“Embedded” Out-of-Pocket Limits Might Be Required for 2016 Plan Years

Posted by on May 22, 2015 | Be the First to Comment

Federal regulators have stated – informally and unofficially – that employer-sponsored group health plans will be subject to a controversial interpretation of the Affordable Care Act’s (ACA) provision that limits the cost-sharing (e.g., deductibles, copayments and coinsurance) plans may require of enrollees.

Note on ACA/Insurance Jargon: Plan provisions that limit enrollees’ cost-sharing are often called “out-of-pocket limits,” and we’re using that term here.

The ACA’s Maximum Out-of-Pocket Limits on Essential Health Benefits

The ACA disallows a non-grandfathered health plan from having annual out-of-pocket limits for essential health benefits that are higher than $6,600 for self-only coverage and $13,200 for family coverage. These are the maximum annual out-of-pocket limits for plan years starting in 2015. For plan years starting in 2016, the maximum out-of-pocket limits increase to $6,850 and $13,700, respectively. If a plan has a network, these restrictions apply only with respect to in-network services. For details on how the maximum out-of-pocket limit provisions apply to employer-sponsored health plans and how those plans identify their essential health benefits, see our Alert.

Background Note on ACA Regulations. The three agencies responsible for implementation of the maximum out-of-pocket limit mandate are the Departments of Health and Human Services (HHS), Labor (DOL) and Treasury (through the Internal Revenue Service (IRS). They have typically issued regulations and other guidance concerning the ACA’s benefit mandates (e.g., preventive care coverage) jointly. The agencies have issued a few FAQs on the maximum out-of-pocket limit provision, but have not issued the type of tri-agency regulations we have come to expect for the ACA benefit mandates.

HHS has independently issued regulations under the maximum out-of-pocket limit provision, explaining how it applies to insurance programs seeking “qualified health plan” status. Those regulations do not apply to employer-sponsored plans (but might apply to insurance policies that smaller employers purchase to provide coverage to their employees). The DOL and IRS (the agencies whose regulations govern most employer-sponsored plans) have not explained how much credence employers should give the HHS maximum out-of-pocket limit regulations in designing and administering their plans.

HHS’ Controversial Interpretation of the Maximum Out-of-Pocket Limits

Earlier this year, HHS stated that the maximum out-of-pocket limit mandate requires that each enrollee – including an individual that is part of an enrolled family – have his or her own individual out-of-pocket limit on essential health benefits that is no higher than the maximum self-only out-of-pocket limit.

Note on ACA/Insurance Jargon. Having a separate individual out-of-pocket limit for each family member in addition to an overall family out-of-pocket limit is referred to as having an “embedded” out-of-pocket limit. In contrast, if a plan had a non-embedded out-of-pocket limit, the amount of out-of-pocket expenses that any one family member incurred would not matter. The out-of-pocket limit would not be met until the total of all family members’ out-of-pocket expenses reached the family out-of-pocket limit.

Under HHS’ interpretation, a plan would violate the ACA maximum out-of-pocket limit provision during its 2016 plan year unless it applied an out-of-pocket limit no higher than $6,850 to each individual enrolled as part of a family and, in addition, applied an overall out-of-pocket limit to the family no higher than $13,700.

The Interpretation is Not a Regulation. HHS’ embedded out-of-pocket limit interpretation was the proverbial needle in the annual regulatory haystack known as the “Notice of Benefit and Payment Parameters.” The interpretation appeared only in the preamble to the regulatory changes made by the Notice, and did not appear as an actual change to HHS’ regulations. HHS stated in the preamble that the interpretation is a “clarification” of existing rules. HHS later issued FAQs clarifying that the interpretation would apply to plan years starting in 2016. Aside from arguments about whether statements made in a preamble are binding on anyone, many would argue that HHS does not have authority to implement this provision with respect to employer plans (see “Background Note on ACA Regulations” above).

Employer Plans May Need to Comply with the HHS Interpretation

From the time HHS issued this interpretation, there have been questions about whether employer-sponsored health plans need to comply (see “The Interpretation Is Not a Regulation” above). Many sought informal guidance from IRS and DOL representatives on whether those agencies planned to apply this interpretation to employer plans, but received noncommittal responses. We have received reports that informal and nonbinding statements from IRS and DOL representatives have now confirmed that those agencies intend to join in HHS’ embedded out-of-pocket limit interpretation. There has been no report, however, of whether or when more tangible or official guidance might be issued.

