The Affordable Care Act (ACA) has made a number of significant changes to group health plans since the law was enacted in 2010. While many key ACA reforms took effect in 2014 and 2015, there are still a number of requirement changes coming up in 2017.
In preparation for these changes, we’ll be featuring a series of posts to walk you through these new requirements and help you develop a compliance strategy. This post, Volume 1, is focused on plan design changes.
2017 ACA Plan Design Changes
1. Grandfathered Status
A grandfathered plan is one that was already in existence when the ACA was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. However, grandfathered status does not automatically expire as of a specific date. A plan may maintain its grandfathered status as long as no prohibited changes are made. Once a plan relinquishes grandfathered status, it cannot be regained and the plan must comply with additional reforms under the ACA.
Review your plan's grandfathered status:
If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2017 plan year. Grandfathered plans are exempt from some of the ACA’s mandates. A grandfathered plan’s status will affect its compliance obligations from year to year.
If your plan will lose its grandfathered status for 2017, confirm that the plan has all of the additional patient rights and benefits required by the ACA for non-grandfathered plans. This includes, for example, coverage of preventive care without cost-sharing requirements.
If your plan will keep grandfathered status, continue to provide the Notice of Grandfathered Status in any plan materials provided to participants and beneficiaries that describe the benefits provided under the plan (such as the plan’s summary plan description and open enrollment materials). Model language is available.
2. Cost-Sharing Limits
Effective for plan years beginning on or after January 1, 2014, non-grandfathered health plans are subject to limits on cost-sharing for essential health benefits (EHB). The ACA’s overall annual limit on cost-sharing (also known as an out-of-pocket maximum) applies for all non-grandfathered group health plans, whether insured or self-insured. Under the ACA, a health plan’s out-of-pocket maximum for EHB may not exceed $7,150 for self-only coverage and $14,300 for family coverage, effective for plan years beginning on or after January 1, 2017.
Health plans with more than one service provider may divide the out-of-pocket maximum across multiple categories of benefits, rather than reconciling claims across multiple service providers. Thus, health plans and issuers may structure a benefit design using separate out-of-pocket maximums for EHB, provided that the combined amount does not exceed the annual out-of-pocket maximum limit for that year. For example, in 2017, a health plan’s self-only coverage may have an out-of-pocket maximum of $6,000 for major medical coverage and $1,150 for pharmaceutical coverage, for a combined out-of-pocket maximum of $7,150.
Beginning with the 2016 plan year, the self-only annual limit on cost-sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or family coverage. This embeds an individual out-of-pocket maximum in family coverage so that an individual’s cost-sharing for essential health benefits cannot exceed the ACA’s out-of-pocket maximum for self-only coverage.
Note that the ACA’s cost-sharing limit is higher than the out-of-pocket maximum for high-deductible health plans (HDHPs). In order for a health plan to qualify as an HDHP, the plan must comply with the lower out-of-pocket maximum limit for HDHPs. The Department of Health and Human Services (HHS) provided FAQ guidance on how this ACA rule affects HDHPs with family deductibles that are higher than the ACA’s cost-sharing limit for self-only coverage.
According to HHS, an HDHP that has a $10,000 family deductible must apply the annual limitation on cost-sharing for self-only coverage ($7,150 in 2017) to each individual in the plan, even if this amount is below the $10,000 family deductible limit. Because the $7,150 self-only maximum limitation on cost-sharing exceeds the 2017 minimum annual deductible amount for HDHPs ($2,600), it will not cause a plan to fail to satisfy the requirements for a family HDHP.
Check your plan's cost-sharing limits:
Review your plan’s out-of-pocket maximum to make sure it complies with the ACA’s limits for the 2017 plan year ($7,150 for self-only coverage and $14,300 for family coverage).
If you have a health savings account (HSA)-compatible HDHP, keep in mind that your plan’s out-of-pocket maximum must be lower than the ACA’s limit. For 2017, the out-of-pocket maximum limit for HDHPs is $6,550 for self-only coverage and $13,100 for family coverage.
If your plan uses multiple service providers to administer benefits, confirm that the plan will coordinate all claims for EHB across the plan’s service providers, or will divide the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2017.
Confirm that the plan applies the self-only maximum to each individual in the plan, regardless of whether the individual is enrolled in self-only coverage or family coverage.
3. Health FSA Contributions
Effective for plan years beginning on or after January 1, 2013, an employee’s annual pre-tax salary reduction contributions to a health flexible spending account (FSA) must be limited to $2,500 (as adjusted for inflation). The $2,500 limit was increased to $2,550 for taxable years beginning in 2015 and 2016. The IRS typically announces whether the limit will be adjusted for the next year toward the end of the year.
The FSA limit does not apply to employer contributions to the health FSA, and does not impact contributions under other employer-provided coverage. For example, employee salary reduction contributions to an FSA for dependent care assistance or adoption care assistance are not affected by the health FSA limit.
Update your health FSA's contribution limit:
Work with your advisors to monitor IRS guidance on the health FSA limit for 2017.
Once the 2017 health FSA limit is announced, confirm that your health FSA will not allow employees to make pre-tax contributions in excess of the limit for the 2017 plan year. If the 2017 limit is announced too late for your open enrollment, use the 2016 limit to comply.
Communicate the health FSA limit to employees as part of the open enrollment process.
We hope you found Affordable Care Act Requorements Taking Effect in 2017: Vol. 1 helpful. Stay tuned for part two of this series, which will cover requirements for providing summary of benefits and coverage (SBC).
This ACA Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. Information from Zywave, Inc.