2014 Surprise: Unexpected Doubling of Out-of-Pocket Maximum

Buried in a document released by the Departments of Health and Human Services, Labor, and the Treasury, the federal government made an important pronouncement that greatly troubles the patient advocacy community and most certainly will impact patient access to quality healthcare. A February 2013 document entitled “Frequently Asked Questions (FAQs) about Affordable Care Act Implementation Part XII” states that certain group health plans will have a 1-year grace period starting in 2014 during which they can impose out-of-pocket maximums higher than what is defined in the Affordable Care Act (ACA), placing an undue financial burden on patients.¹

As research has shown, a major reason patients do not adhere to their treatment plans is high out-of-pocket costs.² Saddling people with chronic conditions—even for 1 year—with higher out-of-pocket expenses will have a major negative impact on their ability to afford the healthcare services that they need.

The ACA includes standards designed to protect patients from high out-of-pocket costs for the majority of health plans in the exchange marketplace. Section 1302(c)(1) of the Act requires health plans to comply with established annual limitations on out-of-pocket spending.³ This annual limit applies to qualified health plans, non-grandfathered individual and small group policies, and non-grandfathered group health plans. The limit does not include the monthly premiums for enrollment, which have risen dramatically in recent years. This protection is vital for people with severe and chronic health conditions, whose out-of-pocket spending can total thousands of dollars each year.

The federal government’s policy decision was unveiled when the department clarified how non-grandfathered group health plans, which utilize multiple service providers to help administer covered benefits, would comply with ACA. For example, a health plan may use one administrator for major medical coverage and a separate pharmacy benefit manager.¹ The FAQ document states that if a group plan has “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),” such an out-of-pocket maximum cannot exceed the annual limitation.¹

What that means is group health plans that utilize multiple service providers could set an out-of-pocket limit for each service provider up to the maximum allowed under ACA. For example, the 2014 out-of-pocket cap for an individual under ACA is expected to be approximately $6500. Based on the FAQ document, health plans with multiple administrators could set a cap for individuals at $6500 for medical care plus $6500 for drug benefits. This total of $13,000 would be in addition to the cost of the patient’s insurance premium. This allowance, even within the 1-year limit offered by the FAQ document, will disproportionately harm people with chronic diseases and disabilities. The administrative burden to collect and share data on a timely and accurate basis for plans that utilize multiple service providers is understandable. However, permitting these plans to have a total annual out-of-pocket limit that could be twice the amount of other plans is contrary to ACA.

The National Health Council and more than 100 patient advocacy organizations have urged the federal government to revise the proposed leniency outlined in the FAQ and require plans with multiple service providers to maintain a total annual out-of-pocket limit that does not exceed the dollar amounts set in ACA.⁴ There are many different ways the limit could be parceled among the providers. The bottom line is the sum of separate out-of-pocket limits must not be greater than the annual limit established by law, and separate limits should not be developed in a way that discriminates against patients with high costs within a particular benefit.

A second but equally troublesome issue is the manner and method the federal government used to introduce this grace period policy. Contrary to federal rule-making policy, the 1-year allowance for certain group health plans was not introduced or referenced in either the proposed essential health benefi ts (EHB) regulations issued November 2012 or the final EHB rule that came out in February 2013. Rather, the policy appeared in the FAQ document with no opportunity for stakeholder input. This unexpected interpretation of the statute highlights the importance of creating and enforcing a uniform appeals process not only for issues related to coverage but also for issues resulting from calculating out-of-pocket expenses.

Patients with high-cost health needs are the most likely to need the protection of an annual out-of-pocket maximum and will be most concerned about how their medical expenses count toward this maximum. The ability to appeal such calculations is imperative. This grace period and the method in which it was announced demonstrate the need for the patient advocacy community and those who support patient access to affordable treatments to be vigilant in their efforts to ensure the implementation of ACA is done in a way that best serves those in greatest need of care—people with chronic diseases and disabilities.