ACA News & Publications

ACA Pathways: 2020 Out of Pocket Max Cost Sharing Limits Announced

April 23, 2019

On April 19, 2019, the Department of Health and Human Services (HHS) released its final Notice of Benefit and Payment Parameters for 2020. This rule describes benefit and payment parameters under the Affordable Care Act (ACA) that apply for the 2020 benefit year. Standards included in the rule relate to:

  • Annual limitations on cost sharing;
  • The individual mandate's affordability exemption;
  • Direct enrollment in the Exchanges; and
  • Special enrollment periods in the Exchanges.

HHS also sought comments on issues to address in the future, such as the practice of "silver loading," the automatic re-enrollment process through the Exchanges and any additional measures that would reduce eligibility errors and potential government misspending. Although the final rule does not finalize any policies related to these issues, HHS noted that it intends to take the comments received in response to the proposed rule into consideration in future rulemaking.

Annual Limits On Cost Sharing

The ACA requires non-grandfathered plans to comply with an overall annual limit, or an out-of-pocket maximum, on essential health benefits (EHB). For 2020, the out-of-pocket maximum will increase to $8,150 for self-only coverage and $16,300 for family coverage. This is an increase from the 2019 limits of $7,900 and $15,800, respectively (but slightly lower than the annual limits proposed in the notice earlier this year of $8,200/$16,400).

Individual Mandate's Affordability Exemption

Under the ACA, individuals who lack access to affordable minimum essential coverage (MEC) are exempt from the individual mandate penalty. For purposes of this exemption, coverage is considered affordable for an employee if the required contribution for the lowest-cost, self-only coverage does not exceed 8% of household income, adjusted annually. The final rule provides that, for 2020, an individual would be exempt from the individual mandate penalty if he or she must pay more than 8.24% of his or her household income for MEC. This is a slight decrease of 0.07% from the 2019 percentage of 8.3%.

However, the Tax Cut and Jobs Act, passed at the end of 2017, reduced the ACA's individual mandate penalty to zero, effective beginning in 2019. As a result, beginning in 2019, individuals will no longer be penalized for failing to obtain acceptable health insurance coverage. Despite this repeal, the final rule notes that individuals may still need to seek this exemption for 2019 and future years (for example, in order to be eligible for catastrophic coverage).

Direct Enrollment In The Exchanges

In an effort to provide greater flexibility in how consumers shop for health insurance coverage, the 2020 final rule enhances direct enrollment through the Exchanges. Specifically, the final rule expands opportunities for individuals to directly enroll in Exchange coverage by enrolling through the websites of certain third parties, referred to as direct enrollment entities, rather than through The final rule also implements several changes intended to streamline the regulatory requirements applicable to these direct enrollment entities.

Direct enrollment is a mechanism for issuers and web brokers to enroll applicants in Exchange coverage through a non-Exchange website in a manner that would be considered to be through the Exchange. Initially implemented for the 2019 plan year, the final rule enhances the direct enrollment pathway to allow approved direct enrollment partners to host the Exchange eligibility application and enrollment service for Exchange applicants on their non-Exchange websites without redirecting to

New Special Enrollment Period Through The Exchanges

Under the Exchanges, certain special enrollment periods (SEPs) are available for people who lose health insurance during the year or experience other qualifying events. The 2020 final rule establishes a new SEP, available at the option of the Exchange, for off-Exchange enrollees who experience a decrease in household income and are determined to be eligible for the premium tax credit through the Exchange.

Silver Loading

On October 12, 2017, the White House announced that it would no longer reimburse insurers for cost-sharing reductions made available to low-income individuals through the Exchanges, effective immediately. Because Congress did not pass an appropriation for this expense, the Trump administration has taken the position that it cannot lawfully make the cost-sharing reduction payments.

In response to this, many issuers increased premiums in 2018 and 2019 only on silver level qualified health plans (QHPs) to compensate for the cost of those cost-sharing reduction payments -- a practice sometimes referred to as "silver loading" or "actuarial loading." Because premium tax credits are generally calculated based on the second-lowest-cost silver plan offered through the Exchange, "silver loading" has led to consumers receiving higher premium tax credits.

Because there has been no congressional appropriation for the cost-sharing reduction reimbursements, the proposed Notice of Benefit and Payment Parameters for 2020 requested comments on ways to address the practice of silver loading for future plan years. Since HHS did not propose any changes to silver loading in the proposed rule, the final rule does not finalize a policy related to silver loading. However, HHS noted that it will take the comments received in response to the proposed rule into consideration in future rulemaking.

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits

Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

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