Cost-Sharing (Reductions), Employee Benefits Compliance, Small Employers

2016: “Small” group increases to 100 Employees; and Embedded Individual OOPM Applies to All Size Plans

employee guide

As employers start preparing for 2016 renewals, here are two important changes to keep in mind:

  • “Small” group definition increases to 100 employees, and
  • Embedded individual out-of-pocket maximum (OOPM) applies for all size plans

“Small” Group Definition

Starting with the 2016 plan year, “small” group increases to 100 employees.  Under the ACA, the definition is up to and (including) 100 full-time employees (FT EEs) and full-time equivalents (FTEs).  State law definitions may differ, but some states (e.g., California) are amending their definitions to match the ACA definition.

Ramifications?  Employers with up to 100 employees will be:

  • Eligible to buy coverage in the exchange
  • Subject to modified community rating
  • Required to cover “essential health benefits” (EHB)
  • Required to meet specified actuarial levels, plus or minus two percentage points (bronze 60% AV, silver 70% AV, gold 80% AV or platinum 90% AV)

Embedded Individual Out-of-Pocket Maximum

Starting with the 2016 plan year, plans of all sizes (both insured and self-funded) must limit the annual in-network, out-of-pocket maximum (OOPM) for any individual to $6,850,even if the individual has family coverage and the plan previously imposed a higher family deductible or OOPM.  This applies to high deductible health plans (HDHPs) as well as to non-HDHPs; however, it does not apply to grandfathered or retiree-only plans.

Where can you find the new rule on embedded individual OOPM?

  • The 2016 Notice of Benefit and Payment Parameters (issued February 27, 2015 by HHS) “clarified” that the individual OOPM applied for all individuals, even those enrolled in family coverage.
  • A May 8, 2015 FAQ issued by HHS explained how the embedded individual deductible applies to HDHPs with family deductibles that exceed the individual OOPM.
  • A May 26, 2015 FAQ issued jointly by the DOL and IRS confirmed that the embedded  individual deductible applies to large and self-funded group health plans as well as to insured plans, but not to grandfathered or retiree plans.

Once an individual reaches the individual OOPM for the calendar year, the individual is not responsible for any more cost-sharing amounts for EHB.  The plan must start paying 100%. This generally applies only for in-network benefits, though exceptions may apply if a network does not include providers who are available to provide the service.