Coming up with a clear definition of “out of pocket limit” is a tough one, and the term can be difficult for consumers to understand, a regulator says.
The topic came up Tuesday during a teleconference on implementation of consumer information provisions of the Patient Protection and Affordable Care Act (PPACA).
The Standard Definitions Team, an arm of the Consumer Information Subgroup at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., held the session to review proposed definitions of several insurance-related terms, including “co-payment,” “out-of network copayment,” “in-network copayment,” and “co-insurance.”
The subgroup is helping the NAIC and the U.S. Department of Health and Human Services develop standards for a summary of benefits and coverage explanation for individual and group health insurance.
During the conference call, one of the definitions the team discussed in detail was “out of pocket limit,” and discussion participants agreed that defining the term is challenging. The team started with the following definition:
“The most you are required to pay each year towards the cost of your covered health care. The limit protects you from very high health care costs. This limit does not include your premium or balance-billed charges for health care you receive from non-preferred providers. Some [health care coverage] does not count all of your co-payments and coinsurance payments when determining this limit. Review your health care policy to see whether your deductibles, copayments, and co-insurance count towards this limit.”
Some subgroup members said using the phrase “are required” in the first sentence makes it sound as if the out of pocket limit is a deductible or a premium when, in fact, the limit is supposed to be a protection for the consumer.
Members also debated whether to strike the second sentence in the definition, but they decided to keep it because they said it explains the significance of the term.
One subgroup member said that it is important to keep the last sentence in the definition, because consumers need to have this “in your face” information.
The subgroup ended up revising the “out of pocket limit” definition to read:
“The most you pay during a policy period, usually a year, before your [health insurance plan] begins to pay 100% of covered health care costs. The limit protects you from very high health care costs. This limit does not include your premium, balance-billed charges, or health care your plan does not cover. Some [health care coverage] does not count all of your coinsurance payments or out of network payments towards this limit. Review your health care policy to see whether your deductibles, copayments, and co-insurance count towards this limit.”
The subgroup says “health insurance plan” and “health care coverage” are bracketed because it is working to determine whether one consistent term – such as health insurer, health insurance plan, health care coverage, or health care plan – should be used throughout all the definitions.
The panel has come up with final definitions of the terms “premium,” “deductible,” “excluded services,” and “prescription drug coverage.”