A new FAQ on Obamacare has caused quite the ruckus in the world of human resources.  In 2016, new out-of-pocket limits kick in for non-grandfathered health plans.  This will make the single coverage limit rise to $6,850 and the family coverage limit increase to $13,700.  These limits will apply to every single individual under a plan, regardless of whether that person is enrolled in family coverage or not.

The HR world is referring to this as the “embedded rule”.  In a nutshell, this is how this rule will work:

Consider having four individuals enrolled in family coverage under a non-grandfathered group health plan that has an out-of-pocket limit of $13,000.  If one of the individuals under your plan has  $12,000 in expenses they can only be held responsible for $6,850 of those charges. This places the plan on the hook for the rest of the money.  In this case, the rest of the money equates to $5,150.  Basically, the rest of the individuals on your plan could still rack up $6,150 worth of out-of-pocket charges before reaching the plan limit of $13,000.

The rules currently still in place dictate that the individual could have ultimately been held responsible for the entire $12,000 bill.  Once the embedded rule fully kicks in, this will no longer remain true.  The maximum an employee could be made to pay under a non-grandfathered group health plan will be $6,850.  End of story. 

Currently, most employers’ plans are not in compliance with this “embedded rule”.  One analysis found that only 17% of firms have an embedded out-of-pocket limit in their high deductible plans.  This will need to change and fast, since the rule kicks in no later than 2016.