Repeal of Limited Deductibles for Small Group Employers

April 3, 2014

The health reform law originally limited small group health plan deductibles to $2,000 for single coverage and to $4,000 for family coverage, starting with 2014 plan years.  (Federal law defines small group as those with 100 or fewer workers.  Until 2016, states hold an option to apply a further limitation that could make the size threshold as small as 50.)  Congress has just passed a repeal of that requirement, which the President is now expected to sign into law.

This will be a welcome development for many employers, as it re-introduces the ability to offer a lower cost plan with higher deductibles.  Critics have long noted that the deductible limit was not particularly well-conceived since the size of the employer does not directly correlate to the amount of the deductible the employer, or its employees. might desire.  There were also concerns that, over time, a small employer’s ability to use health savings accounts (HSAs) could be compromised.  Moreover, others had observed that such a restrictive deductible limit was not necessary to curb abuse -- specifically, while deductibles have been increasing, the plans often were selected due to lower premiums.  In other words, it was a trade-off.  Finally, the deductible limits did not work as a practical matter.  Many carriers in certain markets were unable to create compliant plans that would satisfy other health reform requirements, and low deductibles pushed up premium costs.  (A special rule gave the Department of Health & Human Services the authority to allow a policy to impose a higher deductible limit if an insurance carrier could demonstrate an inability to reach a given coverage threshold (one of the metal tiers) without using a larger deductible.)

The bill, as passed by Congress, does not address other group insurance or employment-related provisions.  As noted above, the President is expected to sign the change into law in the next few days.

Helpful links

Click here to download the PDF

For actual text of the law, please click this link, and note it appears in Section 213.

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