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2021 Updates on Cost Sharing

These limits apply to in-network out-of-pocket costs for most health plans:

Cost-sharing limits overview

The Affordable Care Act (ACA) requires limits for consumer spending on in-network essential health benefits (EHBs) covered under most health plans. These are known as out-of-pocket (OOP) maximum limits.

OOP maximums include deductibles, copays, and coinsurance costs paid by consumers. They do not include health plan premiums or out-of-network costs.

OOP limits apply to most health plans. Specifically, they apply to all non-grandfathered individual and group plans, regardless of size or whether the plan is insured or self-funded.

Annual OOP maximum limits

The in-network OOP maximums are adjusted annually. Current amounts are:

comparison chart: 2020-2021 OOP Maximums

Embedded individual OOP maximum in family plans

Effective Jan. 1, 2016, most health plans cannot allow any individual, including those with family coverage, to spend more than the individual OOP maximum established under the ACA. This is commonly referred to as an “embedded” individual OOP maximum.

Additional rules for Health Savings Account (HSA) plans

In addition to the ACA cost-sharing limits, HSA-compatible high-deductible health plans (HDHPs) must follow additional Internal Revenue Service (IRS) rules. These rules require plans to have minimum deductible amounts and maximum OOP limits that differ from the ACA OOP limits.

This chart combines the 2021 ACA and IRS rules for HSA-compatible HDHPs:

2021 ACA and IRS rules for HSA-compatible HDHPs

* There is not a stated IRS minimum deductible for individuals with family coverage. However, if a family plan has a separate individual deductible amount for individual family members, that amount must be at least as high as the ACA minimum family deductible.

Administration Finalizes Medicare Drug Pricing Rules

On Nov. 20, 2020, the U.S. Department of Health and Human Services (HHS) issued two new drug pricing rules that follow through on Executive Orders (EOs) signed by President Trump this summer. The HHS Office of Inspector General (OIG) released a prepublication version of a final rule that bans drug rebates in Medicare Part D that are not passed on to patients at the point of sale (POS). Additionally, the Centers for Medicare & Medicaid Services (CMS) released a prepublication version of an interim final rule to lower what Medicare Part B pays for certain drugs based on what other countries pay by establishing a mandatory nationwide demonstration to test a new “most favored nation” (MFN) payment model.

Drug Rebate Rule

Effective Jan. 1, 2022, the drug rebate rule removes Anti-Kickback Statute safe harbor protections for rebates manufacturers negotiate with Medicare Part D plans that are not applied at the POS. A new safe harbor protection will become effective 60 days after publication of the rule to permit plans, pharmacies, and pharmacy benefit managers (PBMs) to apply rebate discounts at the POS to lower patients’ out-of-pocket (OOP) costs. A second new safe harbor, also effective 60 days after publication, will protect flat service fee arrangements that Part D plan sponsors establish with PBMs.

Initially proposed in Feb. 2019, the rule was withdrawn from further regulatory action a few months later in recognition of the negative impact on both Medicare beneficiaries and taxpayers. It was estimated the proposed rule would increase Part D premiums by approximately 25-40%. The Congressional Budget Office and CMS Office of the Chief Actuary further estimated it would result in a significant increase in federal spending over ten years ($177 billion and $196 billion, respectively), making it one of the most expensive proposed regulations in U.S. history. On July 24, 2020, President Trump signed an EO that directed HHS to complete its prior rulemaking process. The EO also included a requirement that the HHS Secretary publicly confirm that the action will not increase federal spending, Medicare beneficiary premiums, or patients’ total OOP costs prior to finalizing any rule. In tandem with the final rule’s release, Secretary Azar issued a letter asserting confirmation in which he relied on his personal experience to project that those costs would not increase.

Most Favored Nation Rule

CMS released an interim final rule (IFR) to implement an MFN Model to test whether more closely aligning payment for Medicare Part B drugs with international prices can better control Medicare Part B spending without adversely affecting the quality of care for Medicare fee-for-service (FFS) beneficiaries. Beginning Jan. 1, 2021, the MFN Model will initially link 50 single-source drugs and biologicals to a price calculated from the lowest price among Organisation for Economic Co-operation and Development (OECD) members that have a per-capita Gross Domestic Product (GDP) similar to the US. To cover administration costs, providers will be paid a flat “add on” per dose fee, which will be the same for each MFN Model drug. Paying a flat fee rather than a percentage of each drug’s cost, which Part B currently does, is expected to reduce the financial incentive for providers to administer higher-cost drugs.

Participation in the MFN Model is mandatory and will include all providers and suppliers nationwide that receive separate Medicare Part B FFS payment for an MFN Model drug, with limited exceptions. The model will have a seven-year demonstration period beginning Jan. 1, 2021.

FDA Unapproved Drugs Initiative Cancelled

In addition to the two new rules, HHS released a notice [PDF] to terminate the U.S. Food and Drug Administration (FDA) Unapproved Drugs Initiative. The original intent of the program was to reduce the amount of unapproved drugs on the market by requiring manufacturers to remove those drugs from the market or obtain FDA approval by demonstrating evidence of safety and efficacy. However, the program provided manufacturers a “period of de facto market exclusivity,” which allowed them an opportunity to raise prices in an environment largely insulated from market competition. The initiative has also been linked to drug shortages. HHS concluded that the initiative’s termination will have a positive impact on public health because the program limited patient access due to price increases or drug shortages.

Employer COVID-19 Updates

As we monitor the spread of COVID-19, we want to assure you that we will continue to deliver the excellent service you expect from us. Here is the latest update from our team.

