Out-of-Pocket Limits Delayed to 2015

ImageOut-of-Pocket Limits Delayed to 2015

AUGUST 13, 2013 – 12:34 PM

Author:  Michael Gomes,  Executive Vice President, BenefitMall

On August 13, the New York Times reported that the Obama Administration has delayed the out-of-pocket cost limits that protect individuals and families to 2015. This delay allows health plans one more year to offer plans with more lenient out-of-pocket cost restrictions. These limits represent one of the most publicized “insurance market reforms” contained in the Patient Protection and Affordable Care Act (PPACA) and this delay follows a string of recent announcements by the administration postponing portions of its signature health insurance reform law.

Delay Announced in February

The delay of out-of pocket limits for many health plans was explained in a February 2013 FAQ issued by the U.S. Department of Labor (DOL) but did not receive attention until recently, when DOL officials confirmed the delay.  Since the passage of PPACA, DOL, as well as the Internal Revenue Service (IRS) and the U.S. Department of Health and Human Services (HHS) have often issued far-reaching decisions in FAQ’s. DOL alone has published 15 separate FAQ sections since PPACA’s passage answering a total of 137 questions.

Details of the Delay

PPACA restricts out-of-pocket cost limits, including deductibles and copays, at $6,350 for individuals and $12,700 for families. The one-year delay to 2015 allows some health plans to “set higher limits, or no limit at all on some costs.”  Health plans can require enrollees to pay $6,350 for services like doctor and hospital services and another $6,350 for prescription drugs. The New York Times article notes that the delay on these limits was justified because employers and health plans use different companies to administer coverage. These companies often have “separate computer systems” for medical coverage and drug coverage “that cannot communicate with each other.” The delay gives these companies more time to upgrade their computer systems to accommodate the new federal requirements.

The following is the DOL FAQ that led to the delay:

Where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums under section 2707(a) or 2707(b), the Departments will consider the annual limitation on out-of-pocket maximums to be satisfied if both of the following conditions are satisfied:

a. The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and

b. To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1).

This statement essentially means that a consumer may have to pay the maximum out-of-pocket costs for “major medical care” and then pay the same maximum costs for prescription drug coverage.

Impact of the Delay

One immediate impact of the delay is the extra costs it will impose on Americans with chronic illnesses, disabilities, or unexpected health conditions. Prescription drugs and medical treatments for conditions like cancer, diabetes and multiple sclerosis can cost tens of thousands of dollars a year or more. The limit on out-of-pocket costs was supposed to prevent individuals from having to bear large portions of these costs. This delay will, at least through 2014, compel many Americans to continue paying for these treatments.

Despite the close attention being paid to implementation of PPACA, it is impossible to grasp every aspect of the law’s enforcement. As a result, this provision has gone almost unnoticed for the past six months. With the hundreds of FAQ’s, dozens of regulations and all other relevant information regarding PPACA’s implementation, questions remain regarding what other provisions of this law have escaped the notice of the health care industry and the public at large.

We will continue to monitor this issue and keep you informed of any new developments. In the meantime, please visit www.BeWellInsurance.com to view past blogs and Legislative Alerts. Or, you may visit www.HealthcareExchange.com for more blog posts, polls, surveys and numerous resources.The views expressed in this post do not necessarily reflect the official policy, position, or opinions of Be Well Insurance Solutions. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

To view the February 2013 FAQ, click here.

To view the DOL that led to the delay, click here.

For the New York Times report, click here.

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