President Obama has signed legislation that repeals a provision of the Affordable Care Act that limited deductibles in small group health insurance plans to $2,000 for individuals and $4,000 for family coverage.
The repeal was part of a larger measure – the Protecting Access to Medicare Act of 2014 – that delays for a year a scheduled 24% reduction in payment for doctors who treat Medicare patients.
The removal of the deductible cap applies to plans for employers of 50 or fewer full-time workers, up until 2016, when the definition of small group changes to 100 or fewer full-time employees.
The deductible limit was originally intended to take effect for plans that take effect this year. The repeal takes effect immediately and retroactively to March 10, 2010,
Implementing ACA regulations had barred insurance companies from taking into account an employer’s health flexible spending accounts or health retirement account contributions for the purposes of determining compliance with deductible limits.
Unfortunately, the regulation had the unintended effect of basically forcing some small employers to purchase plans with lower deductibles if they were to continue offering coverage. And the lower-deductible plans included significantly higher premiums in many cases.
But not all small group plans were affected. Insurance companies in some states were able to avoid the deductible limit rules thanks to exceptions created by the Centers for Medicare and Medicaid Services, as well as in Health and Human Services regulations.
These changes allowed plans to exceed the $2,000 and $4,000 deductible limits if it helped the plan achieve the lowest allowable actuarial value of 60% (meaning that 60% of health services are covered by the insurer).
At this point, we will have to wait and see if insurers in the small group market start offering policies that exceed the now-repealed limits. If they do, it will give small employers more choice.
As your broker, we will let you know during your next renewal if small group plans with higher deductibles come back on the market as a result of this law change.