2016 ACA "Embedded" Cost Sharing

[MBSC]

On Tuesday, Federal regulators confirmed that an HHS notice issued in May is correct. The clarification impacts 2016 non-grandfathered plans.

A consumer who purchases a family health insurance plan will have an out-of-pocket cost of $6,850 for themselves or for a single family member – the same amount as someone with individual coverage. A family cap of $13,700 would apply if more than one person in a family submits claims.

This means after a patient has paid $6,850 in individual copays, coinsurance and deductibles, the health insurance company is then responsible for 100 percent of the total remaining costs.

The Department of Health and Human Services, Treasury and Labor, wrote in Tuesday’s letter, that this rule keeps consumers from being penalized for choosing family coverage rather than individual coverage.

From the HHS notice:

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......

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.

 

[MichaelB]

This is a nice surprise. Thanks for the link!

 

[pb4uski]

Interesting. Since the plan we have has aggregate deductibles rather than stacked deductibles, we just bought his and her policies since the cost was the same and we effectively got the benefit of a stacked deductible.

 

[Theseus]

Did the his & hers plans too, although as of today we both have hit our deductibles anyway. Of course last year when choosing plans, I couldn't say with confidence if that was going to be the case. Even less certain about [-]income[/-] amount needed to be withdrawn to cover expenses. Now approaching the 11th hour, I am seeing that it may be possible to even keep AGI below 250% of the cliff, meaning we could have benefited from cost sharing as well. Didn't think at the time that we could have lived so well on so little.

 

[sengsational]

The FAQ says that if you got bit by this family deductible thing in 2015, this clarification isn't going to have an effect on that. I got bit in 2014, but went his and hers this year. I'm going his and hers again unless there's a benefit to combining.

 

[GTFan]

I don't think the FAQ says that at all, in 2016 you will have a new plan (even if it's your current one) under these rules so there will be no family plan penalty. For non-grandfathered plans you get from the exchange, of course.

We're going to get a heavily subsized plan on the exchange in 2016 and I'm going to enroll it as a family plan, replacing the current two individual plans we have with Humana now. Will be same plan we have (I think, depending on what we see in open enrollment) but I'm confident that if we go to a family plan there will not be the penalty that caused me to get two plans this year.

 

[rodi]

As I've mentioned before... CoveredCA tried to force families onto the same plan to qualify for the subsidy. Kind of related/but opposite of what the issue is here. We had to forego the up-front subsidies in order to enroll my husband on a different plan than myself and the kids. We'll get the subsidy back at tax time.

More related to this issue - I'm not sure how the max OOP and deductible work if you have different insurers. I don't think that would be addressed in these new guidelines.

 

[sengsational]

I don't think the FAQ says that at all, in 2016 you will have a new plan (even if it's your current one) under these rules so there will be no family plan penalty. For non-grandfathered plans you get from the exchange, of course.

We're going to get a heavily subsized plan on the exchange in 2016 and I'm going to enroll it as a family plan, replacing the current two individual plans we have with Humana now. Will be same plan we have (I think, depending on what we see in open enrollment) but I'm confident that if we go to a family plan there will not be the penalty that caused me to get two plans this year.

When I read this, I thought that they were saying that you couldn't go back in time (to 2015 and earlier) and apply the clarification to try to improve the deal you got back then.

Q2. Does the clarification of section 1302(c)(1) of the Affordable Care Act apply for plan or policy years that begin in 2015?

No. The Departments will apply this clarification only for plan or policy years that begin in or after 2016.

As to your getting a family policy, you should probably know for sure how the individual versus family deductible works.

 

[GTFan]

I'm still not following how family plans will get burned (as they do today) in 2016, even if all you're doing is re-enrolling a current plan on the exchange this year. All exchange family plans in 2016 will have the new (correct) deductible limits that match what you get with two individual policies today (assuming a 2-person plan). If the individual deductible in a family plan is $1k, insurance will pay after $1k is spent for that individual just as the guidelines say.

So the family limit only kicks in as a fail-safe when one or more persons exceed it, which is as it should be. And that's clearly what the guidelines posted in your OP say as well. Your diagram is correct for existing plans in 2015 but not for any plan enrolled on the exchange to be effective in 2016, *including* existing exchange plans that are simply re-enrolled via normal open enrollment. Every year is a new plan year on the exchange so your 'can't go back in time' assessment of the FAQ as it applies to existing 2015 plans was correct, but ALL plans going forward will have the new rules.

 

[MichaelB]

I think everyone is saying the same thing - beginning 2016 the deductions are now treated as individual (embedded) even when the plan is family, agregate deductible is no longer applicable.

In our case DW turns Medicare age next year. If we have a family plan, I would need to convert mine to an individual policy when she starts on Medicare. To avoid any confusion over my yearly deductible, I'm leaning now toward individual plans for the both of us one more year.

 

[sengsational]

They "got me" in 2014 on the family/individual thing. The 2013 and 2015 BCBS NC brochures explained how they would ignore the individual deductibe on a family policy, but they "forgot" to print that in the 2014 brochure. So I'm going to get back at them by buying two individual plans from now until I'm 65, just to increase their billing cost.

 

[gauss]

Not to split hairs here, but do these rules only apply to Out of Pocket Max and not deductibles?

-gauss

 

[GTFan]

Cost-sharing under these rules is the OOP Max.