***See Update at bottom***
Sigh, here we go again. The New York Times is reporting that another component of the Affordable Care Act is being delayed until 2015. This time it appears to be the popular provision that caps out-of-pocket expenses, as the article details here:
The limit on out-of-pocket costs, including deductibles and co-payments, was not supposed to exceed $6,350 for an individual and $12,700 for a family. But under a little-noticed ruling, federal officials have granted a one-year grace period to some insurers, allowing them to set higher limits, or no limit at all on some costs, in 2014.
Under the policy, many group health plans will be able to maintain separate out-of-pocket limits for benefits in 2014. As a result, a consumer may be required to pay $6,350 for doctors’ services and hospital care, and an additional $6,350 for prescription drugs under a plan administered by a pharmacy benefit manager.
Some consumers may have to pay even more, as some group health plans will not be required to impose any limit on a patient’s out-of-pocket costs for drugs next year. If a drug plan does not currently have a limit on out-of-pocket costs, it will not have to impose one for 2014, federal officials said Monday.
There are several parts to this delay that confused me last night when I read it before bed. Having slept a few hours and not (yet) seen many other sources of information, I’m still trying to work out a few questions. Mainly I’m surprised it isn’t specified what is meant by “some insurers” in this instance.
Before we get to that, though, here’s the stated reasoning behind the delay included in the Times piece (my emphasis in bold):
A senior administration official, speaking on condition of anonymity to discuss internal deliberations, said: “We knew this was an important issue. We had to balance the interests of consumers with the concerns of health plan sponsors and carriers, which told us that their computer systems were not set up to aggregate all of a person’s out-of-pocket costs. They asked for more time to comply.”
Health plans are free to set out-of-pocket limits lower than the levels allowed by the administration. But many employers and health plans sought the grace period, saying they needed time to upgrade their computer systems. “Benefit managers using different computer systems often cannot keep track of all the out-of-pocket costs incurred by a particular individual,” said Kathryn Wilber, a lawyer at the American Benefits Council, which represents many Fortune 500 companies that provide coverage to employees.
So there are apparently technical limitations in assessing out-of-pocket maximums for an individual. Color me skeptical. Taking them at their word, the obvious question is how were they previously determining such maximums in the first place? Or, for that matter, as Austin Frakt remarks on Twitter, how then are they determining their premiums?
Yet as the Times notes this delay was apparently buried in a Labor Department FAQ from February. Clicking through their link takes you to part twelve of the FAQ concerning “Limitation on Cost-Sharing under the Affordable Care Act.” Here’s the full portion regarding the limitation on out-of-pocket maximums:
Q2: Who must comply with the annual limitation on out-of-pocket maximums under PHS Act section 2707(b)?
As stated in the preamble to the HHS final regulation on standards related to essential health benefits, the Departments read PHS Act section 2707(b) as requiring all non-grandfathered group health plans to comply with the annual limitation on out-of-pocket maximums described in section 1302(c)(1) of the Affordable Care Act.
The Departments recognize that plans may utilize multiple service providers to help administer benefits (such as one third-party administrator for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization). Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants’ expenses against any out-of-pocket maximums. These processes will need to be coordinated under section 1302(c)(1), which may require new regular communications between service providers.
The Departments have determined that, only for the first plan year beginning on or after January 1, 2014, where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums under section 2707(a) or 2707(b), the Departments will consider the annual limitation on out-of-pocket maximums to be satisfied if both of the following conditions are satisfied:
- The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
- To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1).
The Departments note, however, that existing regulations implementing Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) prohibit a group health plan (or health insurance coverage offered in connection with a group health plan) from applying a cumulative financial requirement or treatment limitation, such as an out-of-pocket maximum, to mental health or substance use disorder benefits that accumulates separately from any such cumulative financial requirement or treatment limitation established for medical/surgical benefits. Accordingly, under MHPAEA, plans and issuers are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.
