SECOND OPINIONS: Maxing Out: Guidance on Out-of-Pocket Maximums

Once an individual has met the plan’s OOP max, the plan must pay 100% of covered benefits. This requirement applied for plan years starting on or after January 1, 2014, except with respect to grandfathered plans.

The Department of Health and Human Services has issued regulations in the context of Exchange-qualified health plans, but these regulations do not apply directly to other group health plans, such as Employee Retirement Income Security Act (ERISA) plans (although can be viewed as analogous guidance). The agencies have not issued regulations applicable to group health plans, but have issued several Q&As. The most recent Q&As were issued in January and May of this year and can be found at www.dol.gov/ebsa/faqs (see Parts XVIII & XIX).

Below we answer several questions group health plans may have that have been addressed in the agency Q&As.

What is the OOP Max amount? 

• For the 2014 plan year, the allowed OOP Max amount is $6,350 self / $12,700 family.
• For the 2015 plan year, the allowed OOP Max amount is $6,600 self / $13,200 family.   

What expenses count toward the OOP max? 

The ACA provides that cost-sharing amounts that must be counted toward the OOP max include deductibles, co-insurance, and copayments. The statute provides that such cost-sharing does not have to include premiums, balance billing amounts for non-network providers, or spending for noncovered services. 

The Q&As further clarify that:

• Plans are not required to count cost-sharing with respect to non-network providers toward the OOP max.
• Plans are not required to count cost-sharing for noncovered services toward the OOP max.
• Plans are not required to count amounts charged above the usual, customary and reasonable (UCR) amount toward the OOP max.
• Plans only are required to count cost-sharing for essential health benefits toward the OOP max (the same group of benefits to which the annual and lifetime limit rules apply).
• Plans can limit the costs of prescription drugs that are counted toward the OOP max to generic only and are not required to count the cost of brand prescription drugs if a generic is available and medically appropriate. Note that the determination as to whether a generic drug is “medically appropriate” is to be made by the individual’s personal physician.

Does the OOP Max apply to each plan option separately or must OOP max amounts be combined? 

Prior to the ACA, group health plans often had separate OOP maximums applied to different types of benefits, particularly where these benefits were administered by different service providers. For example, a plan may have one OOP max for medical benefits and separate OOP max for pharmacy benefits.

The Q&As clarified that out-of-pocket costs paid with respect to all of these benefits must be added together and counted toward the OOP max. However, recognizing that these different service providers may need more time to coordinate, the agencies allowed a one-year transition for the 2014 plan year.

• For the 2014 plan year, a plan that had separate OOP max amounts for benefits with different service providers could maintain the separate OOP maximums but each still would need to be no greater than the allowed OOP max amount.

For example, in 2014, where the allowed OOP max for individuals is $6,350, the plan could have a $6,350 OOP max for medical and a $6,350 OOP max for pharmacy.

• For the 2015 plan year, the Q&As provide that the plan must combine the out-of-pocket costs for all service providers to count toward one OOP max. The Q&As did note that the plan could retain separate OOP maximums for different benefits, as long as when added together, they did not exceed the allowed OOP max. 

For example, in 2015, where the allowed OOP max for individuals is $6,600, the plan could only have one $6,600 individual OOP max for both medical and pharmacy. However, the plan could split the allowed $6,600 OOP max and have a $2,300 OOP max for pharmacy and $4,300 for medical, as long as the total OOP max does not exceed the allowed amount.

Plans should ensure that they are counting all required costs toward the required OOP max, particularly where they have had separate OOP maximums in the past. In addition, plans should review the Q&A guidance because they are not necessarily required to count every out-of-pocket cost toward the OOP max. The sooner an individual meets his or her OOP max, the sooner the plan must start paying benefits at 100%, so plans will want to understand where they can draw the line and limit what is counted toward the OOP max as well.

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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html   

Contributors:  

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.