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June 11, 2014

Latest Guidance on the Affordable Care Act's Rules for Out-of-Pocket Limits and Preventive Services Requirements

The Departments of Treasury, Labor, and Health and Human Services (HHS), which are responsible for implementing the Affordable Care Act1 (collectively, the “Departments”), have published answers to two sets of frequently asked questions (FAQs).2 The FAQs address two of the law’s requirements for non-grandfathered plans: the new rules applicable to out-of-pocket limits and the preventive services requirement.

This Capital Checkup summarizes this guidance, which will help plan sponsors understand the law’s requirements, especially as they begin the process of considering benefit changes for the 2015 plan year.

Out-of-Pocket Limits

Effective with the plan year beginning on or after January 1, 2014, non-grandfathered group health plans must comply with a new annual limit on cost sharing, also known as an out-of-pocket limit.3 The maximums for the 2014 and 2015 plan years are noted in the table below.

The Affordable Care Act’s Out-of-Pocket Limit, 2014 and 2015
  2014* 2015**
Individual Coverage $6,350 $6,600
Family Coverage $12,700 $13,200

* For 2014 only, the out-of-pocket limits are the same as the limits applicable to high deductible health plans paired with Health Savings Accounts (HSA).

** Starting in 2015, the out-of-pocket limits are no longer tied to HSA limits, but are calculated based on a percentage increase from the previous year. The percentage increase used this year was 4.2 percent (rounded).

The answers clarify the following rules for the 2015 plan year:

  • Plan sponsors may have separate out-of-pocket limits on different categories of benefits (e.g., medical and prescription drugs) as long as the combined amount of all such limits does not exceed the allowed amount. For example, a plan could cap a participant’s out-of-pocket spending on medical expenses at $4,000 and drug expenses at $2,600, because those two limits added together do not exceed the allowed amount of $6,600.
  • The out-of-pocket limit applies to in-network expenses only. A plan may limit a participant’s out-of-network expenses, but is not required to do so.
  • A plan sponsor is not required to count expenses for non-covered items or services toward the out-of-pocket limit.
  • Reference pricing involves designs where a plan pays a fixed price for a particular procedure (e.g., a knee replacement), which certain providers will accept as payment in full. The goal is to negotiate cost-effective arrangements with high-quality providers. Plans may have a reference-based pricing program where they do not count amounts above the reference price paid by participants toward the out-of-pocket limit. The plan would need to treat providers who accept the reference amount as the plan’s only in-network providers and would have to use a reasonable method to ensure that it provides adequate access to high-quality providers. The Departments are seeking comments on these types of arrangements to help them provide additional guidance in the future. Comments are due by August 1, 2014.
  • Generally, if a participant chooses a brand drug when a generic is medically appropriate, the plan does not have to count the amount paid by the patient (including the differential between brand and generic) toward the out-of-pocket limit.

Preventive Services

Non-grandfathered plans must provide certain preventive services without imposing any cost sharing when those services are obtained from in-network providers. One category of required preventive services includes certain services that are recommended by the U.S. Preventive Services Task Force (USPSTF).4 When the USPSTF adds or updates a recommendation, that recommendation becomes a plan requirement effective with the plan year beginning one year after the USPSTF issues the new or updated recommendation.

On September 24, 2013, the USPSTF revised its recommendation regarding medications for risk reduction of breast cancer in women who are at increased risk for breast cancer and at low risk for adverse medication effects. The revised recommendation is that “clinicians should offer to prescribe risk-reducing medications, such as tamoxifen or raloxifene.”5 Consequently, non-grandfathered group health plans must cover risk-reducing medications, such as tamoxifen or raloxifene, for women without cost sharing subject to reasonable medical management. This rule applies to the plan year beginning on or after September 24, 2014 (i.e., January 1, 2015 for a calendar-year plan).

Another answer provides a safe harbor for plan sponsors that want to offer a tobacco-use-cessation program that is consistent with the USPSTF recommendations relating to tobacco counseling and interventions. The Departments would consider a plan that offers the following program to be in compliance:

  • Screening for tobacco use, and
  • For those who use tobacco products, at least two cessation attempts per year. A cessation attempt includes coverage for: four tobacco-cessation counseling sessions of at least 10 minutes each (including telephone counseling, group counseling and individual counseling) without prior authorization, and all FDA-approved tobacco cessation medications (both prescription and over-the-counter) for a 90-day treatment regimen when prescribed by a health care provider without prior authorization.

This is a safe-harbor design. There are other plan designs that would also comply with the requirements.


Plan sponsors of non-grandfathered health plans should review the rules concerning out-of-pocket limits and their coverage for preventive services to assure that they are consistent with the new guidance in answers to FAQs.

• • •

As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the new guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with employers and their attorneys on compliance issues.


1 The answers to the first set of FAQs are available on the Department of Labor (DOL) website. The latest FAQs are also available on the DOL website. (Return to the Capital Checkup.)

2 The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)

3 For background information on this requirement and the transition rule for the first year of applicability, see Sibson Consulting’s May 10, 2013 Capital Checkup, “Guidance on Out-of-Pocket Maximums in 2014 for Non-Grandfathered Health Plans.” (Return to the Capital Checkup.)

4 The USPSTF recommendations at issue (those with an A or B rating) are on the Task Force’s website. (Return to the Capital Checkup.)

5 See the September 2013 item in the list of recommendations by date on the Task Force’s website. (Return to the Capital Checkup.)


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