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ACA FAQs Update Guidance on Limitations on Cost-Sharing and Provider Nondiscrimination

EBSA, in a new FAQ prepared jointly with IRS and the Department of Health and Human Services (HHS) (collectively, the Departments), has addressed the application of provisions of the Public Health Service Act (PHSA), clarifying rules relating to limitations on cost-sharing under the Affordable Care Act (ACA) and provider nondiscrimination. ( EBSA, FAQs about Affordable Care Act Implementation (Part XXVII), 5/26/2015)

Limitations on cost-sharing.

PHSA §2707(b), as added by ACA and incorporated under Code Sec. 9815(a)(1) and ERISA § 715(a)(1), provides, among other things, that a group health plan must ensure that any cost-sharing requirements under the plan not exceed the limitations provided for by ACA §1302(c)(1), limiting annual out-of-pocket maximums. (See Pension and Benefits Week ¶  2  3/2/2013.)

For plan years beginning in 2015, the maximum annual limitation on cost sharing under §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, the maximum annual limitation on cost sharing is $6,850 for self-only coverage and $13,700 for other than self-only coverage. In HHS’s Notice of Benefit and Payment Parameters for 2016, HHS clarified that 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.

In response to the HHS clarification, the Departments have determined that PHSA §2707(b) applies this requirement to all non-grandfathered group health plans, including non-grandfathered self-insured and large group health plans. Thus, the self-only maximum annual limitation on cost sharing applies to an individual who is enrolled in family coverage or other coverage that is not self-only coverage under a group health plan. (Q&A 1)

Illustration: 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. Assume that Individual A incurs claims associated with $10,000 in cost sharing, and that Individuals B, C, and D each incur claims associated with $3,000 in cost sharing. In this case, because, under the HHS clarification, the self-only maximum annual limitation on cost sharing ($6,850 in 2016) applies to each individual, cost sharing for Individual A 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 A 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.

The Departments also stated that (1) the Departments will apply this clarification only for plan years that begin in or after 2016 (Q&A 2), and (2) the clarification also applies to non-grandfathered high-deductible health plans as defined by Code Sec. 223(c)(2). (Q&A 2)

Provider nondiscrimination.

PHSA §2706(a), as added by ACA and incorporated under Code Sec. 9815(a)(1) and ERISA § 715(a)(1), provides that non-grandfathered group health plans must not discriminate with respect to participation under the plan or coverage against any health care provider who is acting within the scope of that provider’s license or certification under applicable state law.

According to a prior FAQ, the Departments stated that PHSA §2706(a) is self-implementing, and that, until any further guidance is issued, plans and issuers are expected to implement the requirements using a good faith, reasonable interpretation of the law. Specifically, the Departments stated that, for this purpose, to the extent an item or service is a covered benefit under the plan or coverage, and consistent with reasonable medical management techniques specified under the plan with respect to the frequency, method, treatment, or setting for an item or service, a plan must not discriminate based on a provider’s license or certification, to the extent the provider is acting within the scope of the provider’s license or certification under applicable state law. (See Pension and Benefits Week ¶  6  5/6/2013.)

Later, the Departments published a request for information, seeking comments on all aspects of interpretation of PHSA §2706(a).PHSA §2706(a). (See Pension and Benefits Week ¶  2  5/5/2014.)

In light of the breadth of issues identified in the comments to that request, the Departments stated that the prior FAQ no longer applies (Q&A 5). Instead, until further guidance is issued, the Departments will not take any enforcement action against a group health plan with respect to implementing the requirements of PHSA §2706(a), as long as the plan or issuer is using a good faith, reasonable interpretation of the statutory provision. See Q&A 4.

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