Premiums, copays, deductibles and other out-of-pocket medical expenses often add up to thousands of dollars per year for the average American family. And that’s when everyone’s in relatively good health. Out-of-pocket (OOP) expenses can become overwhelming or even financially devastating for someone who’s dealing with a serious, ongoing health issue. The Affordable Care Act cost-sharing caps limit some out-of-pocket medical costs for consumers, requiring health plans (including most self-insured employers) to cover costs that exceed those limits. Annual ACA caps can have some impact on a self-insured employer’s healthcare spending, though stop loss insurance may help control the risk.
Affordable Care Act Cost-Sharing Caps: What They Do
Out-of-pocket maximums have been part of the ACA since it was implemented in 2013. The Act established that consumers would only be required to pay up to a certain dollar amount for essential health benefits in a given year. Group health plan providers are required to cover any excess OOP expenses for covered individuals who reach their OOP maximum before the end of the plan year. The provision applies to both fully-funded and self-funded plans.
(Self-insured employers may be exempt from the ACA’s cost-sharing provisions only if they have grandfathered plans. A self-funded plan is eligible for grandfathered status if it was established before the ACA was enacted in 2010 and has continuously maintained certain provisions ever since.)
It’s important to note that the OOP caps only apply to covered, in-network services, and they don’t apply to health insurance premiums. So if someone covered by a self-funded plan reaches their OOP maximum and then incurs more OOP costs from an out-of-network provider, the ACA doesn’t require the plan to cover those expenses. This is especially relevant for self-insured employers that use reference-based pricing. If a provider doesn’t accept the amount that an employer pays for a given service, they can bill the patient for the unpaid portion of their bill. These costs would not count toward the patient’s OOP maximum.
Affordable Care Act Cost-Sharing Caps for 2022
The Department of Health & Human Services establishes the annual Affordable Care Act cost-sharing caps, which increase slightly each year. The HHS sets two maximums each year, one for “self-only coverage” and one for “other than self-only coverage;” essentially, individual vs. family coverage.
For the 2022 plan year, the OOP maximum is $8,700 for an individual and $17,400 for a family. These limits were only slightly increased from 2021, when OOP maximums were capped at $8,550 for an individual and $17,100 for a family.
The caps were nearly set to be higher: HHS studied the idea of raising 2022 OOP maximums to $9,100 for self-only coverage and $18,200 for family coverage, but ultimately ruled against it.
ACA Caps and Self-Insured Employers
If the HHS had followed through with slightly higher maximums, self-insured employers would have saved a little money. The greater an individual’s share of their healthcare costs is, the less their health plan has to contribute if they incur claims above the OOP maximum. (Of course, employees benefit from lower caps.)
But the overall impact of lower caps probably won’t be hugely significant for self-insured employers, for a few reasons. One, these maximums only affect a small number of people. Since Affordable Care Act cost-sharing caps don’t apply to premiums, most people don’t spend enough in eligible medical expenses to come close to reaching their annual cap. Plus, OOP costs tend to go up as people age, so younger employees covered by a self-insured employer are generally less likely to spend above their maximum.
Two, self-insured employers can use the protection of stop loss insurance to shield them from excessive OOP costs. Specific stop loss allows the self-insured employer to set its own cap on what it will pay for any one individual’s healthcare costs. Aggregate stop loss allows the employer to set a cap on what it pays for overall group claims. Shielding the employer from excessive OOP costs is just one of the ways that stop loss insurance helps self-insured employers manage unpredictable healthcare costs.
Stop Loss Insurance Brokers, Inc. is here to keep you informed about any self-funding developments that may affect your business. If you have questions about Affordable Care Act cost-sharing caps or anything to do with self-funding and stop loss, contact me today.
Stop Loss Insurance Brokers, Inc. is your source for information about all things related to self funding. We are here to answer questions you have about stop-loss provisions, switching from fully-funded to self-funded insurance, or whatever else you may be wondering about around health insurance plans. Contact us today!