updated May 21, 2020
On May 14, the Department of Health and Human Services (HHS) published in the Federal Register its Notice of Benefit and Payment Parameters for 2021 final rule and posted an accompanying fact sheet. The 2021 annual out-of-pocket (OOP) maximums for non-grandfathered group health plans will increase by approximately 4.9 percent over this year's limits:
- Self-only coverage: $8,550 in 2021, up from $8,150 in 2020.
- Other than self-only coverage: $17,100, up from $16,300.
These limits apply to all OOP costs for in-network essential health benefits.
HHS and IRS Out-of-Pocket Limits Differ
There are two sets of limits on out-of-pocket expenses for health plans, determined annually by federal agencies, which can be a source of confusion for plan administrators. The first is the HHS's annual OOP limits for all non-grandfathered Affordable Care Act-compliant plans, noted above. The second is the IRS's out-of-pocket limits for health savings account (HSA)-qualified high-deductible health plans (HDHPs), released on May 21 in IRS Revenue Procedure 2020-32.
Below is a comparison of the two sets of limits:
Out-of-pocket limits for ACA-compliant plans (HHS)
Out-of-pocket limits for HSA-qualified HDHPs (IRS)
Self-Funded Plans Can Exclude Drug Coupons from Counting Toward Deductibles
Drug companies make discounts at the pharmacy counter or post-purchase rebates available for brand-name prescription drugs by issuing coupons or cards that consumers can use to buy the specified medications.
Under the 2021 benefit parameters final rule, a self-funded group health plan will be permitted, but not required, to exclude the value of a drug manufacturer's payment assistance from spending that is applied toward annual limits on cost-sharing amounts (such as plan deductibles and out-of-pocket maximums). Plans can do so by putting in place a co-pay accumulator program. Simply put, these programs don't count toward patient cost-sharing limits the value of co-pay assistance cards or coupons that drug makers offer consumers to induce them to purchase brand name drugs.
The 2021 benefit parameters differ from the rule for 2020, which permitted plans to exclude the value of co-pay coupons from a participant's cost-sharing limits only when the prescription drug had a medically appropriate generic equivalent available. Enforcement of the 2020 final rule was placed on hold pending publication of the 2021 rule because of implementation concerns over whether co-pay assistance would make a participant ineligible to contribute to an HSA.
Under the final rule for 2021, "a self-funded group health plan has the flexibility to determine whether to include or exclude the amount of drug manufacturer co-pay coupons, regardless of whether a medically appropriate generic equivalent is available," according to an analysis by attorneys at Vorys, a national law firm. "An insured group health plan may also have to comply with any applicable state laws regarding co-pay coupons," the attorneys noted.
"Some states—including Arizona, Illinois, Virginia, and West Virginia—have banned co-pay accumulator programs," Katie Keith, a former research professor at Georgetown University's Center on Health Insurance Reforms, wrote on the Health Affairs blog. "In those states, insurers are required to count coupons and co-pay assistance towards a plan's deductible or out-of-pocket limit."
[SHRM members-only toolkit: Managing Health Care Costs]
HSA Eligibility Concerns
Last year, the oversight agencies—the HHS, the IRS and the Department of Labor—determined that plan sponsors who complied with the 2020 benefit parameters final rule, before the co-pay coupon provision was suspended, could cause participants enrolled in HSA-compatible HDHPs to become ineligible to make or receive HSA contributions. HSA eligibility requires that account holders have no other health insurance other than an HDHP, except for vision and dental coverage. This requirement excludes any product or service that helps pay medical expenses before the plan deductible is met, such as a drug manufacturer's discount coupon or rebate.
"Unless new guidance is issued by the IRS changing its current position that discounts must be disregarded in determining whether a HDHP deductible has been met, it appears that sponsors of HSA-compatible HDHPs must adopt a co-pay accumulator program in order to preserve participants' eligibility to make or receive [HSA] contributions," according to the Vorys attorneys.
Related SHRM Articles:
IRS Raises 2021 Employer Health Plan Affordability Threshold to 9.83% of Pay, SHRM Online, July 2020
IRS Announces 2021 Limits for HSAs and High-Deductible Health Plans, SHRM Online, May 2020
2020 Drug Coupon Rule Dropped Due to Implementation Concerns, SHRM Online, September 2019
New Tactic Emerges to Control Rx Spending, HR Magazine, September 2019