Consolidated Appropriations Act, 2021

On Sunday, December 27, President Trump signed a COVID-19 relief and government spending package called the Consolidated Appropriations Act, 2021. As part of the relief bill, the government has expanded upon earlier-provided relief for flexible spending accounts (FSA) and dependent care flexible spending accounts (DCA).

Employers may choose to adopt any or all of the following provisions; however they are not mandatory.

  1. Rollovers – Allow employees to carry over all unused amounts in a FSA and/or DCA from the 2020 or 2021 plan year to the next plan year.
  2. Grace Periods – Extend the FSA grace period from 2 1/2 months to 12 months following the end of the plan years for those plan years that end in 2020 or 2021.
  3. Qualifying Dependent Age – Allow reimbursement for expenses incurred for a child through the plan year where the child attains age 14 (this helps address a situation where a child attained age 13 during the pandemic, therefore, the parent may not have been able to use the funds because school or daycare was closed).
  4. Election Changes – Permit prospective mid-year election changes without regard to a change in status in order to accommodate these updates.
  5. Reimbursements Post-Termination – Allow reimbursements through the end of 2020 or 2021 plan year in which participation ends, including any grace period or extended grace period even if those reimbursements were incurred after the employee was employed with the employer.

Deadline for Making Plan Amendments

Employers wanting to adopt one or more of the above provisions must amend their applicable plan documents by the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. This means changes for the 2020 plan year need to be adopted by December 31, 2021, and changes for the 2021 plan year need to be adopted by December 31, 2022.

Colorado Hospitals Rank in Watson Health 100 Top Hospitals Study

Several Colorado hospitals made the Watson Health annual list of top 100 hospitals in the US: UCHealth Poudre Valley Hospital, Medical Center of the Rockies, Rose Medical Center in Denver, UCHealth University of Colorado Hospital in Aurora, Sky Ridge Medical Center in Lone Tree and Swedish Medical Center in Englewood. 3,134 hospitals in the U.S. were analyzed based on clinical outcomes including numbers of complications, mortality and short-term readmission rates, and operating with financial efficiency. UCHealth and HealthONE in Denver were also named among the Top 15 health systems in the country. More details here.

Senate Bill 215 Passed

In Denver – With his signature, Gov. Jared Polis helped tens of thousands of Coloradans take a step closer to the quality health care they need by expanding access to more affordable health insurance.

Polis signed Senate Bill 20 – 215 into law, ensuring the continuation of the state’s successful reinsurance program as well as expanding subsidies for tens of thousands of Coloradans who purchase their insurance on the individual marketplace. State lawmakers approved the plan during their recent legislative session and Polis signed that plan into law.

“To say that this is a huge step forward for Colorado would be an understatement. Literally hundreds of thousands of people across the entire state will benefit,” said Adam Fox, director of strategic engagement of the Colorado Consumer Health Initiative. “Now more than ever, we all understand the health of all of us depends on the health of each one of us. Helping more Coloradans get access to quality health care isn’t just the right and moral thing to do, it is the smart thing to do.”

The law continues a federal fee on insurance carriers set to expire this year and reinvests that fee – with no cost to the state budget – in three ways:

  1. Continue Colorado’s successful reinsurance program, which lowered premiums for those purchasing on the individual market by 20 percent in its first year.
  2. Make insurance more affordable for individual-market consumers who don’t benefit from reinsurance, namely lower income Coloradans that receive federal subsidies under the Affordable Care Act.
  3. Create affordable health insurance options for people left out of the Affordable Care Act, including individuals in the “family glitch” and those who lack proper documentation.

“This is a monumental piece of legislation for Colorado and the nation,” said Healthier Colorado executive director Jake Williams. “The pandemic propelled us to create innovative solutions to healthcare affordability and ensure that people who have suffered the most from the economic downturn are not left holding the bill. We are not only the first state in the nation to provide a path forward for people without proper documentation to secure private health insurance so they can seek the care they need and deserve, but we found a way to support hardworking families by fixing a common barrier to care known as the family glitch. When Coloradans are healthy, so is our economy.”

Specifically, the new law will help all Coloradans by stabilizing the health insurance market. Also helped will be the 250,000 individuals and families who purchase their health insurance on the individual market through the continuation of the state’s reinsurance program. This bill will provide increased purchasing power for tens of thousands of Coloradans who receive financial assistance to help with the cost of their insurance coverage, but for whom coverage remains expensive and often carries high deductibles. In addition, Colorado is one of the first states to further expand financial assistance and coverage to thousands of Coloradans who have been left out of the Affordable Care Act including people in the “family glitch,” which ties what is considered affordable employer coverage to the cost of the employee, rather than factoring in the much higher cost of covering the entire family. Finally, Coloradans who lack proper documentation will also be helped.

“Given the tough budget situation created by COVID-19 and our restrictive and unfair tax policy this kind of bipartisan health care expansion is nothing short of amazing. The ability to take an existing fee already paid by the insurance industry and reinvest it where it will do the most good for the largest number of Coloradans is a powerful demonstration of Colorado’s commitment to the health of its residents,” said Erin Miller, Vice President of Health Initiatives at the Colorado Children’s Campaign. “With this bill, Colorado continues to lead the nation in implementing creative health insurance reforms to make coverage more affordable and accessible. The three-legged policy stool created by this policy held together a strong and diverse group of advocates and ensured this new law will benefit kids and families in all parts of our state, including those who have historically and repeatedly been left behind by our policies.”