Hickock Boardman Benefits

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Embedded Deductibles

The Affordable Care Act (ACA) requires non-grandfathered health plans to include an annual limit on total enrollee cost sharing for essential health benefits (EHB). This annual limit is often referred to as an “out-of-pocket maximum” (OOP) or “maximum out-of-pocket” (MOOP).

Some recent guidance from the Department of Health & Human Services (HHS) along with the Department of Labor (DOL) provides that for plan years beginning on or after January 1, 2016 all non-grandfathered health plans must apply the maximum out of pocket amounts to all individuals regardless of whether they are part of a family deductible plan. That “embedded deductible” amount for 2016 is $6,850.

This could affect health plans (including HDHP with an HSA) when an employee has family coverage. For example, if a plan has a $6,000 MOOP for self-only coverage and a $12,000 MOOP for family coverage, individuals who have family coverage would have their expenses paid at 100 percent for a year, only after the family satisfies the $12,000 MOOP, even if one individual incurred all of the out-of-pocket expenses.  According to HHS and the DOL, this type of plan design is no longer permitted for non-grandfathered plans for plan years beginning in or after 2016.

Click here to download the pdf titled 'Embedded Out-of-Pocket Maximum for Family Coverage'.