Insights

Elimination of Small Group Deductible Limit

April 6, 2014

Employee Benefits

On April 1, 2014, the President signed into law the Protecting Access to Medicare Act of 2014. The bulk of the provisions relate to Medicare; however, the law also contained a provision repealing the limitation on deductibles that applied to fully-insured small group plans under the Affordable Care Act (ACA).

Background

Originally, PHSA section 2707(b) limited cost-sharing by imposing both an out-of-pocket maximum that applied to all group health plans (unless grandfathered) and a limit on annual deductibles for fully-insured small group plans for plan years beginning on or after January 1, 2014.

Fully-insured small group plan deductibles were limited to $2,000 for a plan covering a single individual, or $4,000 for other coverage tiers. The proposed deductible limits for 2015 were $2,150 for self-only coverage and $4,300 for other than self-only coverage. However, the regulatory agencies recognized that it would be extremely difficult (if not impossible) for insurers to create a bronze-level plan (60% actuarial value) if they were limited to a $2,000 deductible. Proposed regulations were subsequently released permitting a health plan’s deductible to exceed the $2,000 limit if the plan could not reasonably provide the actuarial value of a given level of coverage. In most cases, this change rendered the statutory limit meaningless.

Deductible Limits Repealed

The limit on annual deductibles has been deleted from PHSA section 2707(b), effective retroactively to the original enactment of the ACA (September 23, 2010). However, all non-grandfathered group health plans will still be required to comply with cost-sharing requirements in regard to the out-of-pocket maximums for plan years beginning in 2014, but group health plans (even fully-insured small groups) no longer need to worry about annual deductible limits.

 

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