By: HUB’s EB Compliance Team

Each year, the U.S. Department of Health and Human Services (“HHS”) issues a “Notice of Benefit and Payment Parameters” under the Affordable Care Act (“ACA”). This annual rule announcement is sometimes called the “Payment Notice.” Historically, a proposed version has been issued around December or January and finalized around May or so.

However, starting in 2022, HHS committed to release the calculations for out-of-pocket maximum limits no later than January of the preceding calendar year. This allows even more time for employers to react to the changes. The calculations described in the new guidance also determine the ACA Employer Mandate penalties for 2024.

2024 Out-of-Pocket Maximums

Under the new guidance, the ACA out-of-pocket maximum (OOPM) limits for 2024 will be $9,450 for self-only coverage and $18,900 for family coverage (defined as anything other than self-only coverage). This is a roughly 3.8% increase from the 2023 limits of $9,100 and $18,200, respectively.

As a reminder, HHS requires that the individual OOPM be embedded for each enrolled individual within the family OOPM. (Loosely defined, the embedded requirement applies an individual limit for each family member ahead of the family cap. This design helps a single family member access medical benefits sooner than having to meet the full family amount.) High deductible health plans will need to comply with the lesser of the Internal Revenue Service (IRS) OOPM and the ACA OOPM. Detailed information about the challenges connected to navigating these different thresholds is available in this earlier article (while the figures have changed, the methodology described in the article still holds).

Projected 2024 Employer Mandate Penalties

The same calculation that applies for purposes of the OOPM limits is also used to determine the increases in the ACA employer mandate penalties (among other items). Given the approximately 3.8% increase in out-of-pocket maximums and the premium adjustment percentage in the final rule, we project that the 2024 employer mandate penalty increase will be similar: $2,970 for the (a) penalty (up from $2,880 for 2023) and $4,460 for the (b) penalty (up from $4,320 for 2023). We await official confirmation from the IRS.

Takeaways

While these changes are not effective until 2024, the much earlier announcement gives employers ample time to prepare for 2024 enrollments. The most immediate impact from a design standpoint is the change to out-of-pocket-maximums applicable to all insured and self-insured non-grandfathered medical plans.

While the increase in the ACA employer mandate is consistent with other cost of living adjustments, it does raise the stakes on employers ensuring they are making compliant offers of coverage to their full-time employees.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your organization’s particular needs.