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

Since the Congressional Research Service reported that the Obama administration had missed as many as one- third of ACA's legally required deadlines - and that report was circa November 2011 - the government has announced it won't be able to verify individuals' eligibility for ACA exchange subsidies until 2015 - relying on "the honor system" for a full year. Also delayed 12 months is the employer mandate requiring those with more than 50 employees to offer health care. And even while benefits administrators are still planning around that change, another yearlong delay has come to the fore: limits on out-of-pocket spending.

According to the law, starting in 2014, health plan participants will be spending no more than $6,350 in total out-of-pocket costs for individuals and $12,700 for family plans. That cap on out-of-pocket spending has been delayed until 2015, however, if an employer is using two separate vendors for its medical and pharmacy benefits. Sandy Ageloff, Southwest health & group benefits leader for Towers Watson, says the rule only applies "to nongrandfathered plans" and emphasizes that the delay only applies to those who split their services.

"So the biggest piece of the legislation," Ageloff says, "is that compliance is still required for Jan. 1, 2014, if the benefit plan - whether it's a self-funded employer plan or a fully insured carrier program - is using a single vendor for the administration of both medical and pharmacy, they still have to comply 1/1/14. The nuance comes in when you have multiple vendors, you get a one-year deferral in total compliance. You still have to comply in pieces, but you don't have to comply in total."


More than a phone call

The number of plans that maintain their grandfathered status continues to shrink, but Ageloff estimates that 35% or 40% of large employers use different vendors and thus have the extra year. Complicating things, she says, is that "a number of carriers actually have, behind the scenes, carved out that relationship with a pharmacy vendor," so two can masquerade as one. Figuring out compliance may require more than just a phone call to your provider.

"For example, if you look at Anthem Blue Cross Blue Shield, they have a subcontracted relationship with ESI to manage their pharmacy benefits," Ageloff says. "Same is true of a lot of other broad-based medical insurance carriers. So the health plans themselves are taking different interpretations on whether the full mandate for 2014 applies to them or if they get the deferral. So that's complicating this. As an employer, if say, I use Anthem BCBS as either my [third-party administrator] or I'm buying an insured product from them, I'm relying on them to tell me how they interpret their own program. So that's creating some challenges, particularly for self-funded employers who control their own plan design."

The National Business Group on Health vice president of public policy, Steve Wojcik, says, like the employer mandate delay, the out-of-pocket pushback was done to allow systems to catch up to what is required of them in terms of processing and accounting. And, like the employer mandate delay, he says it's good news.

"It means that employers and their plans have another year to consolidate and coordinate," Wojcik says. "In many cases the issue is that the PBM handles the pharmacy benefit separately, and the medical expenses are handled through the health plan, so a lot of times their systems don't talk with one another, and then the patient or plan member doesn't have up-to-the-minute information on where they stand toward their out-of-pocket limit."

Wojcik says, "By and large, most people don't approach their out-of-pocket limits in a year, so for most people, it's not going to affect them." For those who do - usually those with chronic conditions or highly expensive pharmacy needs or both - "it will just be another year before they get relief."


Twofold effect

But for high-spending plan participants whose employers divide medical and pharmacy there is a chance, however unlikely and slightly impractical, that they could financially take it on the chin for a year. Ageloff points out that some employers will be raising premiums and co-payments to cover other costs, and for 12 months a family's total out-of-pocket, in accordance with ACA, could be a crushing $25,400.

"There is a potential twofold impact to employees or consumers," Ageloff says. "One is that because of this regulation in general saying you cannot go above the maximums that are set for high-deductible HSA plans, the $6,350 and the $12,700. Since you can't go above those, and you have to include copayments and other types of payment that have been excluded in the past, what we're seeing a number of employers do is actually increase their out-of-pocket maximum from where it was 2013 to essentially keep themselves whole because they're not having to add more to that equation.

"If you are in that two-vendor situation, one for medical and one for pharmacy, the guidance says you can comply individually for both pieces independently. So a potential consumer ramification would be to say, 'I'm going to have the $6,350 on medical, and I'm going to have an additional $6,350 on pharmacy for 2014.' That won't work in 2015, but for one year employees could see a sizable increase in their out-of-pocket maximum. ... We're not seeing a lot of employers do that, because they know they would just have to reverse that for 2015."

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