Detail Review of Out-Of-Pocket Maximum Limits and Possible Compliance Issues

Out-of-Pocket Maximum Limits

Date Issued: September 2023

Most group health plans are designed with cost-sharing measures such as deductibles, copays, coinsurance, and an out-of-pocket (OOP) maximum or limit. Once plan participants incur enough claims to satisfy a plan’s OOP maximum, the plan will typically provide full coverage, at least for in-network claims. While there is certainly flexibility for designing such cost-sharing measures, there are compliance requirements that must be taken into consideration. Specifically for the OOP maximum, there are limits on the amount that can be required before participants receive full coverage, and there are rules about which costs must count toward satisfying the OOP maximum. Several of the applicable compliance requirements are discussed below.

This article provides more detail based on the webinar that was presented on August 23, 2023 titled Compliance Issues with Out Of Pocket Maximums. 

ACA Annual OOP Maximum Limits

The Affordable Care Act (ACA) sets limits on the amount that a participant can be required to pay for in-network essential health benefits (EHBs) by requiring that OOP maximums for health plans not exceed a particular amount. The OOP maximum requirements set by the ACA apply to most health plans, including all non-grandfathered individual and group plans, regardless of size or whether the plan is fully insured or self-funded. The ACA OOP maximums are adjusted annually. Non-grandfathered group health plans must set the plan OOP maximum for EHBs at or below these amounts. Below are the ACA requirements for 2022-2024.

All non-grandfathered plans must cap OOP spending at $9,450 (in 2024) for any covered person. For a family plan with an OOP maximum of more than $9,450, the plan can satisfy this rule by embedding an individual OOP maximum for each covered individual within the family. See the below example from HHS illustrating a compliant embedded individual deductible.

HHS Example:

“…if any other than self-only plan has an annual limitation on cost sharing of $10,000 and one individual in the family plan incurs $20,000 in expenses from a hospital stay, that particular individual would only be responsible for paying the cost sharing related to the costs of the hospital stay covered as EHB up to the annual limit on cost sharing for self-only coverage (…$9,450 for 2024)”

Costs Applied to the OOP Maximum

Under the ACA, a non-grandfathered group health plan is required to count all costs incurred for in-network EHBs toward satisfying the OOP maximum. Therefore, any participant payments due to a plan deductible, coinsurance, or copayment for in-network EHBs should be applied to the OOP maximum. To determine which benefits are EHBs, a fully insured plan will follow the state requirements for EHBs in the state in which the policy is issued. Self-funded plans must choose a particular state as their benchmark plan to identify EHBs if they intend to exclude non-EHB benefits from counting toward the plan's OOP maximum.

While a plan is not typically required to count any out-of-network costs for purposes of the OOP maximum, there is an exception for claims subject to the No Surprises Act. The No Surprises Act applies to claims for out-of-network emergency and air ambulance services and for out-of-network services provided by in-network facilities (such as anesthesiology and radiology). For these services, cost-sharing amounts must be determined as if the services were in-network, and they must count toward in-network deductibles and OOP maximums.

A plan is not required to count costs incurred for non-essential health benefits, balance-billed amounts for non-network providers, out-of-network claims, or spending for non-covered services toward the OOP maximum. In addition, a plan is not required to count any premium contributions toward the OOP maximum. However, a plan could certainly be designed to be more generous and to count additional costs toward satisfying the OOP maximum (e.g., out-of-network or non-essential health plan benefits).

Reference-Based Pricing

Reference-based pricing plans typically have no network, which raises the question of how the ACA OOP maximum rules apply to such a plan when those rules depend on whether services were provided in-network or out-of-network. Under agency guidance, a reference-based pricing plan may treat the providers who accept the reference-based price as in-network providers (cost-sharing associated with those claims count toward the OOP maximum) and providers who do not are treated as out-of-network (cost-sharing or balance billing associated with those claims do not have to count toward the OOP maximum), but only if the plan has a reasonable method to ensure adequate access to quality providers who will accept the reference price.

Whether the plan has a reasonable method to ensure adequate access to qualify provider is determined based on all the facts and circumstances, including:

• Whether the plan has an exception process if there is not a provider who will accept the reference price, or whether the quality of services would be compromised if the participant used a provider who accepts the reference price. The exception process would limit the participant to paying the normal cost-sharing as if the provider accepted the reference price, and the plan would cover any remaining balance bill costs.
• Upon request, the plan provides participants with a list of providers that will accept the reference price for each service covered by the plan; a list of providers that will accept a negotiated price above the reference price for each service; and information on the process and underlying data the plan used to ensure that an adequate number of providers accepting the reference price meet reasonable quality standards.

If the reference-based pricing plan does not provide adequate access to quality providers who will accept the reference price, then any balance bill amounts charged by the providers would count towards the OOP maximum.

HDHP Annual OOP Maximums

High deductible plans (HDHPs) that are intended to be compatible with health savings accounts (HSAs) must meet minimum deductible and maximum OOP requirements.

The qualifying HDHP OOP maximums are also adjusted annually. Qualifying HDHPs must set the plan OOP maximum at or below these amounts. Below are the qualifying HDHP OOP requirements for 2022-2024.

NOTE: The OOP limits set by the IRS for qualifying HDHPs are lower than the OOP limits set by HHS for group health plan coverage to comply with the ACA as set forth above.

The IRS does not require that family HDHP coverage apply an embedded OOP, but an HSA-compatible plan must satisfy both ACA and IRS requirements. To comply with both ACA and qualifying HDHP OOP requirements, for any family HDHP coverage with an OOP maximum above the single ACA OOP maximum, the plan would need to have an embedded single OOP maximum that is equal to or lower than the single ACA OOP maximum. For example, for family HDHP coverage offered in 2024, if the family OOP maximum is $12,000, there would need to be an embedded individual OOP maximum of $9,450 or less.

Drug Discount Cards – Manufacturers’ Financial Assistance

HHS issued regulations providing that the amount of the drug manufacturers' financial assistance toward brand-name drugs may be, but is not required to be, counted toward the OOP maximum. The plan could choose to count only the cost less the amount covered by the manufacturer toward the OOP maximum. For example, if the drug costs $400/month, but the individual only has to pay $100 after the manufacturer discount, only $100 would count toward the OOP maximum.

Separate guidance from the IRS addresses drug discount cards for purposes of maintaining HSA-eligibility. The guidance in Q&A 9 of Notice 2004-50 indicates that a discount card for prescription drugs will not cause an individual who is covered by an HDHP to be ineligible for an HSA if the individual is required to pay the costs of the drug (after taking into account the discount) until the minimum HDHP deductible is satisfied. So, using the same example as above, if the individual is required to pay $100 without any further plan cost-sharing until the minimum HDHP deductible is satisfied, the discount card will not interfere with HSA-eligibility.

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.