It’s Not Too Late – Options for Employers and Insurers to Limit Out-of-Pocket Costs For Consumers Beginning in 2014

Under an FAQ issued in February, and as described in my previous blog, all self-funded employer group plans, and fully insured employer group plans offered in the large group and small group markets, have the flexibility to delay implementation of the out-of-pocket cost limitations under the Affordable Care Act until 2015.  However, the cost of this flexibility to consumers seems to far outweigh the benefit to employers and insurers – a benefit which appears to be more than they even asked for.

According to the preamble to the Final Rule and other reports, employers and insurers indicated that the need for this delay was limited to the large group market, and necessary to allow them to coordinate with their vendors in order to aggregate out-of-pocket expenditures across separately administered benefits.  As they did with the extension of coverage to dependents up to age 26, insurers and employers should implement these out-of-pocket limits early beginning in 2014, and only delay implementation to the extent they are unable to coordinate with their vendors.

For example, since the need for the delay is limited to the large group market, employers and insurers should voluntarily comply with the out-of-pocket limitations beginning in 2014 for self-funded and fully insured small employer group plans.

Additionally, many insurers use a separate pharmacy benefits manager (“PBM”) to administer pharmacy benefits for all plans and policies and across all markets.  Beginning 2014, insurers that use a separate PBM are required to comply with the out-of-pocket limitations under the Affordable Care Act in the individual market, both on- and off-Exchange.  Since insurers and their PBM will have the ability to coordinate and aggregate out-of-pocket expenditures for medical and pharmacy benefits in the individual market, they should implement the out-of-pocket maximum limitations in the small and large group markets as well.

Finally, employers and insurers did not seem to raise any concerns about a specific vendor’s capability to determine an individual’s out-of-pocket expenditure for the category of benefits administered by that vendor.  Accordingly, beginning in 2014, they should include a separate out-of-pocket limit on those separately administered benefits that currently do not have one.

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