Beginning in 2014, the Affordable Care Act (ACA) will set maximum limits on how much consumers can be required to pay out-of-pocket annually for their health care. Under the law, the maximum amount a consumer with single coverage will pay out-of-pocket will generally be $6,350, while a family could pay up to $12,700.
In 2015, health plans must have one, combined out-of-pocket maximum. Out-of-pocket maximums include copayments, deductibles, and coinsurance, and they apply only to plans that are not grandfathered under the law. Premiums are not counted in calculating out-of-pocket maximums.
There is, however, an issue with 2014 only – the transition year – that merits mention. According to guidance from the federal government issued in February, health plans with more than one benefits administrator do not have to combine out-of-pocket limits into one total until 2015. Practically speaking, non-grandfathered plans will cap the amount that consumers pay out-of-pocket for major medical expenses. However, if a health plan uses more than one company to administer its benefits – as many do for major medical and pharmacy benefits, for example – the 2014 transition year (2014 only) presents an unusual situation. Please note that this policy applies to small, large, and self-insured plans both inside and outside of the Marketplace, but not to the individual market.
For a consumer to determine his or her potential out-of-pocket maximum cost for a plan that currently has more than one benefit administrator (e.g., one for medical and one for pharmacy), the consumer must ask the following: Do each of my two benefits currently have a cap on out-of-pocket spending? If they do, then the consumer could face separate caps in 2014, for a total of up to $12,700 for individual coverage and $25,400 for family coverage. If one benefit, such as the pharmacy benefit, currently has no cap, then the consumer could face no cap on that benefit (in this example, pharmacy spending) in 2014.
For example, a plan with a separate cap on pharmacy benefits today can keep that limit in 2014, with the limit capped at $6,350 for individual coverage or $12,700 for family coverage. But a plan with no drug spending limit today does not have to cap members’ out-of-pocket spending on pharmacy at all in 2014.
An exception to the new rule exists for plans that use a separate provider to run their behavioral health benefits. Under the Mental Health Parity and Addiction Equity Act of 2008, health plans cannot apply separate out-of-pocket limits for those benefits. This exception is applicable in 2014 only, when plans could otherwise impose two out-of-pocket maximums. Additionally, if dental and/or vision insurance is an “excepted benefit” (i.e., has a separate premium charge) or is part of a grandfathered plan, the out-of-pocket limit does not apply.
A note on terminology…
A copayment is a fixed amount you pay for a covered health care service, usually when you receive the service (e.g., when you go to the doctor and pay $15 before your appointment). The amount can vary by the type of covered health care service.
A deductible is the amount you owe for health care services your health plan covers before it begins to pay (e.g., if your deductible is $1,000, your plan will not pay anything until you have met your $1,000 deductible for covered health care services subject to the deductible). The deductible may not apply to all services.
Coinsurance is your share of the costs of a covered health care service, calculated as a percentage (e.g., 20%) of the allowed amount for the service. You pay coinsurance plus any deductibles you owe. For example, if the health plan’s allowed amount for an office visit is $100 and you have met your deductible, your coinsurance payment of 20% would be $20. The health plan pays the rest of the allowed amount.
A premium is the amount that must be paid for your health insurance or plan. You usually pay it monthly, quarterly or yearly.