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HHS Explains Application of Annual Cost-Sharing Limit to Family HDHP Coverage

From the March 12, 2015 EBIA Weekly

Available at

HHS has posted an FAQ explaining how the annual cost-sharing limit under health care reform will affect high-deductible health plan (HDHP) coverage. In the preamble to final 2016 parameters regulations issued last month (see our article), HHS established that the cost-sharing limit for self-only coverage should apply to all covered individuals, whether or not they are covered by a self-only plan. The new FAQ explains the agency’s position by applying it to a hypothetical HDHP with a $10,000 family deductible.

The FAQ notes that under the HSA rules, HDHP family coverage cannot provide any benefits until covered expenses (other than for preventive care) exceed the minimum annual deductible for family coverage. For 2015, that minimum family deductible is $2,600. (A plan could have an embedded individual deductible, but it would have to be higher than the family minimum.) But family HDHP coverage could impose a much higher deductible. (We note that the deductible could not, however, exceed the HDHP out-of-pocket maximum for family coverage, which is $12,900 for 2015.) For example, if the HDHP had a family deductible of $10,000—higher than the self-only annual limit on cost sharing ($6,600 for 2015)—the plan would have to begin covering the expenses of any family member whose expenses exceeded the self-only annual cost-sharing limit, notwithstanding the plan’s higher family deductible. The FAQ indicates that this policy applies starting in the 2016 plan year (when the self-only annual limit on cost-sharing will increase to $6,850).

EBIA Comment: This interpretation of health care reform’s annual cost-sharing limitation effectively embeds an individual out-of-pocket limit in all family group health plans with a higher family deductible—whether or not the high-deductible coverage is meant to make employees HSA-eligible. (The annual cost-sharing limit on spending for covered essential health benefits applies to all non-grandfathered, nonexcepted group health plans, as the PHSA provision is incorporated by reference into both the Code and ERISA.) That will likely affect plan costs, so it will probably require sponsors and insurers to reconsider and adjust benefits, premiums, or both. Given the significance of this policy, we wonder why it was articulated only in the preamble to the regulations (making it harder to find), and not in the regulatory language itself. Whatever the reason, any doubt about the agency’s commitment to this position left by the regulations should be eliminated by this FAQ reinforcing the point. Fortunately, the FAQ makes it clearer that plans will not have to apply this rule until their 2016 plan years, so sponsors and insurers will have time to respond. For more information, see EBIA’s Health Care Reform manual at Section IX.B (“Cost-Sharing Limits”); see also EBIA’s Consumer-Driven Health Care manual at Section X.C(“Family HDHP Coverage”) and EBIA’s Self-Insured Health Plans manual at SectionXV.D.4 (“Out-of-Pocket Maximums and Health Care Reform’s Overall Cost-Sharing Limit”).

Contributing Editors: EBIA Staff.

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