CMS Asks Employers to Verify TRF Filings for 2014

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An FAQ regarding transitional reinsurance fee (TRF) submissions for 2014 appeared on the Centers for Medicare and Medicaid Services (CMS) “REGTAP” site on May 12, 2015. (CMS uses REGTAP to provide information on several different programs it administers, including TRF collections.) The new FAQ indicates that employers may receive emails asking them to provide information so CMS can make sure the appropriate TRF payments were made for 2014.

The FAQ indicates that these requests are going to plans that have already paid the 2014 TRF directly or through a third party, and to plans that had no obligation to complete the 2014 TRF filing in the first place. CMS asks that any employer receiving one of these requests visit the site indicated and respond to the questions asked “so that CMS can reconcile records.” The request will be received via an email entitled ”ACTION REQUIRED: 2014 Transitional Reinsurance Program Contribution Submission Not Found – Case ID #.”

A TRF Review, In Case You Were Able to Forget…

The TRF is a per capita fee that is to be paid with respect to every individual that has coverage under a policy or plan subject to the requirement (for example, it applies to enrolled spouses and children, not just employees). Insurers and sponsors of self-insured plans are required to pay the TRF with respect to the major medical coverage they provide.

IMPORTANT: Employers that did not sponsor a self-insured plan during 2014 were not required to remit the TRF for 2014 or complete the on-line filing through pay.gov.

You may recall that the TRF is assessed for calendar years 2014, 2015 and 2016. Each year, an entity required to file (for example, an employer sponsoring a self-insured major medical plan) must determine its average enrollment count over the first nine months of the year and then report that count by Nov. 15. The filer does so using an on-line process made available through pay.gov. The on-line facility determines the TRF amount due based on the enrollment count reported, and the filer completes the process by arranging an ACH transfer of that amount. (There is also an option to pay the TRF in two installments.)

The on-line process had a number of difficulties, and employers were relieved when they were able to complete it. Once those employers’ ACH transfers cleared, it seemed they could set aside TRF concerns until the 2015 filing.

CMS Is Having Some Issues With the Filings

Apparently, despite its elaborate filing procedure (in which employers entered the same information multiple times), CMS is having trouble matching payments to payers. Employers for whom CMS cannot find a filing or a payment will be asked to go through yet another online process so that they can pay (or show that they have already paid) the TRF. It’s not clear why an employer would get thrown into this bucket or how many employers have received greetings from CMS. It appears that CMS issued an FAQ on this process because it received calls asking whether the request was a legitimate CMS inquiry or some type of phishing effort. The FAQ assures us that these are indeed CMS requests.

Plans Must Cover 18 Separate Birth Control Methods With No Cost-Sharing

Posted by on May 14, 2015 | Be the First to Comment

New frequently asked questions (FAQs), define the contraceptive coverage that a non-grandfathered group health plan must provide in order to comply with the Affordable Care Act (ACA) mandate to cover certain preventive services without cost-sharing. The FAQs refer to 18 FDA-approved contraception methods and require coverage of at least one form of contraception within each of the 18 methods. If the FDA approves additional contraception methods, it appears that at least one form of contraception within each of those additional methods also would be required. The new FAQs are Part XXVI of an ongoing series issued by the agencies responsible for implementation of the ACA mandates (the Departments of Treasury, Labor and Health and Human Services).


The ACA requires non-grandfathered plans to provide a wide variety of preventive care benefits with no cost-sharing…no deductible, no co-payment, no co-insurance. If a recommendation or guideline does not specify the frequency, method, treatment or setting for the provision of a recommended preventive service, a plan may use reasonable medical management techniques to determine those limits. The required preventive care items include FDA-approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity, as prescribed by a healthcare provider.

In 2013, the agencies responsible for implementation of the preventive care mandate issued FAQs that:

  • Required access to the full range of FDA-approved contraceptive methods including, but not limited to, barrier methods, hormonal methods, and implanted devices.
  • Noted that plans may use reasonable medical management techniques to control costs and promote efficient delivery of care, such as covering a generic drug without cost-sharing and imposing cost-sharing for equivalent branded drugs.
  • Required plans to waive otherwise-applicable cost-sharing for a brand or non-preferred brand version of a particular drug if it would be medically inappropriate, as determined by the woman’s health care provider (the contraceptive coverage mandate applies only to women, not to men).

