Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Out-of-Pocket Health Spending Caps Start in 2014 with Limited Exceptions, Administration Says

By John Reichard, CQ HealthBeat Editor

August 13, 2013 -- The Obama administration emphasized last week that a wide swath of American consumers will benefit in 2014 from the first-ever federal limits on how much health insurers can require their policyholders to pay out of pocket for medical expenses, as the White House attempted to fend off a new flurry of Republican attacks on its implementation of the health law.

The limits are a "still a major win" for consumers, even though in some cases the new financial protection consumers will get on how much they shell out for prescription drugs won't take effect until 2015, said an administration official who spoke on background.

The official's comments followed a fresh round of attention to the cost-sharing limits generated by a recent New York Times story that focused on a delay in one type of protection insurers and employers must adopt for consumers enrolled in certain health plans.

Republicans seized on the story as evidence that the Obama administration is cushioning big business from difficulties in complying with the health law, but not the public.

The Labor Department disclosed the delay in February. But the administration called little attention to it in its press materials. And it escaped the notice of many lawmakers on Capitol Hill.

However, patient advocacy groups did see it and in subsequent weeks urged the administration to cancel the delay, to no avail. The postponement was granted to some plans because employers and insurers said they needed more time to retool computer systems to comply with the new limits on out-of-pocket spending.

Under the health law, plans in 2014 can't require an enrollee to pay more than $6,350 a year out of pocket for medical services and pharmaceuticals covered under "essential benefits" provisions of the overhaul (PL 111-148 PL 111-152). The limit for families is $12,700. There are no such federal protections in effect now.

When Plans Are Split

The one-year delay applies to health plans that have different benefit administrators for medical services and for pharmaceuticals, the federal official said. For example, plans that carve out their drug benefits and have them managed by a different vendor fall into this category. These plans must abide by the $6,350 limit on medical services in 2014, just as other health plans must. They also must have a limit of $6,350 in 2014 on drug expenses if they currently limit out-of-pocket drug expenditures.

In effect, that means that in 2014, plans that split up their benefits administration can have double the out-of-pocket limit that plans who administer medical and drug plans together must abide by. And plans that have no out-of-pocket caps for drug costs don't have to institute one in 2014.

However, by 2015 all the plans granted the one-year delay must comply with the single limit of $6,350 for medical and pharmaceutical expenses.

According to the administration official, all of the plans offered to individuals and small employers in the new insurance exchanges opening in October will have the single limit in 2014 with no delays in the cost-sharing protections.

The cost-sharing protections are not required in plans that are "grandfathered" under the health law, however. According to a 2012 employee benefits survey sponsored by the Kaiser Family Foundation, 48 percent of enrollees in employer-sponsored coverage are in plans that were in place in March 2010 when the overhaul became law and so are exempt from many of the overhaul's requirements as long as they do not make major modifications to their coverage. The number of grandfathered plans is expected to dwindle over time.

Insurance industry and administration officials had no immediate estimate as to what percentage of enrollees in health insurance plans are in those with separate benefit administrators for medical and drug benefits.

But patient advocates said that the delay would create undue hardship.

Delay Could Be Hardship

Myrl Weinberg, CEO of the National Health Council, said in a June 7 statement reacting to the initial word of the delay that even a one-year postponement "will disproportionately harm people with chronic diseases and disabilities. The administrative burden to collect and share data on a timely and accurate basis for plans that utilize multiple service providers is understandable. However, permitting these plans to have a total annual out-of-pocket limit that could be twice the amount of other plans is contrary to ACA."

This out-of-pocket limit of roughly $13,000 in 2014 "would be in addition to the cost of the patient's insurance premium," Weinberg noted.
But the Obama administration is emphasizing that the health law is putting into effect consumer protections not now required by law—and that would disappear if Republicans succeeded in repealing the overhaul.

Although most health plan enrollees have protection against out of pocket costs now, until the health law there was no federal requirement for such out-of-pocket limits.

According to the Kaiser survey, 87 percent of people enrolled in health plans have out-of-pocket limits in those plans. And only 2 percent of health plan enrollees are in plans that have limits above $6,000, roughly the limit in the health law. But the same survey shows that a large majority of people with health insurance are in plans that do not count prescription drug spending toward the out-of-pocket maximums.

David Dross, who tracks managed pharmacy plans for the Mercer consulting company, said in an email that his sense is that it is rare for companies to have separate out-of-pocket maximums for their prescription drug coverage. A separate study by Takeda Pharmaceuticals found that in 2011 only 14 percent of employers had out-of-pocket limits on pharmaceutical spending.

Publication Details