Jump to content

HDHP and post-deductible flat dollar copayment


Recommended Posts

Hello, 

Is there any guidance regarding whether a plan may impose a post-deductible flat dollar copayment for medical coverage?  The flat dollar approach is apparently allowed for pharmacy coverage only. If that is true, then does the flat-dollar element for medical services render the plan as being no longer a qualified HDHP?  If so, can anyone provide guidance to support either way. Thank you.

Link to comment
Share on other sites

After satisfying the required statutory minimum HDHP deductible, the plan can impose any form of cost-sharing and still maintain HDHP status.  That could be a copay structure for Rx and/or regular services.

The only limitation there is that all cost-sharing amounts (including a post-deductible copay) must count toward the HDHP's OOPM.

IRS Notice 2004-50:

https://www.irs.gov/pub/irs-drop/n-04-50.pdf

Q-21.  Are amounts incurred by an individual for medical care before a health plan’s  deductible is satisfied included in computing the plan's out-of-pocket expenses under section 223(c)(2)(A)?

A-21.  A health plan’s out-of-pocket limit includes the deductible, co-payments, and other amounts, but not premiums.   Notice 2004-2, Q&A 3.  Amounts incurred for noncovered benefits (including amounts in excess of UCR and financial penalties) also are not counted toward the deductible or the out-of-pocket limit.  If a plan does not take copayments into account in determining if the deductible is satisfied, the copayments must still be taken into account in determining if the out-of-pocket maximum is exceeded.      

Example .   In 2004, a health plan has a $1,000 deductible for self-only coverage.  After the deductible is satisfied, the plan pays 100 percent of UCR for covered benefits.  In addition, the plan pays 100 percent for preventive care, minus a $20 copayment per screening.  The plan does not take into account copayments in determining if the $1,000 deductible has been satisfied.  The copayments must be included in determining if the plan meets the out-of-pocket maximum.  Unless the plan includes an express limit on out-of-pocket expenses taking into account the copayments, or limits the copayments to $4,000, the plan is not an HDHP.   

 

https://www.newfront.com/blog/significant-hsa-contribution-limit-increase-for-2023

image.png.9718a00391c7a3756436f09d9af4c2ba.png

 

 

Link to comment
Share on other sites

3 hours ago, Brian Gilmore said:

After satisfying the required statutory minimum HDHP deductible, the plan can impose any form of cost-sharing and still maintain HDHP status.  That could be a copay structure for Rx and/or regular services.

The only limitation there is that all cost-sharing amounts (including a post-deductible copay) must count toward the HDHP's OOPM.

IRS Notice 2004-50:

https://www.irs.gov/pub/irs-drop/n-04-50.pdf

Q-21.  Are amounts incurred by an individual for medical care before a health plan’s  deductible is satisfied included in computing the plan's out-of-pocket expenses under section 223(c)(2)(A)?

A-21.  A health plan’s out-of-pocket limit includes the deductible, co-payments, and other amounts, but not premiums.   Notice 2004-2, Q&A 3.  Amounts incurred for noncovered benefits (including amounts in excess of UCR and financial penalties) also are not counted toward the deductible or the out-of-pocket limit.  If a plan does not take copayments into account in determining if the deductible is satisfied, the copayments must still be taken into account in determining if the out-of-pocket maximum is exceeded.      

Example .   In 2004, a health plan has a $1,000 deductible for self-only coverage.  After the deductible is satisfied, the plan pays 100 percent of UCR for covered benefits.  In addition, the plan pays 100 percent for preventive care, minus a $20 copayment per screening.  The plan does not take into account copayments in determining if the $1,000 deductible has been satisfied.  The copayments must be included in determining if the plan meets the out-of-pocket maximum.  Unless the plan includes an express limit on out-of-pocket expenses taking into account the copayments, or limits the copayments to $4,000, the plan is not an HDHP.   

 

https://www.newfront.com/blog/significant-hsa-contribution-limit-increase-for-2023

image.png.9718a00391c7a3756436f09d9af4c2ba.png

 

 

One more question, but does it matter whether the co-pay is a flat dollar amount or a percentage?  The client seems to believe that the copayment for medical coverage post-deductible must not be a flat dollar amount.  I couldn't find any guidance that says the post-deductible co-pay for medical services must not be a flat dollar amount.

Link to comment
Share on other sites

A copay is by definition a flat dollar amount.  Coinsurance is the percentage based form of cost-sharing.  Either one could be applied in any fashion post-deductible, and both would have to apply to the OOPM.

The SBC glossary provides a good uniform set of definitions for health plan purposes: https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-uniform-glossary-of-coverage-and-medical-terms-new.pdf

In this example, the IRS specifically recognizes the validity of a HDHP copay structure post-deductible:

IRS Notice 2004-50:

https://www.irs.gov/pub/irs-drop/n-04-50.pdf

Q-21.  Are amounts incurred by an individual for medical care before a health plan’s  deductible is satisfied included in computing the plan's out-of-pocket expenses under section 223(c)(2)(A)?

A-21.  A health plan’s out-of-pocket limit includes the deductible, co-payments, and other amounts, but not premiums.   Notice 2004-2, Q&A 3.  Amounts incurred for noncovered benefits (including amounts in excess of UCR and financial penalties) also are not counted toward the deductible or the out-of-pocket limit.  If a plan does not take copayments into account in determining if the deductible is satisfied, the copayments must still be taken into account in determining if the out-of-pocket maximum is exceeded.      

Example .   In 2004, a health plan has a $1,000 deductible for self-only coverage.  After the deductible is satisfied, the plan pays 100 percent of UCR for covered benefits.  In addition, the plan pays 100 percent for preventive care, minus a $20 copayment per screening.  The plan does not take into account copayments in determining if the $1,000 deductible has been satisfied.  The copayments must be included in determining if the plan meets the out-of-pocket maximum.  Unless the plan includes an express limit on out-of-pocket expenses taking into account the copayments, or limits the copayments to $4,000, the plan is not an HDHP.   

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...