New FAQs Are More Specific

Noting that prior guidance may have reasonably been interpreted as allowing exclusion of some FDA-approved contraception methods, the agencies provided clarification in the new FAQs and committed to applying it prospectively only, starting with plan years beginning on or after July 10, 2015 (at least 60 days after publication of the FAQs). With respect to contraceptives, the FAQs specify the following:

  • Plans must cover without cost-sharing at least one form of contraception in each of the methods (of which there are currently 18) the FDA has identified for women in its current Birth Control Guide. The coverage must also include the clinical services, including patient education and counseling, needed for provision of the contraceptive method.
  • Within each method, a plan may continue to use reasonable medical management techniques and may require cost-sharing for some items and services within the chosen contraceptive method, so long as at least one form of contraception is available within that method without cost-sharing. For example, a plan may discourage use of brand name pharmacy items within a given method over generic pharmacy items within that method through the imposition of cost-sharing.
  • If using such medical management techniques within a method of contraception, an “easily accessible, transparent, and sufficiently expedient exceptions process that is not unduly burdensome”  must be available. A plan must waive cost-sharing that would otherwise apply to an item if a woman’s attending provider recommends that item based on medical necessity, even if multiple other FDA-approved forms of the same method of contraception are available with no cost-sharing.
  • Based on previous guidance requiring coverage of hormonal contraception methods, some plans apparently cover oral contraceptives without cost-sharing, but exclude or require cost-sharing for other FDA-approved hormonal contraceptive methods. Examples include injectables, implants, the contraceptive patch, emergency contraception (Plan B/Plan B One Step/Next Choice), and emergency contraception (Ella). The agencies now specify that coverage of at least one form of contraception within each of these separate methods must be covered without cost-sharing.

The FAQs do not address the extent to which religious objections of a plan sponsor would exempt a plan from providing any or all of the contraceptive methods or qualify it for an accommodation under agency guidance.

The Kaiser Family Foundation has compiled a helpful chart regarding required coverage of the 18 contraceptive methods.

Agencies Also Addressed Other Preventive Issues in FAQs

The agencies took the occasion of these FAQs to provide clarification on a few other issues. Related to women’s preventive healthcare, the agencies noted that plans must provide these benefits to enrolled children, if age-appropriate. This apparently includes prenatal preventive care services for a pregnant dependent daughter, even if the plan generally excludes coverage of such pregnancies.

In addition:

  • A plan must cover preventive screening, genetic counseling and BRCA genetic testing without cost-sharing for women who previously had breast cancer, ovarian cancer or other non-BRCA-related cancer.
  • Plans may not limit sex-specific recommended preventive services based on an individual’s sex assigned at birth, gender identity or recorded gender.
  • A plan may not require cost-sharing with respect to anesthesia services performed in connection with a screening colonoscopy if the provider determines the services are medically appropriate.

Overheard Today on Capitol Hill: Repeal the Cadillac Tax

Posted by on April 28, 2015 | Be the First to Comment

Congressional Democrats today introduced a bill to repeal the Affordable Care Act’s “Cadillac Tax.” Judging by the number of Congressmen moving to co-sponsor the bill, it appears the Cadillac Tax is as largely disfavored on Capitol Hill—at least in the House of Representatives—as it is in the employer community. The bill has at least 65 co-sponsors, including several Republicans, and the strong support of organized labor. The legislation is called the “Middle Class Health Benefits Tax Repeal Act.”

The Cadillac Tax is a nasty 40-percent penalty tax on high-value health plans. It applies beginning in 2018 to an employee’s employer-based health coverage that, in the aggregate, has premium values in excess of certain thresholds. The 2018 thresholds are $10,200 for self-only coverage and $27,500 for family coverage, although there are several exceptions.

Employers whose health coverage exceeds these thresholds will end up paying the tax directly or indirectly. The tax was designed to force employers to ratchet down the richness of their health plans, thus requiring covered employees and their dependents to pay a larger share of their medical expenses. In theory this would ultimately lead to a reduction in healthcare consumption, which in turn would lead to reduced healthcare costs.

