Embedded Out-of-Pocket Maximums Coming in 2016

All plans must have embedded out-of-pocket maximums in 2016, but you can still have an HSA
All plans must have embedded out-of-pocket maximums in 2016, but you can still have an HSA. David Crockett/Moment/Getty Images

Starting in 2016, all health insurance plans must have embedded individual out-of-pocket maximums (OOPM). What does that mean, and how does it affect your coverage?

For 2016, the OOPM for an individual is $6,850, and the OOPM for a family is $13,700 (plans can have OOPMs that are lower than these amounts, but not higher). An embedded individual OOPM just means that no single member of a family can incur more than $6,850 in covered medical costs during the year.

If multiple family members have claims, the total family spending can reach $13,700. But starting in 2016, the only way to reach that limit would be if two or more family members had significant claims.

Deductible and OOPM - what's the difference?

The deductible is the amount you pay before your insurer begins to pay for your care (except for benefits like preventive care, that apply before the deductible). The OOPM is the maximum amount that you’ll pay - including the deductible - over the course of the year for all essential health benefits.

The OOPM can be the same as the deductible or higher, depending on the plan design. It's common to see Bronze plans that have the same deductible and OOPM, with the plan paying 100% of charges after the deductible is met. But many plans have a deductible and then coinsurance (often an 80/20, 90/10, or 70/30 split), with the OOPM being reached after you've paid the deductible plus a pre-determined amount in coinsurance.

Embedded deductibles and OOPMs have long been standard on most health insurance plans, but HSA-qualified high deductible health plans (HDHPs) often have aggregate deductibles and out-of-pocket maximums instead. That means there's just one total family deductible and OOPM. On family plans with aggregate deductibles/OOPMs, the OOPM can be reached with a single family member's claims, or a combination of various family members' claims.

So a single sick family member could incur far more than $6,850 in out-of-pocket costs. 

Changes coming in 2016

But in the Notice of Benefit and Payment Parameters for 2016 that was published in early 2015, HHS stated that the individual OOPM ($6,850 in 2016) applies to all individuals starting in 2016, including those who are covered by a family plan. The new regulation applies to all non-grandfathered individual and group plans, including HSA-qualified plans, large-group plans, and self-insured plans.

Embedded OOPMs mean that each person on the plan has his or her own OOPM - but each person's out-of-pocket costs are also added together towards the family OOPM (ie, a family of four people still has an OOPM of no more than $13,700, even if all four family members incur significant claims).

Although aggregate OOPMs have generally been limited to HSA-qualified plans, they can result in a family needing to meet the whole family OOPM, even if just one family member has claims. Even after the ACA was implemented, it was common to see HSA-qualified plans with a family OOPM of $10,000 or more, and no embedded individual OOPM.

But that will change in 2016. All plans - even those that are HSA-qualified - will have embedded individual OOPMs, and no individual family member will incur costs in excess of $6,850. Family plans will be allowed to have OOPMs as high as $13,700, but limits that high won't be reached unless two or more family members have claims.

Yes, you can still have an HSA-qualified plan

In 2016, the OOPM for an HSA-qualified plan can't be any higher than $6,550 for an individual plan, and $13,100 for a family plan. HSA-qualified plans will clearly have no trouble remaining compliant with the ACA, since the OOPM restrictions imposed by HSA regulations are most strict than those imposed by the ACA.  

But HSA-qualified plans will have to ensure that no single member of a family can incur more than $6,850 in out-of-pocket costs. Many HSA-qualified plans already have OOPMs well below these levels, but the new regulations mean that no family will be exposed to $13,000+ in medical costs for a single family members care, regardless of the type of plan they have.  

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