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A Better Partnership


Jan 2014
January 28, 2014

New Health Care Reform Guidance – Part I

The Federal agencies implementing Health Care Reform have issued important new clarifications on:  
  • Out-of-pocket limits: How an employer-sponsored group health plan can maintain separate out-of-pocket limits for medical and prescription drug programs
  • Wellness benefits: When reasonable alternatives must be provided and how to address a doctor’s advice that a program requirement is medically inappropriate

Out-of-Pocket Cost Limitations

Beginning with plan years in 2014, non-grandfathered group health plans must limit a participant’s annual out-of-pocket costs to $6,350 for self-only coverage and $12,700 for all other coverage tiers.

Many employers use multiple administrators for their group health plans. One common arrangement is to use one administrator for the medical benefits and another administrator for the prescription drug benefits. Previous guidance said that for plan years that begin in 2014, the medical coverage for non-grandfathered health plans had to comply with the new statutory out-of-pocket limit, but non-medical coverages could have a separate out-of-pocket limit (that also complied with the new statutory limits, or even no out-of-pocket limit). The previous guidance also explained that for plan years that begin in 2015, non-grandfathered group health plans will have to apply the out-of-pocket maximum across all essential health benefits.

The new guidance, however, gives employers greater flexibility—especially where separate administrators are unable to efficiently share information in order to administrate a single out-of-pocket maximum across all of the health plan’s benefits. The new guidance clarifies that plans may divide the out-of-pocket limits, essentially operating each group of benefits with a separate out-of-pocket limit, as long as the combined amount of the out-of-pocket limits for all essential health benefits does not exceed the annual maximum. For example, an employer could structure its self-only coverage with a $2,000 out-of-pocket maximum on prescription drugs and $4,350 maximum on all other essential health benefits. The only exception is with mental health and substance use treatment benefits, which under the Mental Health Parity and Addiction Equity Act cannot have a separate out-of-pocket maximum from the plan’s medical/surgical benefits.

Wellness Programs

The new clarifications also address several issues raised since the publication of the final Wellness Program regulations last summer.

Under the Wellness Program regulations, if your plan requires different contributions from smokers and non-smokers, then it must also provide an opportunity for smokers to qualify for the non-smoker contribution rate. Employers often require smokers to complete a smoking cessation program to qualify for the lower contribution rate. The new guidance clarifies that an employer only has to offer the tobacco cessation program once a year. Thus, if the smoking cessation program is offered near the beginning of the plan year and the employee does not sign up, the employer is not required to offer another smoking cessation program later in the year (though the employer is certainly free to do so).

The new guidance also addresses reasonable alternatives in those situations where a participant’s doctor advises that the wellness program’s normal requirement for obtaining a reward is medically inappropriate. In many situations, there may be more than one way to accommodate the doctor’s recommendation. The new guidance reveals that the employer has a say in how the reasonable alternative will be implemented, so long as it accommodates the doctor’s recommendation. The new guidance also clarifies that employers can modify the new regulation’s sample language explaining the availability of a reasonable alternative, as long as the modified explanation includes all required content.

More Information on the following will be providedin upcoming eAlerts:
  • Mandated coverage of breast cancer medication under preventive services
  • Clarification regarding expatriate exception
  • Expansion of fixed indemnity exception
  • Explanation of mental health and substance abuse coverage mandates

If you have questions about these changes, please contact April A. Goff ( or 616.752.2154), Norbert F. Kugele ( or 616.752.2186) or any member of Warner’s Health Care Reform Task Force.

Click here for Part 2.

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