Benefit 
Health Advisor

Limits on Out-of-Pocket Maximums—Full Compliance Delayed for Some Health Plans

The Affordable Care Act (ACA) limits the amount that health plan enrollees can be forced to pay out of pocket for essential health benefits. Once the annual out-of-pocket maximum is reached for the year, an enrollee will not be responsible for additional cost-sharing for these benefits for the remainder of the year.


The ACA’s limitation on a plan’s out-of-pocket maximum is effective for plan years beginning on or after Jan. 1, 2014. However, special transition relief has been provided for plans that use more than one service provider to administer benefits.  Under this relief, a plan’s major medical benefits will be required to comply with the ACA’s out-of-pocket maximum as scheduled, but non-major medical benefits, such as prescription drug coverage, will get an additional year to comply with the mandate.


While the effective date for the ACA’s out-of-pocket maximum has not been completely delayed, this transition relief will provide an additional year for some types of benefits to be in full compliance. Read below for details on the transition relief.


Which plans are subject to the limit?


On Feb. 25, 2013, the Department of Health and Human Services (HHS) issued a final rule on the ACA’s cost-sharing limits for health plans. According the final rule, the ACA’s out-of-pocket maximum applies to all non-grandfathered health plans. This includes, for example, self-insured health plans and insured health plans of any size.


How is the limit applied?


For plan years beginning in 2014, the ACA’s out-of-pocket maximum is tied to the out-of-pocket maximum for HSA-compatible high deductible health plans (HDHPs). There are separate limits for self-only coverage and coverage other than self-only coverage (that is, family coverage).


  • For 2014, the out-of-pocket maximum cannot exceed $6,350 for self-only coverage and $12,700 for family coverage.
  • For 2015, the out-of-pocket maximum cannot exceed $6,600 for self-only coverage and $13,200 for family coverage.
    • The plan complies with the out-of-pocket maximum with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
    • To the extent there is an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), this maximum does not exceed the ACA’s out-of-pocket maximum.


For plan years beginning after 2014, the ACA’s out-of-pocket maximum limit will be increased based on the premium adjustment percentage.


For purposes of applying the ACA’s out-of-pocket maximum, cost-sharing includes any expenditure required by or on behalf of an enrollee with respect to essential health benefits, such as deductibles, copayments, co-insurance and similar charges. It excludes premiums and spending for non-covered services. Also, for plans using provider networks, the final rule provides that an enrollee’s cost-sharing for out-of-network benefits does not count toward the cost-sharing limit.


What is the transition rule for 2014?


A set of frequently asked questions (FAQs) from HHS provide a temporary transition rule for applying the ACA’s out-of-pocket maximum when a plan utilizes more than one service provider to help administer benefits (for example, a health plan with a third-party administrator for major medical coverage, a separate pharmacy benefit manager and a separate managed behavioral health organization).


Currently, when a plan has more than one service provider administering benefits, the providers may impose different out-of-pocket maximums and may utilize different methods for crediting participants’ expenses against any out-of-pocket maximums. According to the FAQs, these processes will need to be coordinated to comply with the ACA’s out-of-pocket maximum, which may require new regular communications between service providers.


The FAQs provide that, only for the first plan year beginning on or after Jan. 1, 2014, where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the ACA’s out-of-pocket maximum, the annual limit will be satisfied if both of the following conditions are met:


  • The plan complies with the out-of-pocket maximum with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
  • To the extent there is an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), this maximum does not exceed the ACA’s out-of-pocket maximum.


Thus, plans with multiple providers may be able to keep separate caps for their major medical and non-major medical coverage until the first plan year that begins on or after Jan. 1, 2015.

Also, under this temporary relief, it appears that if a plan’s non-major medical coverage (for example, prescription drug coverage) does not have an out-of-pocket maximum, it may not have to put one in place for the 2014 plan year. Thus, under this interpretation, a plan may not be required to have any out-of-pocket limit on prescription drug costs for the 2014 plan year. Formal guidance from HHS confirming this interpretation would be helpful.


In addition, the FAQs include a reminder that the federal mental health parity laws prohibit health plans and issuers from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.


What rule applies for 2015 plan years?


On Jan. 9, 2014, the Departments of Labor, HHS and the Treasury (Departments) issued FAQs clarifying the out-of-pocket maximum requirement following the first year of applicability. These FAQs state that, for plan years beginning on or after Jan. 1, 2015, non-grandfathered group health plans and group health insurance coverage must have an out-of-pocket maximum which limits overall out-of-pocket costs on all essential health benefits. This rule applies to all non-grandfathered health plans, including plans that use more than one service provider to administer benefits.


The Departments recognize that some plans, such as those with multiple service providers, may find it easier to divide the annual limit on out-of-pocket costs across multiple categories of benefits, rather than reconcile claims across multiple service providers. In the FAQs, the Departments stated that plans and issuers are permitted to structure a benefit design using separate out-of-pocket limits, provided that the combined amount of any separate out-of-pocket limits applicable to all essential health benefits under the plan does not exceed the annual limitation on out-of-pocket maximums for that year.