When the Affordable Care Act (ACA) was enacted in 2010, it was designed to be implemented in waves, with changes coming every year until the entire plan was fully operational. One provision, the cap (limit) on out-of-pocket healthcare expenses that individuals and families must pay, changes in 2016. The changes will lower the cost to families that run up big medical bills, which is exactly what the ACA was designed to do. Unfortunately, the nation’s biggest employers and the Republican Party are not happy with the coming changes.
Out-of-Pocket Expenses versus Premium Payments
Out-of-pocket expenses (also referred to as cost-sharing expenses) cover the cost of things such as deductibles, copayments, and coinsurance. It does not include premiums for coverage paid through payroll deductions or direct payments to a private healthcare plan provider. The changes in 2016 do not affect or include any aspect of healthcare premiums which make you eligible for medical care in the first place.
The cap on out-of-pocket expenses is limited to medical care for the 10 essential benefits defined under the ACA, which are:
- Outpatient care
- Emergency room care
- Hospital in-patient care
- Maternity and new-baby care
- Pediatric services that include dental and vision care
- Mental health and substance abuse care
- Prescription drugs
- Diagnostic tests
- Preventive services (screenings, vaccinations, counseling, etc.) and management-care services for chronic diseases
- Services, therapy, and devices during recovery, disability, or treatment for chronic conditions
Current Out-of-Pocket Cap
Currently, the annual cap for out-of-pocket expenses when healthcare is provided by an in-network medical facility is:
- $6,600 for individual coverage.
- $13,200 for family coverage.
In the case of the individual coverage plan, once a person pays $6,600 in out-of-pocket expenses in a given year (coverage period) the healthcare provider pays 100% of all such medical expenses after that.
For family out-of-pocket expenses, once an individual family member’s out-of-pocket expenses reach the cap of $13,200, the healthcare provider pays 100% for all expenses beyond that amount for that individual. The $13,200 cap applies individually to every family member. The family could pay as much as $13,200 per family member per year.
2016 Out-of-Pocket Cap
Cap limits will be greater in 2016 but the way the caps apply to family coverage will be quite different:
- $6,850 for individual coverage.
- $13,700 for family coverage.
The terms for cap limits will be the same for individual coverage as they were before 2016.
For families, the $13,700 cap covers the entire family collectively but the caps on individual family members will be the same as that of a person under an individual coverage plan (6,850). The $13,700 cap is twice that of the individual’s $6,850.
If one family member becomes seriously injured or ill and accrues large medical bills, for example, his/her out-of-pocket expense cap is $6,850. Any expenses beyond that for the individual are covered 100% by the insurance provider.
If a second family member suffers a similar fate, his/her out-of-pocket expenses are also capped at $6,850, which would satisfy the family cap of $13,700 per coverage period.
Once the family cap of $13,700 is met, all out-of-pocket expenses for the entire family are covered 100% by the provider.
Critics of the 2016 change are concerned that employer costs will go up and revisions to existing plans will be required. A letter sent to the White House in June by the ERISA Industry Committee (ERIC) asked to have the 2016 cost-sharing changes (out-of-pocket expense caps) “withdrawn immediately,” saying, “Many employers face a major plan design change or revision to the pricing structure to accommodate the additional cost.” On its website, ERIC describes itself as “the only national association advocating solely for the employee benefit and compensation interests of America’s largest employers.”
In a letter sent in August to the US Department of Health and Human Services, three Republican members of the House of Representatives questioned the Obama Administration’s authority to proceed with the changes.
“Incredibly Important Protection”
JoAnn Volk is a senior research fellow at the Center on Health Insurance Reforms at Georgetown University in Washington, DC. In describing the 2016 cost-sharing changes, she states: “This is an incredibly important protection for people who have significant health care costs. This brings a whole new level of assurance that they didn’t have before the Affordable Care Act.”
- "Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2016; Final Rule ." Federal Register. National Archives and Records Administration, 27 Feb. 2015. Web. 26 Aug. 2015.
- Guarisco Fildes, Annette. "ERIC Urges Agencies to Withdraw New Rule on Out-of-Pocket Limits in Group Health Plans." ERIC / The ERISA Industry Committee. ERIC, 16 June 2015. Web. 26 Aug. 2015.
- Ryan, Paul D., John Kline, and Fred Upton. "August 7, 2015, Letter to the Honorable Sylvia Mathews Burwell, Secretary, US Department of Health and Human Services." Bloomberg BNA. Congress of the United States / House of Representatives, 7 Aug. 2015. Web. 26 Aug. 2015.