How to plan for new health care spending limits effective in 2015

Health care reform introduced new rules to limit how much people would have to spend out of pocket on health expenses before their insurance kicks in. One rule requires prescription drug costs to count toward the same limit as medical costs starting in 2015. That means many organizations will soon have some important decisions to make about how their health coverage works.

“With medical and prescription drug costs accumulating in the same bucket, it will be easier for employees to reach the ceiling on what they have to pay,” says Amber Hulme, Medical Mutual Vice President, Central and Southern Ohio. “However, it’s a significant change and many organizations will want to evaluate their current plan designs before they renew for 2015.”

Smart Business spoke with Hulme about how the limits work, what they mean for the average employer and what organizations need to do to make sure they are giving their employees the best options available.

What do these limits mean?

They help people spend less out of pocket for certain expenses before their health insurance starts paying at 100 percent. Each state decides what expenses qualify. Depending on the type of plan, there are different limits. Next year, a single person will have a $6,600 limit for standard copay plans and a $6,450 limit for high-deductible plans, which can be used with a health savings account, known as an HSA. The limits for family coverage are double those amounts.

Currently, prescription drug costs don’t count toward the same limit as medical costs. That includes copays, coinsurance, deductibles and other similar charges involved with getting a prescription filled. Next year, all those costs count toward the same limit. If employees reach their limit sooner, the health plan will start paying at 100 percent sooner. As a result, some organizations may see their insurance rates go up.

Will the change apply to everyone?

It will, but the degree of change will depend on the type of drug coverage the organization chooses. If they have a ‘major medical’ plan, medical and drug benefits already accumulate toward one deductible. So whether an employee is getting a prescription filled or visiting the doctor, the costs already count toward the same out-of-pocket limit.

However, a great deal will change for organizations with a copay prescription drug plan. With those plans, drug and medical costs currently accumulate separately, often with no limit on drug costs. For those organizations, benefits will work very differently when both costs count toward the same limit. Some organizations won’t see a change until the start of their next “plan year,” which in many cases is not based on the actual calendar year.

Are there any exceptions?

There are actually two important exceptions. First, grandfathered plans do not have to comply with this limit rule. If an organization purchased its plan before the Affordable Care Act (ACA) was signed into law and hasn’t made any significant benefit changes since then, it is considered grandfathered. The other exception is for “grandmothered” or “transitional” plans, which started last November with President Barack Obama’s “keep your plan” relief. Organizations are actually still exempt from many ACA provisions if they meet either condition.

How should organizations prepare?

These limits could introduce a relatively major change for some organizations, so they may want to reconsider their benefit structure for 2015.

For example, if an organization has a $1,000 maximum out of pocket, it may want to look at raising that limit to help save money on the next renewal. Obviously, organizations will want to make the right choice for the business as well as its employees. But it can be complicated, so it’s important to ask for help. To be really prepared, organizations will want to schedule time with their insurance broker or sales representative to discuss options.

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