The Department of Labor, IRS and Department of Health and Human Services have erased any residual doubt about how out-of-pocket limits set by the Affordable Care Act will govern family members covered under a group plan. In the latest “FAQs about Affordable Care Act Implementation” (part XXVII), the agencies make clear that OOP limits applicable to single coverage also apply to individuals covered in a family policy in a non-grandfathered plan.

Earlier regulations left some doubt about the matter.

The new required approach is called an “embedded” limit, and will be required for plan years beginning in 2016.

Also see: What you need to know about the cap on out-of-pocket spending delay

For plan years beginning in 2016, the single coverage limit will be set at $6,850 (up from $6,600 this year). The cap for “other than single” coverage will be $13,700, up from $13,200 this year.

Slightly different limits apply to high deductible health plans – specifically, for 2015 the HDHP limits are $6,450 for self-only coverage and $12,900 for family coverage; 2016 limits have not yet been announced.

The specific question the agencies posed to themselves in the latest FAQ is this: “The 2016 Payment Notice clarified that under section 1302(c)(1) of the Affordable Care Act, the self-only maximum annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or in coverage other than self-only. Does PHS Act section 2707(b) apply this requirement to all non-grandfathered group health plans?”

The answer was unambiguous: “Yes.”

The agencies illustrated the principle with the following example:  Assume that a family of four is enrolled in family coverage under a group health plan in 2016 with an aggregate annual limitation on cost-sharing for all four enrollees of $13,000. Assume that individual No. 1 incurs $10,000 in claims, and that the other three each incur $3,000 in claims. Total claims come in at $13,000, the aggregate cap on OOP expenses.

Without “embedded” OOP limits, the employer would not have incurred any expense.

Also see: The risks of maintaining grandfathered health plan status

However, the self-only maximum annual limitation on cost-sharing ($6,850 in 2016) applies to each individual, therefore the cost sharing for individual No. 1 is limited to that amount. The plan must cover the difference between the $10,000 in expenses incurred by individual No. 1 and that $6,850 cap (i.e. $3,150). However, that number does not represent the employer’s higher cost due to the “embedded” OOP requirement. That number depends upon the level of expenses incurred by other family members.

In this example the higher cost to the employer due to the “embedded” OOP adds up to $2,850. That’s because the total expenses incurred by each of the four employees is $6,850 + $3,000 + $3,000 + $3,000, i.e., $15,850. Since the plan’s aggregate OOP cap is $13,000, the employer must cover the difference between that amount and the aggregate OOP cap:  $15,850 - $13,000 = $2,850.

Richard Stolz is a freelance writer based in Rockville, Maryland.

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