New ACA guidance will force some employers to alter 2016 health plans

A new FAQ on Obamacare should have a lot of employers taking a close look at their 2016 health plans. 

In 2016, new out-of-pocket limits kick in for non-grandfathered health plans — the single coverage limit rises to $6,850, and the family coverage limit climbs to $13,700.

That much you probably knew, especially if you have a high-deductible health plan.

But here’s what you may not have known: That $6,850 limit will apply to every individual under your plan, regardless of whether a person is enrolled in family coverage or not.

That’s the word handed down from the DOL’s latest FAQ (No. 27) on Obamacare.

The ’embedded rule’

This has been dubbed the “embedded rule” (as in individual limits are embedded in family plans), and it applies to all non-grandfathered group health plans.

Here’s an example of how this rule applies:

Say you’ve got four individuals enrolled in family coverage under your non-grandfathered group health plan that has an out-of-pocket limit of $13,000. If one individual under that plan racks up $12,000 in medical expenses, they can only be held responsible for $6,850 of those charges, putting the plan on the hook for the remaining $5,150. That means the remaining individuals could still rack up $6,150 worth of out-of-pocket charges before reaching the plan limit of $13,000.

Under the old rules, the individual could’ve been held responsible for the entire $12,000 bill, soaking up all but $1,000 of the maximum out-of-pocket costs under the $13,000-capped plan. Not anymore. The maximum an employee could be made to pay under a non-grandfathered group health plan is $6,850 — period. It does not matter what kind of plan the person’s enrolled in or what the overall out-of-pocket limit for that plan is.

Only 17% are currently ready

As it stands, most employers’ plans aren’t yet in compliance with this rule, according to research by Aon Hewitt, which found that only 17% of firms currently have an embedded out-of-pocket limit in their high-deductible plans.

That’s going to have to change — and soon. The embedded rule kicks in for plan years that begin in or after 2016.