HHS “Clarifies” Regulations to Establish New Out-of-Pocket Requirements

As a matter of course, it seems that any change HHS may make to something as important as a health plan’s cost-sharing requirements would be loud and clear. Especially around March, common decency dictates that such changes should be in bold, underlined, and all in capital letters for the benefit of those understandably distracted by March Madness (as my beloved Hoosiers’ once promising season turned into a celebration of a 10 seed). However, HHS recently chose a different tact in its Benefit and Payment Parameters for 2016. Rather than amending or supplementing existing regulations, HHS used the preamble to “clarify” the existing regulations and provide that the annual limitation on out-of-pocket expenses for any individual is the self-coverage maximum, even when the individual has self-plus or family coverage. Fortunately, in a recent FAQ, HHS clarified that this requirement will become effective until plan year beginning on or after January 1, 2016.

This means that a plan with a family out-of-pocket limit higher than $6,850 (the maximum self-only limit for 2016) will need to pay covered medical costs for any person whose out-of-pocket expenses exceed $6,850, even if he or she has self-plus or family coverage with a higher aggregate out-of-pocket limit. For example, assume a plan has the maximum allowable out-of-pocket limits for 2016, $6,850 for self-only coverage and $13,700 for family coverage. Next, assume one member of a family incurs $10,000 in out-of-pocket expenses for a claim, and no one else in the family has paid any out-of-pocket expenses. Under the rule, the plan is now required to pay the $3,150 difference between the $6,850 self-only coverage maximum and the $10,000 claim, even though the family has not collectively reached the $13,700 family out-of-pocket maximum.

Once you shake off the March Madness and start to think about your company’s health care planning for the 2016 plan year, we recommend reviewing your plan language to determine if any changes are necessary to comply with this rule beginning in 2016.

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