an enrollee with family coverage would not be subject to cost-sharing for costs associated with covered benefits if one of two scenarios has been met:

  1. The enrollee and his/her enrolled dependents have reached a combined out-of-pocket limit of $13,700. Under this scenario, no members of the family would be subject to cost-sharing for covered benefits in the future.
  1. Any one of the family members reaches the embedded individual coverage maximum of $6,850. Under this scenario, only the member of the family that reached the $6,850 individual limit would not be subject to cost-sharing for covered benefits in the future.

On May 26,2015 it was clarified by HHS and The Department of Labor (DOL) that this mandate applies to all health plans, including non-grandfathered plans, large and small group plans, high-deductible health plans (HDHP), and plans that are both fully insured and self-funded.

Employers implementing this rule within their HDHP should take special care to clearly communicate this change to their plan members. The embedded out-of-pocket maximum requirement may cause confusion for HDHP members since the ACA maximum out-of-pocket limit is not the same as the maximum out-of-pocket limit established by the Internal Revenue Service (IRS) on HDHPs. In 2016, HDHP dollar limits are only $6,550 for individual coverage and $13,100 for family coverage. Therefore, for members enrolled in individual coverage in 2016 in an HDHP plan their maximum out-of-pocket limit for a particular individual will be $6,550 while the limit for individuals enrolled in family coverage in 2016 in an HDHP will be $6,850. These family plan members will also be subject to an earlier limit if the individual’s aggregate family out-of-pocket costs exceed the $13,100 family coverage limit.

Employers that currently do not have an embedded out-of-pocket maximum should begin working with their benefit plan administrator and broker now to make necessary plan changes and to build a member communication strategy, to be prepared for the changes to go into effect in 2016.