Tag: High Deductible Health Plans

DOL Opinion Finds Stop Loss Policy is not a Plan Asset

DOL recently issued Advisory Opinion 2015-02A, concluding that an employer’s stop loss policy, purchased to manage the risk associated with its liabilities under a self insured medical plan, was not a Plan asset. This accords with our long held view that neither participant contributions toward the cost of their coverage, nor a stop loss insurance policy, need result in the creation of plan assets or trigger ERISA’s trust requirements. The relevant facts in Advisory Opinion 2015-02A:

  • The stop loss insurer would reimburse the Plan Sponsors only if, during the policy year, they pay benefit claims required under the Plans in excess of a pre-determined amount, or attachment point.
  • The insurance would not relieve the Plans of their obligations to pay benefits to Plan participants, and the stop-loss insurer has no obligation to pay claims of Plan participants.
  • The Plan Sponsors would be the named insured under the Policies.
  • Reimbursements to the Plan Sponsors would be made at the end of the calendar year after the Plan Sponsors have paid for plan benefits and presented appropriate stop-loss claims to the insurer for reimbursement.
  • The Policy would reimburse the Plan Sponsors only if the Plan Sponsors pay claims under the Plan from their own assets, so that the Plan Sponsors will never receive any reimbursement for claim amounts paid with participant contributions.
  • No monies attributable to employee contributions are used for paying premiums on the Policies.
  • Specifically, participant contributions are paid into the general account of the employer and recorded in a balance sheet. All health claims and other Plan expenses are paid from this general account.
  • The Plan Sponsor pays premiums for the Policies, or any other stop-loss insurance, exclusively from its general account.

Advisory Opinion 2015-02A

CMS 2016 Payment Notice effectively embeds individual out of pocket limit in family HDHPs

The Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS), recently issued its final 2016 Notice of Benefit and Payment Parameters (2016 Payment Notice), in which it stated that, starting in the 2016 plan year, the self-only annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in other than self-only coverage, including in a family high deductible Health Plan (HDHP). The significance of this is that it effectively embeds an individual out-of-pocket limit in all family group health plans with a higher family deductible.

For example, an HDHP plan that has a $10,000 family deductible may provide payment for covered medical expenses for a member of the family if that member has incurred covered medical expenses during the year of at least $2,600 (the minimum deductible for a 2015 family HDHP). Under the policy finalized in the 2016 Payment Notice, this plan must also apply the annual limitation on cost sharing for self only coverage ($6,600 in 2015) to each individual in the plan, even if this amount is below the $10,000 family deductible limit.