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High Deductible Health Care Plan Limits and the Affordable Care Act

Posted by Garner, Gary at Tuesday, 06/18/2013 1:15 pm
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[font=Calibri]As we prepare for the implementation of the Patient Protection and Affordable Care Act (PPACA) there are some very strategic “pieces” of the puzzle that are now being disclosed. One of these “pieces” is the out of pocket limits for high deductible health plans.[/font]
[font=Calibri]These limits have a significant importance because they are the benchmark for all policies under the PPACA. According to the regulations the high deductible health plan (HDHP) limits will be the benchmark limits for maximum out of pocket amounts for all policies. [/font]
[font=Calibri]The Internal Revenue Service released the maximum out of pocket limits for high deductible health plans last week.  The maximum out of pocket amounts that policies can have will be $6,350 for the individual and $12,700 for the family.[/font]
[font=Calibri]There is additional guidance for companies who use multiple providers for major medical and non- medical services.  Non-medical services include prescription drug coverage. Under the 2014 guidance companies may have two maximum out of pockets, one for major medical and a second for non-medical services. Each maximum out of pocket limit must be at or below the amounts listed above.  Guidance for plan years after 2014 will require the total of all out of pockets limits be coordinated between multiple service providers and cannot exceed the high deductible plan limits. To see the FAQ discussing the limitations please click this link [/font][font=Calibri][/font][font=Calibri]. [/font]
[font=Calibri]If you do not currently offer a HDHP as part of your employee benefit options, now may be the time to consider this type of policy. The basics of the high deductible policy are:[/font]
[font=Calibri]1.[/font][font=Times New Roman]      [/font][font=Calibri]The individual or family pays for all medical services up to the deductible. Normally the plans utilize a network of providers much like the traditional co-pay plans. Charges reflect the negotiated rates the medical provider has with the carrier, so if the insurance company has a negotiated rate with the doctor of $50 per visit then the insured would pay $50 for a physician visit. There are NO copays with HDHP plans.[/font]
[font=Calibri]2.[/font][font=Times New Roman]      [/font][font=Calibri]Once the deductible is reached, depending on the policy, there may be an additional co-pay amount that must be paid up to the maximum out of pocket limit. Once the maximum out of pocket limit is reached the individual or family will have not any additional out of pocket costs for essential health benefits.[/font]
[font=Calibri]3.[/font][font=Times New Roman]      [/font][font=Calibri]In 2015 all essential health benefit out of pocket costs must be coordinated and cannot exceed  the maximum out of pocket totals. This means the all out of pocket costs for medical, prescription and mental health must not exceed the maximum limits.[/font]
[font=Calibri]4.[/font][font=Times New Roman]      [/font][font=Calibri]There are minimum deductibles required for high deductible health plans. The minimums are $1,250 for individuals and $2,500 for family coverage in 2014. The minimum deductibles and maximum out of pocket limits are indexed for inflation ever year.[/font]
[font=Calibri]5.[/font][font=Times New Roman]      [/font][font=Calibri]Individuals covered under a qualifying HDHP can open a Health Savings Account (HSA) that allows for pre-tax contributions. These pre-tax dollars can be used to pay deductibles and out of pocket costs for qualifying medical expenses. There are limits on the amount that can be deposited into these accounts and there are penalties if the monies are not used for qualifying medical expenses.[/font]
[font=Calibri]The Affordable Care Act seems to be designed around the high deductible health plan format. In the PPACA there is reference to Bronze, Silver, Gold and Platinum plans. These designations refer to 60%, 70%, 80%, and 90% co-insurance plans. For example under a Platinum plan the individual would have to pay the initial deductible of $2,500 then the insurance policy would pay 90% of all medical costs until the individual had paid the maximum out of pocket, which for an individual is $6,350 (for 2014) including the deductible. [/font]
[font=Calibri]If you would like to know more about High Deductible Health Plans and how they work contact [/font][font=Calibri][/font][font=Calibri]or go our “Contact” section and let us know. In addition if you have questions regarding the Patient Protection and Affordable Care Act let us know. See our many blogs on the topic at [/font][font=Calibri][/font][font=Calibri]. [/font]
[font=Calibri]IRS CIRCULAR 230 — DISCLOSURE NOTICE: IRS Circular 230 regulates written communications
about federal tax matters between tax advisors and their clients. To the extent the preceding correspondence and/or any attachment is a written tax advice communication, it is not a full “covered opinion”. Accordingly, this advice is not intended and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS regarding the transaction or matters discussed herein.[/font]

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