The affordability of the Affordable Care Act has taken another positive step to help consumers, as the Centers for Medicare and Medicaid Services (CMS) recently announced changes to health insurance out-of-pocket maximum expenses, and clarification to ACA rules. For 2016, CMS announced a $6,850 limit on out-of-pocket expenses for individuals (a $250 increase from 2015), and a $13,700 limit on family policies (a $500 increase from 2015). The clarification is where healthcare consumers win.
Today the law limits how much people have to pay from their own wallet for deductibles, coinsurance and copayments in an effort to cap costs. (These costs are limited to the insurance policy’s in-network benefits.) The clarification to the law states that all people, whether they have an individual plan or a family plan, will only pay the individual maximum out-of-pocket cost if one person in a family has a medical expense, regardless if they have a family plan. The family out-of-pocket maximum is only invoked when more than one family member has medical expenses during the plan year.
To provide an illustration, let’s look at a family of five with a $13,700 out-of-pocket maximum limit. During the year spouse #1 incurs $10,000 in medical expenses. With the new rule clarification, the family only has to pay $6,850 of the $10,000 bill since one member of the family required medical treatment. Later in the year, spouse #2 and children #1 and #2 are in an accident, and incur $3,000 in medical bills each ($9,000 total). All four individuals requiring medical care totals $15,850 for the year ($6,850 + $3,000 + $3,000 + $3,000). Because the family out-of-pocket maximum is $13,700, the plan or employer must bear the difference of $2,150 since the family will not have to pay above $13,700.
In an interview with Modern Healthcare, Kevin Counihan, CEO of the Affordable Care Act’s health insurance marketplaces, said the policy is intended to “protect families from racking up burdensome medical debts.” He went on to say, “We believe that applying the individual $6,850 maximum … helps remedy the difficulty a consumer could face in paying up to $13,700 out-of-pocket for certain covered medical care under the plan because he or she purchased family coverage instead of self-only coverage.” In a letter Counihan wrote to employers, he went on to say, “It also prevents consumers from being penalized for purchasing family coverage rather than self-only coverage.”
Large employers, especially those with self-pay plans, have been vocal about the rule because unpaid medical costs beyond the $6,850 maximum will cost the employer money, dollars most large companies have not budgeted for in 2016.
Democratic presidential candidate Hillary Clinton has released her plan for lowering out-of-pocket expenses for Americans, calling for caps on out-of-pocket expenses for prescription drug coverage and reducing the amount of money pharmaceutical companies spend on advertising. To bolster the Affordable Care Act, Clinton proposes three sick visits to a doctor every year that do not go against the insurance deductible, and a refundable tax credit of up to $5,000 for families that incur large out-of-pocket costs. Clinton’s competitive challenger, Bernie Sanders, is calling for a single-payer system to reduce healthcare’s financial impact on American wallets. Republican candidates have varying views on the Affordable Care Act, but have almost universally said in stumping speeches and debates that the law is “flawed to its core,” a “failed federal program,” and “unaffordable.”
A 2015 study by the Kaiser Family Foundation found that more than 6.5 million people purchased a Silver level plan, making Silver the most popular healthcare plan in America. Silver plans pay 70% of medical expenses, leaving the remaining 30% to the consumer. For a family of four that does not qualify for any cost assistance to purchase health insurance, a federal marketplace Silver plan costs an average of $986 each month or $11,832 per year. Top that cost with out-of-pocket maximums, and the rule clarification becomes a big win for healthcare consumers.
NOTE: The views expressed here are those of the author and do not necessarily represent or reflect the views of Healthcare, Inc. and HealthCare.com.