America’s Health Insurance Plans (AHIP) gather for their big meeting in Nashville this week, with many significant issues on the agenda, some of them headline news. For instance, industry insiders are watching closely the Supreme Court’s pending decision this month on King v. Burwell—which could remove health insurance subsidies in states that opted out of Obamacare’s Medicaid expansion.
There’s a less well-known but extremely important issue many business leaders want AHIP to tackle this week: “embedded MOOP.” That sounds like perhaps a form of fertilizer that could be used in a garden but actually refers to a, well, variant of fertilizer that Washington is known for producing: Embedded MOOP is a brand new regulation threatening to cost employers and other purchasers hundreds of millions of dollars this year alone.
MOOP stands for “Maximum Out of Pocket,” and it refers to the maximum amount your health plan will require you to pay for your health services in a given year—over and above what you contribute to your premiums. After you’ve paid out your deductible and copays and reached the MOOP, your health plan pays 100% of your subsequent bills for the rest of the year.
“Embedded MOOP” focuses on the out of pocket maximums applied to family plans. Typically, the MOOP for a family plan is two or three times higher than the MOOP for an individual plan. So, say your plan has a MOOP of $6,000 for individuals and $12,000 for families. You have a hospital stay that costs $50,000, for which your plan pays 80%, so you are responsible for the remaining 20%, or $10,000. If you have an individual plan, you won’t have to pay the full $10,000, because you would hit the maximum out of pocket cap at $6,000. But if you are part of a family plan, you would, because you haven’t hit the family plan maximum of $12,000.
That’s how things worked until a couple months ago, according to government directive. But now, for certain kinds of high-deductible health plans, the federal government just issued an ironically named “clarification,” which confusingly reverses those earlier requirements, effective immediately, or maybe effective in 2016–the lawyers watching this say the regulation can be read either way. The “clarification” to federal health rules says that MOOP applies separately to each individual “embedded” in a family plan, so each person covered under a plan has the individual cap.
Back to you in your hospital bed with the $50,000 bill: In this new interpretation of federal health rules, you won’t pay more than the $6,000 individual MOOP regardless of whether you are covered under a family plan or an individual plan.
Admittedly, a $4,000-plus windfall sounds like good news. Who cares if health plans don’t like it? But here’s the problem: The plan doesn’t pay the $4,000; your employer does–and so do you.
AHIP estimates 17.5 million Americans are enrolled in the kind of plans subject to this federal health rule on embedded MOOP. We might reasonably estimate that 3% of them, or about 500,000 people, will encounter a major hospital bill this year. If employers lose thousands of dollars on half of them, or even a quarter of them, there’s not enough room on my calculator for the zeroes in the dollar-figure estimate of loss. The bottom line: Employers will be out hundreds of millions of dollars because federal officials changed the rules mid-game.
Employers have to cover this loss right now, so many are hastily redrafting their HR budgets as you read this. The money will come from employee premiums, lower wage increases, reduced benefits or creating fewer jobs. And even though the new regulation sounds friendly to families on its face, in fact it makes already expensive family coverage even less affordable, because family premiums are likely to skyrocket with this new rule in place.
This is not the first time lawmakers cavalierly forced business to shoulder a major new healthcare cost. In fact, it’s a tradition. Commercially insured patients pay orders of magnitude more for each individual service than taxpayer-funded payers like Medicare and Medicaid do. That amounts to a subsidy to the tune of hundreds of billions of dollars transferred wholesale to the healthcare system from the workers in America’s economy.
Policymakers don’t need to send certificates of appreciation to purchasers for their willingness to pay for the U.S. healthcare system. But, at the very least, government could stop scolding and punishing business for that investment. Alas, in 2018, employers will be hit with the so-called Cadillac tax, an excise tax on purchasers that have the audacity to spend too much on healthcare. And last year, purchasers were admonished by a federal agency for investing in employee wellness programs that they designed explicitly in line with Obamacare. Now, we have the embedded MOOP pummeling of 2015.
In the short term, the administration needs to revisit this regulation pronto, and we hope to see AHIP make the case this week. In the long run, it’s time lawmakers treated purchasers’ role in healthcare with less disregard and more common cause.