Insight to Action

Benefits & Healthcare Update: Departments Release New Guidance on ACA Cost Sharing Limits, HSA Rules

6 May 2015

The Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) recently released plan design rules for the 2016 plan year. The biggest change is the clarification of how out-of-pocket maximum limitations work under the Affordable Care Act (ACA): non-single coverage limits "embed" the single coverage limit in the sense that an individual cannot owe pay more than the single limit regardless of whether the individual has single coverage or is a member in non-single coverage.

Remember, there are two sets of cost sharing rules post-ACA: one regarding out-of-pocket maximum limitations for all large group health plans under the ACA, and another set of rules for Health Spending Accounts (HSAs) and HSA-qualifying High Deductible Health Plans (HDHPs) under the Internal Revenue Code. HHS guidance applies to ACA limits, and IRS guidance applies to HDHP/HSA design limits.

Out-of-Pocket Maximum Limitations under ACA

For all large group health plans, out-of-pocket maximums cannot be greater than $6,850 for single coverage and $13,700 for non-single/family coverage for the 2016 plan year. These out-of-pocket maximums must include both medical and prescription costs. Plans can have either a single out-of-pocket maximum for medical and prescription costs or two separate maximums, the sum of which cannot exceed $6,850 for single and $13,700 for non-single coverage.

According to the latest guidance from HHS, an individual cannot owe more than the single out-of-pocket maximum limit, regardless of whether the individual is in a single plan or a non-single plan. The result of this is that family and other non-single coverage must embed the single limit.

To illustrate how this works, say that a plan has the highest allowable out-of-pocket maximums of $6,850 for single coverage and $13,700 for family coverage. One person covered under a family plan, Ashley, incurs $10,000 of cost sharing and another person, Bailey, incurs $5,000 in cost sharing after Ashley. Under the old understanding of the guidance, Ashley would pay the full $10,000 and Bailey would owe $3,700, stopping at the family $13,700 limit. With HHS's new guidance, Ashley would stop paying at $6,850, the single limit, and Bailey would owe the full $5,000, all for a total of $11,850. The family unit could still incur another $1,850 before the family limit takes effect (unless Ashley incurs more cost sharing).

HSA Rules and HSA-Qualifying HDHP Rules

For the 2016 calendar year, eligible participants may contribute $3,350 with single coverage or $6,650 with non-single/family coverage to their HSAs.

For 2016 plan years, HSA-qualifying HDHPs must have annual deductibles no less than $1,300 for single coverage and $2,600 for non-single coverage. These HDHPs must also have out-of-pocket maximums no greater than $6,550 for single coverage and $13,100 for non-single coverage.

The final HHS regulation for large group health plans is available online at: http://www.gpo.gov/fdsys/pkg/FR-2015-02-27/pdf/2015-03751.pdf

The IRS guidance for HSAs and HSA-qualifying HDHP coverage is available at: http://www.irs.gov/pub/irs-drop/rp-15-30.pdf