HHS 2020 Out-of-Pocket Maximums Raise Employer Penalties

The Affordable Care Act’s cost-sharing limits differ from out-of-pocket caps for HSA-compatible plans

By Leslye Laderman and Richard Stover, © Buck June 19, 2019
HHS 2020 Out-of-Pocket Maximums Raise Employer Penalties

On April 18, the Department of Health and Human Services (HHS) published its annual Notice of Benefit and Payment Parameters final rule for 2020 and a fact sheet summarizing the guidance. The notice finalized the Affordable Care Act's (ACA's) out-of-pocket maximums for health plans next year at $8,150 for self-only coverage and $16,300 for other than self-only coverage. It also finalized proposed rules that change how amounts paid for brand-name drugs are applied towards those maximums.

High-deductible health plans intended to be health savings account (HSA) compatible are subject to lower OOP maximums—the 2020 limits are $6,900 for self-only coverage and $13,800 for other than self-only coverage.


The annual HHS notice provides important guidance related to the ACA marketplaces and various ACA provisions. While primarily focused on the ACA marketplaces and insurers offering products in the marketplaces, the rule finalizes the 2020 ACA out-of-pocket (OOP) maximums that affect large employer and self-insured group health plans.

Effective for plan years beginning on or after January 1, 2014, the ACA imposes annual OOP maximums on the amount that an enrollee in a nongrandfathered health plan, including self-insured and large group health plans, must pay for essential health benefits through cost-sharing.

The final rules slightly reduce the premium adjustment percentage used in the proposed rules to determine the out-of-pocket maximum for plan years beginning in 2020. As a result, the OOP limits represent an increase of $250 for self-only coverage and $500 for other than self-only coverage over the 2019 OOP maximums of $7,900 and $15,800 respectively.

Employer Shared Responsibility Assessments

The premium adjustment percentage also affects the calculation of the employer shared responsibility assessments. In light of the lower percentage adopted in the final rules, the assessment amounts for 2020 are estimated to be $2,570 (for failure to offer coverage) and $3.860 (for failure to offer affordable, minimum value coverage).

[SHRM members-only toolkit: Complying with and Leveraging the Affordable Care Act]

Exclusion of Manufacturer Coupon Amounts from OOP Limits

The proposed rules had included several proposals intended to discourage the use of brand-name drugs when generic equivalents are available. Only one proposal was adopted in the final rule. Effective for plan years beginning in 2020, to the extent consistent with applicable state law, group health plans and issuers are not required to count cost-sharing amounts paid using drug manufacturer coupons for specific prescription brand drugs towards the OOP maximum if the drug has an available and medically appropriate generic equivalent.

Importantly, the final rule doesn't define "coupon" or provide guidance on when a generic equivalent will be considered "available" or "medically appropriate." Plan sponsors should consult with their advisors when designing and implementing a program.

[Update: In August 2019, concerns over compliance issues caused federal agencies to withdraw this rule to let health plans exclude drug manufacturer coupons from annual out-of-pocket maximums when a generic equivalent is available.]

ACA Indexed Dollar Amounts

The table below summarizes the ACA indexed dollar limits for 2020 and prior years.

Out-of-pocket maximums Employer shared responsibility annual assessments

Self-onlyOther than
4980H(a) – Failure to offer coverage4980H(b) – Failure to offer affordable, minimum value coverageAffordability threshold under 4980H(b)
$8,150$16,300$2,570 (est.)$3,860 (est.)9.78%
2019$7,900$15,800$2,500 (est.)$3,750 (est.)9.86%

Leslye Laderman, JD, LLM, is a principal in the Knowledge Resource Center at HR consultancy Buck. Richard Stover, FSA, MAAA, is a principal at the consultancy. This article has been abridged from the original, which appeared in the June 12, 2019, issue of For Your Information, produced by Buck's Knowledge Resource Center. © 2019 Buck Global LLC. All rights reserved. Republished with permission.

Related SHRM Articles:

2020 HSA Limits Rise Modestly, IRS Says, SHRM Online, May 2019

Visit SHRM's resource page for the Affordable Care Act.


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