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Nineteenth Set of ACA FAQs Addresses Out-of-Pocket Maximum, Tobacco Cessation Programs, Health FSA Carryovers, and Summaries of Benefits and Coverage

May 8, 2014

EBSA, in a new set of FAQs prepared jointly with IRS and the Department of Health and Human Services (HHS), collectively, the Departments, addresses a number of questions regarding the out-of-pocket maximum, tobacco cessation programs, and the interplay of permissible carryovers under health flexible spending accounts (health FSAs) and the treatment of health FSAs as excepted benefits. In addition, EBSA announces the extension of safe harbors and other enforcement relief for summaries of benefits and coverage. ( EBSA, FAQs about Affordable Care Act Implementation (Part XIX) and Mental Health Parity Implementation, 5/2/2014FAQs about Affordable Care Act Implementation (Part XIX) and Mental Health Parity Implementation, 5/2/2014 )

Out-of-pocket maximum and limitations on cost-sharing.

Public Health Service Act (PHSA) §2707(b)Public Health Service Act (PHSA) §2707(b), as added by the Affordable Care Act (ACA) and incorporated under Code Sec. 9815(a)(1) and ERISA § 715(a)(1) , provides that a group health plan must ensure that any cost-sharing requirements under the plan not exceed the limitations provided for by ACA Sec. 1302(c)(1), limiting annual out-of-pocket maximums; and ACA Sec. 1302(c)(2), relating to annual limitations on deductibles. For 2014, these limits are $6,350 for self-only coverage, and $12,700 for family coverage. The limits for 2015 are $6,600 for self-only coverage, and $13,200 for other than self-only coverage. These FAQs address several questions about out-of-pocket maximums.

According to the Departments, if an out-of-network provider charges an amount greater than the plan’s or issuer’s allowed amount, a plan may count individual spending for the amount in excess of the allowed amount counted toward the out-of-pocket maximum. For example, if the plan covers 75% of the usual, customary, and reasonable amount (UCR) charged for services provided out-of-network, and the participant pays the remaining 25% of UCR, plus any amount charged by the out-of-network provider in excess of UCR, the 25% of UCR paid by the participant may reasonably be counted, in full or in part, toward the out-of-pocket maximum without including any amount charged above UCR paid by the participant. (Q&A 2Q&A 2)

Large group market coverage and self-insured group health plans have discretion to define “essential health benefits,” and may, for example, include only generic drugs, if medically appropriate and available, while providing a separate option (not as part of essential health benefits) of electing a brand name drug at a higher cost sharing amount. According to the Departments, if, under this type of plan design, a participant or beneficiary selects a brand name prescription drug in circumstances in which a generic was available and medically appropriate, the plan may provide that all or some of the amount paid by the participant or beneficiary—such as the difference between the cost of the brand name drug and the cost of the generic drug—does not have to be counted towards the annual out-of-pocket maximum. For ERISA plans, the summary plan description must explain which covered benefits will not count towards an individual’s out-of-pocket maximum. (Q&A 3)

Preventive services.

PHSA §2713, as added by ACA and incorporated under Code Sec. 9815(a)(1) and ERISA § 9815(a)(1), specifies that a group health plan and a health insurance issuer offering group or individual health insurance coverage must provide benefits without cost-sharing with respect to (1) services recommended by the U.S. Preventive Services Task Force (USPSTF), (2) immunizations recommended by the Advisory Committee on Immunization Practices of the CDC (ACIP), (3) preventive care and screenings for infants, children, and adolescents supported by HHS’s Health Resources and Services Administration (HRSA), and (4) preventive care and screenings for women supported by HRSA. If a recommendation or guideline does not specify the frequency, method, treatment, or setting for the provision of that service, the plan or issuer can use reasonable medical management techniques to determine any such coverage limitations. See Pension and Benefits Week ¶  1  7/19/2010.

Among other things, the USPSTF recommends that clinicians ask all adults about tobacco use and provide tobacco cessation interventions for those who use tobacco products. According to the Departments, since evidence-based clinical practice guidelines can provide useful guidance for plans and issuers in determining coverage limitations, the Departments will consider a group health plan or health insurance issuer to be in compliance with the requirement to cover tobacco use counseling and interventions, if, for example, the plan or issuer covers, without cost-sharing:


1. screening for tobacco use; and
2. for those who use tobacco products, at least two tobacco cessation attempts per year. For this purpose, covering a cessation attempt includes coverage for (a) four tobacco cessation counseling sessions of at least 10 minutes each (including telephone counseling, group counseling and individual counseling) without prior authorization, and (b) all Food and Drug Administration (FDA)-approved tobacco cessation medications (including both prescription and over-the-counter medications) for a 90-day treatment regimen when prescribed by a health care provider without prior authorization. (Q&A 5)


Carryovers and treatment of health FSAs as excepted benefits.

Under long-standing regs, health FSA are excepted benefits generally exempt from the Code’s and ERISA’s group health care plan requirements. Among other things, to be excepted, a health FSA must be structured so that the maximum benefit payable to any employee participant in the class (1) cannot exceed two times the employee’s salary reduction election for the year, or (2) if greater, cannot exceed $500 plus the amount of the participant’s salary reduction election (see Pension and Benefits Week ¶  1  1/10/2005). More recently, IRS has modified the “use-or-lose” rule for health FSAs in order to allow, at the plan sponsor’s option, participating employees to carry over up to $500 of unused amounts remaining at year-end (see Pension and Benefits Week ¶  2  11/12/2013).

To resolve any concern about conflicts between these two sets of rules, the Departments have stated that unused carryover amounts remaining at the end of a plan year in a health FSA that satisfy the modified “use-or-lose” rule should not be taken into account when determining if the health FSA satisfies the maximum benefit payable limit prong under the excepted benefits regs. (Q&A 6)

Summaries of benefits and coverage.

PHSA §2715, as incorporated by the Code and ERISA, requires the Departments to develop standards in compiling and providing a summary of benefits and coverage (SBC) that accurately describes benefits and coverage. In 2012, the Departments issued final regs establishing the standards required to be met under §2715, and issued a guidance document, which, among other things, disclosed how to obtain an SBC template, with instructions, sample language, and a guide for coverage example calculations to be used in completing the SBC template (see Pension and Benefits Week ¶  1  2/13/2012). Later, the Departments issued three sets of FAQs addressing questions that had been raised about the final regs, announcing updated templates, and providing various safe harbors and other enforcement relief (see Pension and Benefits Week ¶  4  3/26/2012, Pension and Benefits Week ¶  3  5/21/2012, and Pension and Benefits Week ¶  5  4/29/2013).

In the current set of FAQs, the Departments state that the updated SBC template (and sample completed SBC) made available in April 2013 continue to be authorized. There are no changes to the uniform glossary or the “Why This Matters” language for the SBC, and there are no changes to the “Instructions for Completing the SBC.” The Departments also emphasize the continued effect of the special rule that “to the extent a plan’s terms that are required to be described in the SBC template cannot reasonably be described in a manner consistent with the template and instructions, the plan or issuer must accurately describe the relevant plan terms while using its best efforts to do so in a manner that is still as consistent with the instructions and template format as reasonably possible.” (Q&A 7)

In addition, the Departments have announced that they are extending enforcement relief related to the requirement to provide an SBC and a uniform glossary for the first and second years of applicability of the rules. Thus, until further guidance is provided, the previously-issued enforcement and transition relief guidance will continue to apply, and the FAQ indicates the types of specific extended relief, which are generally identified by the specific prior FAQ set and FAQ number. (Q&A 8)

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