Final Rules on Cost Sharing Parameters/Reductions Released
The Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (HHS) ("the Departments") released their final rules on cost sharing parameters and cost sharing reductions on February 27, 2015. These rules finalize the medical loss ratio programs and a myriad of other related topics in 80 FR 10750. Of particular interest is the finalization of the annual limitation on cost sharing for self-only coverage that applies to all individuals - regardless of whether the individual is covered by a self-only plan or by a plan that is other than self-only (family) coverage.
These final rules on cost sharing for essential health benefits (EHB) require that the individual be responsible for paying the cost sharing related to the costs of medical care EHB up to the annual limit on cost sharing for self-only coverage regardless if the individual has family coverage. The annual limitation cost sharing applies on an annual basis regardless of whether it is a calendar year or non-calendar year plan. This is a major change in HDHPs for HSAs and could require carriers to change their systems and perhaps impact underwriting and rates for such plans.
The Departments did point out that the deductible limit is not regulated in the same manner as the annual limitation on cost sharing. Therefore, family HDHPs that count the family's cost sharing toward the deductible limit can continue to be offered under this ruling. The only limit will be that the family HDHP cannot require an individual in the family plan to exceed the annual limitation on cost sharing for self-only coverage.
For 2016, the maximum annual limitation on cost sharing for self-only coverage is $6,850. Consequently, for 2016, an issurer can offer a family HDHP with a $10,000 family deductible as long as it applies a maximum annual limitation on cost sharing of $6,850 to each individual in the plan, even if the family $10,000 deductible has not been satisfied. This standard does not conflict with IRS rules on HDHPs.
Under the requirements for an HDHP, except for preventive care, an HDHP plan may not provide benefits for any year until the minimum statutory annual deductible for that year has been met. The minimum annual deductible for a family HDHP is $2,600 for 2016. Because the $6,850 self-only maximum annual limitation on cost sharing will exceed the 2016 minimum annual deductible amount for family HDHP HSA coverage, it will not cause the plan to fail to satisfy the requirements for a family HDHP.
What about large and self-funded group health plans? On May 26, 2015 the Departments issued FAQ Part XXVII to clear up any uncertainty about the type of group health coverage that must contain self-only embedded deductibles. All non-grandfathered group health plans, including self-insured and large group health plans must comply with the maximum annual limitation on cost sharing.
This clarification applies for plan or policy years that begin in or after 2016. The purpose of cost sharing proposals was to ensure that issuers could not reset the annual limitation on cost sharing more frequently than once a year.
Please feel free to contact us for further clarification.
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