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

The U.S. Department of Labor (the “DOL”) has issued FAQs about Affordable Care Act Implementation (Part XIX), which provide guidance on the limitations on cost sharing under the Affordable Care Act (the “ACA”). Here is what the FAQs say:

In General. Public Health Service (“PHS”) Act section 2707(b), as added by the ACA, provides that a non-grandfathered 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) of the ACA, which limits an enrollee’s out-of-pocket costs.

For plan years beginning in 2014, the annual limitation on out-of-pocket costs in effect under section 1302(c)(1) is $6,350 for self-only coverage and $12,700 for coverage other than self-only coverage. For plan years starting after 2014, this annual limitation is adjusted for inflation. It has been proposed by HHS that, for plan years beginning in 2015, the annual limitation be $6,600 for self-only coverage and $13,200 for coverage other than self-only coverage.

In Network/Out Of Network. If a plan includes a network of providers, the plan may, but is not required to, count out-of-pocket spending for out-of-network items and services towards the plan’s annual out-of-pocket maximum. A plan that counts such spending towards the out-of-pocket maximum may use any reasonable method for doing so. For example, if the plan covers 75% of the usual, customary, and reasonable amount (UCR) charged for services provided out-of-network and the participant pays the remaining 25% of UCR plus any amount charged by the out-of-network provider in excess of UCR, the 25% of UCR paid by the participant may reasonably be counted, in full or in part, toward the out-of-pocket maximum without including any amount charged above UCR paid by the participant.

Brand Name Prescription Drugs. Large group market coverage and self-insured group health plans have discretion to define “essential health benefits.” For example, a plan may include only generic drugs, if medically appropriate (as determined by the individual’s personal physician) and available, while providing a separate option (not as part of essential health benefits) of electing a brand name drug at a higher cost sharing amount. If, under this type of plan design, a participant or beneficiary selects a brand name prescription drug in circumstances in which a generic was available and medically appropriate (as determined by the individual’s personal physician), the plan may provide that all or some of the amount paid by the participant or beneficiary (e.g., the difference between the cost of the brand name drug and the cost of the generic drug) is not required to be counted towards the annual out-of-pocket maximum. For ERISA plans, the SPD must explain which covered benefits will not count towards an individual’s out-of-pocket maximum.

In determining whether a generic is medically appropriate, a plan may use a reasonable exception process. For example, the plan may defer to the recommendation of an individual’s personal physician, or it may offer an exceptions process meeting the requirements of 45 CFR section 156.122(c).

Reference Pricing. Reference pricing aims to encourage plans to negotiate cost effective treatments with high quality providers at reduced costs. Until guidance is issued and effective, with respect to a large group market plan or self-insured group health plan that utilizes a reference-based pricing program, the DOL will not consider a plan as failing to comply with the out-of-pocket maximum requirements of PHS Act section 2707(b) because it treats providers that accept the reference amount as the only in-network providers for purposes of applying the annual limitation on cost-sharing, provided the plan uses a reasonable method to ensure that it provides adequate access to quality providers.

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