Tag Archives: health care insurance

Consumers Facing Higher Out-of-Pocket Limits Than Expected

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With all the recent discussion of out-of-pocket limits, let me start by explaining what out-of-pocket limits actually are. An out-of-pocket limit is the maximum amount of money a plan participant may spend in a health plan per year. Beyond that amount of money, a plan participant can receive care to an unlimited amount, and they will not pay a single penny for it. If care becomes too costly for any given individual, then either the employer is paying for it past a certain point, or an insurance mechanism is paying for it. Insurance mechanisms include fully insured plans or self-insured plans with what we call “aggregate reinsurance protection” or “medical stop-loss.” Essentially, insurance or reinsurance will likely be paying the bill, but increased premiums for paying more expensive bills is also highly probable.

Back in February, the Department of Labor offered transitional relief, not from the employer mandates that were delayed, but transitional relief from general PPACA rules. This relief first states that the out-of-pocket limit for next year is $6,350 for an individual and $12,700 for a family. That is the most an individual or family participating in an employer-based health plan will have to pay in a given year for coverage. The regulation then states that some employers use more than one service provider to administer their plans. Some employers, for instance, will use a third party administrator (TPA) to administer claims and to make claims-based decisions on medical treatment. Furthermore, they also will use a pharmaceutical benefits manager (PBM) to make pharmaceutical-based decisions. If you have more than one service provider who administers your plan, or separate benefits under your plan, the regulations state that you may treat those benefits separately. This conclusion means you can charge a separate out-of-pocket maximum for each. For example, if you have a health plan with a TPA and  PBM, each of them will have a $6,350 out-of-pocket maximum for individuals, and each of them will have a $12,700 out-of-pocket maximum for families. So for plan participants, instead of paying a minimum of $6,350 next year, they will be paying $12,700 minimum for the same benefits. For a family next year, instead of paying a minimum of $12,700, they will be paying $25,400 for the same benefits.

Consumers should probably be somewhat angry that this is the case. Out-of-pocket maximum rules are listed very clearly in the ACA, and it appears once again that the administration is selectively enforcing those rules. Just like the employer mandate delays, the federal government again is engaging in a selective and seemingly inaccurate enforcement of the clear provisions of PPACA. The authority for these actions is not known except by simple fiat of the federal government that they have the authority to do this. Clearly, Congress, who passed the legislation on PPACA, seem somewhat angry in the news media that such selective enforcement is occurring and continues to occur by the executive branch. Substantive actions, such as a lawsuit filed by the legislative branch against the executive branch to more faithfully and honestly enforce PPACA, is up in the air, but we do not expect such actions to take place at this time.

Ultimately, this means that people who are in the know with these types of regulations have already had this provision in place in their plans for next year. In my legal practice, for instance, my clients who are concerned about costs have these provisions in their health plans already. WellMEC™ has made this a key feature of the program for some time now, as well. This was possible because when we know about these regulations – again these came out in February – we can adjust much more quickly and provide much greater economic efficiency than a plan that is provided by someone who may be unaware of these regulations.

This is not the only example of cost-saving mechanisms that we provide in our plans. This is just a good example of one that has come to the attention of the media and is ripe for current discussion. With that, we would encourage employers to seek assistance from individuals who understand these regulations and can provide cost-efficient solutions to the employer for their plans, because again, there are numerous examples of the value and savings that employers can achieve by engaging with such individuals.