So the answer to primary question on exactly what constitutes “some” to receive a grace period is (sort of) answered here. Those insurers that “utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums” will be temporarily exempt. However, there are some proverbial asterisks to this, namely that must comply with other coverage mandates and out-of-pocket maximums on coverage separate from “major medical” portions must not exceed $6,350/$12,700 (individual, family). Another caveat spelled out in the regulatory guidance here is that last paragraph quoted above, which states that “under MHPAEA, plans and issuers are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.” Given all this the obvious question is exactly (or even approximately) how many insurers would be exempt next year? That answer would go a long way towards determining the impact, or importance, of this delay.
As I wrote before I can’t help but be skeptical of the need for this grace period, and the information I have doesn’t really satisfy my inner amateur health wonk. Hopefully there will be more written about this, and if I find it I’ll update as needed. As it stands this particular delay leaves more questions than answer.
***Update: The Hill reported on this delay back in April. It provides some crucial clarification:
Advocates are urging the Obama administration to clarify a policy they fear will confront chronically ill patients with out-of-pocket healthcare costs of up to $12,000 next year. The National Health Council is circulating a letter challenging the Department of Labor to modify a policy that could allow certain health plans with multiple service providers to apply the Affordable Care Act’s out-of-pocket spending cap to each provider, rather than cumulatively, in 2014.
In practice, this means that someone with individual coverage could be twice charged the law’s out-of-pocket limit if separate service providers handle their medical and drug benefits.
“Permitting these plans to have a total annual out-of-pocket limit that is twice the amount of other plans subject to this requirement is contrary to the ACA,” the groups wrote. “Separate limits should not be developed in a way that discriminates against patients with high costs within a particular benefit.”
If I’m reading this correctly that would mean that the out-of-pocket limitation isn’t so much entirely delayed as it is expanded for “some” insurers next year only. Ergo, your health insurance isn’t suddenly able to apply whatever cap it wants to your policy until 2015, but that it may (under some circumstances) apply the legally allowed maximum to more than one portion of your policy if it’s handled by separate service providers.
***Update 2: Part of Wonkblog’s take:
So as the eagle-eyed Robert Pear noticed, the Obama administration quietly delayed the rule for certain insurers and employers until 2015 (official details here). The delay was actually announced in February, but as Pear writes, it was “in a maze of legal and bureaucratic language that went largely unnoticed.”
That means it’s time, once again, to play Obamacare Rashomon!
1) “The Obamacare ‘train wreck‘ continues,” with another “vivid demonstration of governing incompetence.”
2) The Obama administration is correctly showing flexibility in the rollout of a vast and complex law. No legislation fully survives first contact with reality, and they’re doing the right thing by listening to employers and insurers who say this small provision would be too burdensome to implement in 2014.
3) The Obama administration is favoring the interests of politically powerful employers and insurers over the interests of consumers and, in particular, the chronically ill, who would be likeliest to spend past these out-of-pocket limits.
4) Almost nothing. This is a small provision that effects relatively few people that’s only being delayed in certain cases — and even then, it’s only being delayed for a single year. Chill out.
My sympathies, as you might expect, lie with some mixture of 2, 3, and 4. What would make Obamacare into a train wreck is if the Obama administration insisted on implementing technically difficult provisions that they don’t have the capacity to implement. These kinds of delays cut the number of possible problems the law will face in its first year.
***Update 3: Sahil Kapur:
It would give employers, large and small, a yearlong reprieve from a portion of the law that requires them to limit out-of-pocket costs under their health plans to $6,350 for individuals and twice that amount for families. In 2014, businesses that offer workers coverage through a variety of plans will only have to abide by the imposed limit for major medical coverage, but not for other coverage like prescription drugs or dental, according the Department of Labor.
The out-of-pocket limit will apply as written on the individual health insurance market.
Consumer protection groups, including major associations that fight heart disease and cancer, are unhappy with the move as it will mean higher co-pays and deductibles for sick Americans until 2015. And Republicans are using it to attack Obamacare.
“It’s one of those damned if you do, damned if you don’t situations,” said Tim Jost, a professor at Washington and Lee University and leading expert on the Affordable Care Act. “If they didn’t, employers would be screaming to Congress about how unreasonable the administration was. But now that they did, consumer groups and others aren’t happy.”
“I’m not happy about it,” he said. “But we’re moving forward.”