The problem is that nearly half of current employment-based health plans are expected to trigger the excise tax in 2018, and ultimately even plans with the ACA’s “minimum value” (60 percent actuarial value) will trigger the tax. That fact, coupled with both the size of the tax and what is shaping up to be a horrendously complicated administrative scheme, leaves the tax with few friends.

Nevertheless, repealing it isn’t as easy as it sounds. The tax was projected to raise almost $90 billion over 10 years, cash that federal authorities were to use to help pay part of the cost of the Affordable Care Act. Congress will either have to accept the hit to the deficit caused by repeal of the tax, or find another way to raise the lost revenue.

The IRS recently issued a request for information (RFI) on the Cadillac Tax, seeking input from employers and others about the tax and how coverage values should be calculated, and how the tax should be administered. See Lockton’s Alert on the RFI; the Alert is authored by Mark Holloway.

April 30 Deadline Set for Correcting Certain TRF Overpayments

Posted by on April 20, 2015 | Be the First to Comment

Posted on behalf of Elizabeth Vollmar, J.D.

The Centers for Medicare and Medicaid Services (CMS), the federal agency that collects the transitional reinsurance fee (TRF) has announced an April 30, 2015 deadline for claiming certain overpayments of that fee with respect to 2014. Specifically, the deadline applies to overpayments that result from misapplication of a permitted method for determining the annual enrollment count on which the fee is calculated or including individuals in the count for whom the fee was not required. Employers with self-insured plans who paid the TRF for 2014 may wish to review the enrollment counts reported if they have concerns that they may have paid more than required.

IMPORTANT: Employers that did not sponsor a self-insured plan during 2014 were not required to remit the TRF for 2014.

Most of us have given little, if any, thought to the TRF requirements since completing the annual online filing last November or December. For those who could use a refresher, here are some of the more important details:

  • The TRF is an annual per capita fee that is required with respect to each and every individual that has coverage under a policy or plan subject to the requirement (e.g., it applies to enrolled spouses and children, not just employees). Insurers and sponsors of self-insured plans are required to pay the TRF with respect to the major medical coverage they provide.
  • For fully-insured coverage, insurers are responsible for completing the TRF filing and remitting the TRF. Therefore, employers providing fully-insured coverage don’t need to worry about the TRF filing or the accuracy of the information reported. 
  • For 2014, the TRF was generally $63 per covered life. (For 2015, it drops to $44 per covered life and, for 2016, it drops to $27.) The TRF is assessed and paid on a calendar-year basis (regardless of plan year). 
  • For 2014, it could be paid in one installment that is due no later than Jan. 15, 2015, or in two installments, the first of which ($52.50 per covered life) was due no later than Jan. 15, 2015, and the balance ($10.50 per covered life) is due the following Nov. 15. 
  • Assessment of the TRF is based on an annual enrollment count, and entities required to remit the TRF were to report their annual enrollment counts for 2014 no later than Dec. 5, 2014. 
  • Using pay.gov, filers reported annual enrollment counts and arranged remittance of TRF payments online. 
  • Various methods were provided to determine annual enrollment counts, with repeated modifications and changes being announced in agency webcasts, conference calls and FAQs. Confusion about how to count and how to report the count abounded.

The agency has now noted in an announcement that “some contributing entities may have misreported their annual enrollment count for the 2014 benefit year…potentially resulting in an overpayment.” Exactly what should be done to correct any errors and obtain a refund is a bit unclear. The announcement first says that filers “can generally correct these errors by simply refiling a form through pay.gov…with the correct annual enrollment count and CMS refunds the payment associated with the erroneous filing.” It sounds simple.  

In the next paragraph, however, the agency states that filers “must send refund requests resulting from annual enrollment count misreporting to CMS by April 30, 2015, or 90 days from the date of their form submission, whichever is later. These requests and other inquiries regarding the reinsurance contribution submission process should be sent to reinsurancecontributions@cms.hhs.gov. So, it appears that an entity seeking a refund must first re-file its form with the adjusted annual enrollment count and then send an email requesting a refund. And it must do this by April 30, 2015. The guidance notes that the deadline is extended to 90 days after the original filing date if that’s later that April 30, but that would mean that the original filing was delinquent.

The guidance notes that this April 30 deadline does not apply to requests for refunds resulting from paying the fee more than once for the same individual. It also notes that filers cannot now change the counting method they used previously to determine their annual enrollment count – only corrections due to misapplication of the method used are permitted.