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The Affordable Care Act and Companies under 50 FTE’s - Total Out of Pocket and Deductible Limitations

Posted by Garner, Gary at Saturday, 02/23/2013 1:51 pm
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On January 1, 2014 the Patient Protection Affordable Care Act (PPACA) will be fully implemented. The PPACA places caps on the “total out of pocket” and “deductibles” that insured’s will pay in small group plans. Under the PPACA a small group plan is a group health plan offered in a company with 49 or less full time equivalents. “Total out of pocket” costs are defined as the maximum an insured or their family can spend on “essential health benefits” in a plan year. “Deductible” out of pocket refers to the amount the insured has to spend before the insurance company begins to pay for some or all of allowable medical costs.


Starting in 2014 the maximum “total out of pocket” costs for a small group plan will be $6,645 for individuals and $13,290 for families. These limits are based on the maximum out of pocket limitation for High Deductible Health Plans.

The maximum “deductibles” for a small group plan will be $2,000 for an individual and $4,000 for a family. There is an adjustment provision for companies that include a Flexible Spending Account in their group plan. The “total out of pocket” and “deductible” amounts will be indexed every year based on the health care inflation index.


The deductible thresholds of $2,000 and $4,000 are much lower than some current small group plan benefits. The natural result will be, by lowering the “total out of pocket” and “deductible” amounts to the mandated level, premiums will increase. We expect many small group plans to be dropped, opting to allow their employees to go to the “health care exchange” and purchase personal policies. While this may seem like the only alternative there are others, such as keeping the group plan and utilizing the “SHOP heath care exchange” to acquire the coverage.

The “SHOP” will allow small employers to acquire their group plan through the “health care exchange”. There are tax benefits this strategy can provide to employers and employees. In addition some businesses may qualify for a “tax credit” of up to 50% of premiums paid if they continue to provide a group plan.

Before making the decision to drop your current small group health plan know all your options. If you would like to discuss how the PPACA will impact your company and review the options that your company may have, email or visit our web site and let us know in the Contact box.