In FAQs about Affordable Care Act Implementation (Part XXVII), the Departments of Labor (“DOL”), Health and Human Services (“HHS”), and the Treasury (collectively, the “Departments”) provide additional guidance on cost sharing limitations under the Affordable Care Act. Here is what the FAQs say:
Background. Public Health Service (“PHS”) Act section 2707(b), as added by the Affordable Care Act, provides that a non-grandfathered group health plan must ensure that any annual cost sharing imposed under the plan does not exceed the limitations provided for under section 1302(c)(1) of the Affordable Care Act. For plan years beginning in 2015, the maximum annual limitation on cost sharing under section 1302(c)(1) is $6,600 for self-only coverage and $13,200 for coverage other than self-only coverage. For plan years beginning in 2016, this maximum annual limitation is $6,850 for self-only coverage and $13,700 for other than self-only coverage. Thereafter, the limitation increases for inflation.
In the final HHS Notice of Benefit and Payment Parameters for 2016 (the “2016 Payment Notice”) (80 FR 10750), HHS clarified that under section 1302(c)(1) of the Affordable Care Act, the self-only maximum annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or in coverage other than self-only (the “Self-Only Rule”). This application of this rule needs the clarification provided below.
The Self-Only Rule. PHS Act section 2707(b) applies the Self-Only Rule to all non-grandfathered group health plans, including non-grandfathered self-insured and large group health plans, and including high-deductible health plans (“HDHPs”). The Departments will apply the Self-Only Rule only for plan years that begin in or after 2016.
Example. The FAQs provide the following example-
Assume that a family of four individuals is enrolled in family coverage under a group health plan in 2016 with an aggregate annual limitation on cost sharing for all four enrollees of $13,000 (note that a plan is permitted to set an annual limitation below the maximum established under section 1302(c)(1), which is an aggregate $13,700 limitation for coverage other than self-only for 2016). Assume that individual #1 incurs claims associated with $10,000 in cost sharing, and that individuals #2, #3, and #4 each incur claims associated with $3,000 in cost sharing (in each case, absent the application of any annual limitation on cost sharing). In this case, because, under the clarification discussed above, the self-only maximum annual limitation on cost sharing ($6,850 in 2016) applies to each individual, cost sharing for individual #1 for 2016 is limited to $6,850, and the plan is required to bear the difference between the $10,000 in cost sharing for individual #1 and the maximum annual limitation for that individual, or $3,150. With respect to cost sharing incurred by all four individuals under the policy, the aggregate $15,850 ($6,850 + $3,000 + $3,000 + $3,000) in cost sharing that would otherwise be incurred by the four individuals together is limited to $13,000, the annual aggregate limitation under the plan, under the assumptions in this example, and the plan must bear the difference between the $15,850 and the $13,000 annual limitation, or $2,850.