Departments Clarify Out-of-Pocket Limit Rules for 2016

May 28, 2015

in Compliance, Employee Benefits, Health Care Reform, Human Resources

On May 26, 2015, the Departments of Health and Human Services, Labor, and Treasury, jointly released the twenty-seventh set of FAQs on Affordable Care Act implementation issues. The FAQs clarify the application of the ACA’s out-of-pocket limit rules for plan years beginning in 2016.

Under the ACA, all non-grandfathered group health plans must ensure that annual out-of-pocket cost sharing (e.g., deductibles, coinsurance and copayments) for in-network essential health benefits does not exceed certain limits, as shown below:

Out-of-Pocket Guide

Plan Years beginning in 2015 Beginning in 2016
Individual $6,600 $6,850
Family $13,200 $13,700

In February, HHS “clarified” that the ACA’s out-of-pocket limits apply to each individual, even those enrolled in family coverage. For example, suppose an employee and spouse enroll in family coverage with an annual out-of-pocket limit of $13,000, and during the 2016 plan year, the spouse has $10,000 of out-of-pocket expenses and the employee has $3,000. Under the new rule, the spouse’s out-of-pocket expenses are capped at the individual limit of $6,850 (with the remaining $3,150 being covered by the plan). The employee is still subject to cost sharing, however, until the $13,000 plan limit is reached.

The FAQs confirm that HHS’ clarification applies to all non-grandfathered group health plans, including large group and self-insured plans. Meaning, starting with 2016 plan years, all non-grandfathered plans must contain an embedded individual out-of-pocket limit for family coverage. For these purposes, family coverage includes any tier of coverage other than employee-only.

The FAQs also confirm that these rules apply to high-deductible health plans (HDHPs). The embedded out-of-pocket limit rules do not impact HSA-qualified HDHPs, as a family HDHP will not be required to start paying medical claims under the ACA out-of-pocket rule until the minimum annual deductible for family HDHP coverage is satisfied. In other words, by the time the embedded individual out-of-pocket limit is reached, the employee will have satisfied the minimum annual deductible for HDHP coverage. Contribution and out-of-pocket limits for HSAs and HDHPs are shown in the table below.

Clarifying Out of Pocket Limit Rules

Minimum Annual Deductible for HDHP 2015-2016 Maximum Annual HSA COntribution 2015/2016 Maximum Annual Out-of-pocket 2015/2016
Individual $1,300 / $1,300 $3,350 / $3,350 $6,450 / $6,550
Family $2,600 / $2,600 $6,650 / $6,750 $12,900 / $13,100

Peter Marathas Employee Benefits Compliance DirectorPeter J. Marathas, Esq.
Legal & Compliance Director, Benefit Advisors Network

Originally posted by Benefit Advisors NetworkDepartments Clarify Out-of-Pocket Limit Rules for 2016” in conjunction with the law firm of Marathas, Barrow & Weatherhead LLP

This post is a service to clients and friends of Shirazi Benefits, a member of the Benefit Advisors Network (BAN). It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.   Benefit Advisors Network and their smart partners are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

The author, Peter Marathas, Jr., Esq., is a partner at Marathas, Barrow & Weatherhead LLP, speaks and writes frequently on the requirements of the Affordable Care Act, provides counsel and assists Shirazi Benefits, a members of the Benefit Advisors Network (BAN), with compliance support. 

Other Affordable Care Act (ACA) & Compliance Posts:

Preventive Care & Birth Control Required to be Covered by ACA

Final Forms and Instructions for ACA Reporting from IRS

New HHS Regulations: Health Plans Covering Families to Have “Embedded” Individual Cost-Sharing Limits

Premium Reimbursement Arrangements – IRS Clarification

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