ERISA-DOL Provides Guidance On Health Plan Cost- Sharing Limitations Under The Affordable Care Act

February 26, 2013

As noted in my blog on February 22, in FAQs about Affordable Care Act Implementation Part XII, the Department of Labor provides guidance on health plan cost-sharing limitations under the Affordable Care Act. The FAQs say the following:

Limitations On Cost-Sharing Under the Affordable Care Act. Public Health Service ("PHS") Act section 2707(b), as added by the Affordable Care Act, provides that a group health plan shall ensure that any annual cost-sharing imposed under the plan does not exceed the limitations provided for under section 1302(c)(1) and (c)(2) of the Affordable Care Act. Section 1302(c)(1) limits out-of-pocket maximums and section 1302(c)(2) limits deductibles for employer-sponsored plans.

Who Must Comply With The Deductible Limitations? These limitations apply to "non- grandfathered" insured group health plans in the small group market. However, the coverage under such a plan may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without exceeding the deductible limit. A self-insured or "non- grandfathered" large group health plan is not subject to the deductible limitations, unless future governmental guidance provides otherwise.

Who Must Comply With The Out-of-Pocket Maximums? All "non-grandfathered" group health plans must comply with the annual limitation on out-of-pocket maximums described in section 1302(c)(1) of the Affordable Care Act. Many of these 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 under section 1302(c)(1), which may require new regular communications between service providers.

For the first plan year beginning on or after January 1, 2014, where a group health plan utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums, the annual limitation on these maximums will be deemed to be satisfied if both of the following conditions are satisfied:

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

(2) To the extent the plan 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).

The FAQs note that plans are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.