AB 1305 and 2016 Carrier Product Portfolios
AB 1305 and 2016 Carrier Product PortfoliosSeptember 9, 2016
Catrina Reyes, J.D., M.P.A., Policy Analyst and Compliance Manager
At the end of 2015, a number of carriers announced that they will be removing certain plans from their 2016 product portfolio due to the passage of Assembly Bill (AB) 1305 on October 8, 2015. AB 1305 provides that “an individual within a family shall not have a maximum out-of-pocket limit that is greater than the maximum out-of-pocket limit for individual coverage for that product.” If the plan “includes a deductible, an individual within a family shall not have a deductible that is greater than the deductible limit for individual coverage for that product.” If the plan is a high deductible health plan, the plan shall include a deductible for each individual covered by the family plan that is either the minimum annual deductible for family coverage established by the IRS for the applicable plan year or the deductible for individual coverage under the plan contract, whichever is greater.
It used to be that deductibles and maximum out-of-pocket limits for family coverage could be structured in two ways. Some plans have aggregate family deductibles and/or maximum out-of-pocket limits. This means the family deductible and/or maximum out-of-pocket limit must be met before the plan pays in part or in whole for covered services for any individual family member. For example, if a plan has a $6,500 maximum out-of-pocket limit for individual coverage and a $13,000 maximum out-of-pocket limit for family coverage, an individual in a family plan that incurs $8,000 in cost-sharing expenses would be responsible for paying the $8,000, because the $13,000 family maximum out-of-pocket limit has not yet been met.
In contrast, most other plans have individual embedded deductibles and maximum out-of-pocket limits for individuals enrolled in family coverage. Under this plan design, each covered family member only needs to meet the individual deductible and/or maximum out-of-pocket limit before the plan pays in part or in whole for covered services for that family member. Using the same example above, the individual in the family plan would only be responsible for the individual maximum out-of-pocket limit of $6,500 as opposed to having to meet the $13,000 family maximum out-of-pocket limit.
With the passage of AB 1305, all plans must now have individual embedded deductibles and out-of-pocket limits for individuals enrolled in family coverage, which is consistent with federal regulations. This change went into effect on January 1, 2016. The provisions related to deductibles will go into effect for large group market plans on January 1, 2017.
According to the Department of Managed Healthcare (DMHC), the Director of DMHC can exempt plans from compliance with AB 1305 “upon a showing by the plan that compliance with these provisions would be disruptive for enrollees and would cause unexpected cost share increases or health care service contract withdrawals. The Director’s exemption will be made on a product by product, case by case, basis, and will extend until December 31, 2016, requiring health care service contracts issued, amended or renewed on and after January 1, 2017 to comply with AB 1305.”
An analysis done by the California Health Benefits Review Program found that most of the health plans in California already have individual embedded deductibles and maximum out-of-pocket limits. Only a small number of high-deductible health plans have aggregate deductibles and maximum out-of-pocket limits and thus can no longer be offered unless exempted by DMHC.
To learn which plans have been removed by each carrier due to AB 1305 and which plans have been modified to comply with AB 1305, view our summary.
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