A little more than a month ago, the Obama administration announced a one-year delay in the enforcement of the Employer “pay-or-play” rules under the Affordable Care Act—a/k/a “ObamaCare.” Now, a handful of recent news articles have reported yet another delay in the Act’s implementation that relates to the law’s limits on out-of pocket maximum payments. These rules place an upper limit on out-of-pocket costs, including deductibles co-payments and other cost-sharing features that are commonly encountered in employer-sponsored group health plans and in virtually all health insurance policies, whether in the individual or group markets. A typical news article (NYT, registration required) says something like the following:
WASHINGTON — In another setback for President Obama’s health care initiative, the administration has delayed until 2015 a significant consumer protection in the law that limits how much people may have to spend on their own health care. The limit on out-of-pocket costs, including deductibles and co-payments, was not supposed to exceed $6,350 for an individual and $12,700 for a family. But under a little-noticed ruling, federal officials have granted a one-year grace period to some insurers, allowing them to set higher limits, or no limit at all on some costs, in 2014. . . ..”
Here’s what really happened: In a set of FAQs issued by the Department of Labor in February of this year, the Departments of Health and Human Service, Labor and Treasury recognized and addressed a very practical problem:
“plans may utilize multiple service providers to help administer benefits (such as one third-party administrator for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization). Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants' expenses against any out-of-pocket maximums. These processes will need to be coordinated . . ., which may require new regular communications between service providers”
The Departments provided the following relief:
“The Departments have determined that, only for the first plan year beginning on or after January 1, 2014, where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits . . . the Departments will consider the annual limitation on out-of-pocket maximums to be satisfied if both of the following conditions are satisfied:
- The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
- 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 [applicable] dollar amounts . . ..”
The rule is intended as an accommodation to assist group health plans with multiple service providers to comply with the Act’s standards. In the case of individual market products, and for employer-sponsored group health plans (other than “grandfathered” plans) with a single carrier or that have an integrated suite of benefits, nothing has changed.
Where an employer has one insurer or administrator for its primary package of health benefits and a different insurer or administrator for other benefits (most often, pharmacy benefits), however, the out-of-pocket maximums will apply separately to each separately administered benefit or package of benefits. This rule recognizes—rightly in our experience—that employers will find it difficult to determine compliance with out-of-pocket maximums where they are dealing with multiple vendors. Employers will now have additional time to put in place or modify their systems and procedures to be able to track aggregate out-of-pocked costs across vendors as contemplated by the law. Moreover, even under the Departments’ accommodation, employer-sponsored group health plans must still apply the limit on out-of-pocked maximums to their primary package of health benefits and to each other separately administered benefit.