A few weeks ago we posted about a new out-of-pocket limit for group health plans that provide family coverage. HHS announced that the ACA cost-sharing limit for self-only coverage applies to each individual who has family coverage. This embedded individual limit is in addition to the existing limit for family coverage, which applies to the aggregate costs of the covered individuals.

The Limit Applies to Self-Insured Plans

HHS announced the new out-of-pocket limit in the preamble of a long regulation that deals mostly with insurance issues. Unlike most ACA guidance for group health plans, the HHS guidance was not issued jointly with the IRS and the Labor Department. Some commentators questioned whether the new out-of-pocket limit was intended to apply to group health plans.

The three agencies have issued a new set of frequently-asked questions (FAQs Part XXVII) confirming that the new out-of-pocket limit applies to all non-grandfathered group health plans, including self-insured plans and high-deductible health plans. For plans that do not currently apply an embedded individual limit to family coverage, this new rule will create administrative challenges and increase health plan costs.

Effective Date

HHS described the new embedded individual limit as a “clarification” of the existing ACA cost-sharing limits. This characterization raised the question whether the new limit was effective immediately, and perhaps retroactively.

The FAQs state that the three agencies will apply the new individual limit only for plan years that begin in or after 2016.

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Photo of Amy N. Moore Amy N. Moore

Amy Moore advises public and private companies and tax exempt organizations on a wide range of tax, ERISA, and employment law issues concerning all types of benefit programs.  Ms. Moore counsels some of the world’s largest multinational companies on the design and implementation…

Amy Moore advises public and private companies and tax exempt organizations on a wide range of tax, ERISA, and employment law issues concerning all types of benefit programs.  Ms. Moore counsels some of the world’s largest multinational companies on the design and implementation of innovative benefit strategies, including the restructuring of retirement programs to meet the needs of the modern work force; the use of surplus pension and insurance assets to provide non-traditional benefits; and the establishment of funding and security arrangements for welfare plans and executive compensation.  She represents clients in connection with pension fund investments in private equity funds, hedge funds, group trusts, and derivatives.  She also advises on benefits and compensation issues in acquisitions and divestitures, debt finance, joint ventures, and other corporate transactions.  Ms. Moore represents companies in audits and contested agency proceedings involving benefit plans and advises clients on employee benefits issues that arise in connection with ERISA litigation and settlements.  She also counsels employers on issues of plan administration and the correction of operational problems under government-sponsored remedial programs.