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Home > Blog > Blog > Health Insurance > Second Circuit: HHS Rule for Embedded Individual Out-of-Pocket Limits Does Not Apply to Pre-2016 Health Insurance Plans

Second Circuit: HHS Rule for Embedded Individual Out-of-Pocket Limits Does Not Apply to Pre-2016 Health Insurance Plans

In Fisher v. Aetna Life Ins. Co., No. 20-3148, __F.4th__, 2022 WL 1193999 (2d Cir. Apr. 22, 2022), the Second Circuit considered three separate but related appeals concerning Plaintiff-Appellant Jacqueline Fisher’s lawsuits against Aetna Life Insurance Company for coverage of EffexorXR, a brand-name anti-depressant, and the applicability of a “Choose Generic” clause in her health insurance plans under group policies obtained through her husband’s company. Fisher also challenged Aetna’s application of the family out-of-pocket limit to her claims rather than the individual out-of-pocket limit and Aetna’s refusal to credit her out-of-pocket costs for EffexorXR to her individual out-of-pocket limit. The court affirmed the district courts’ grant of summary judgment to Aetna on all issues.

First, with respect to Fisher’s claims under the 2014 Aetna NY Silver Plan, the court found that a “February 19 Document” which included the “Choose Generic” clause that was not contained in a “January 9 Document” governed the dispute and Fisher was put on inquiry notice of the terms of the February 19 Document. The January 9 Document that the company signed and executed stated that the “preliminary rate sheet should be read in conjunction with the more detailed benefit descriptions, exclusions, and limitations…” The company employees filled out applications for insurance with Aetna that stated the plan certificate of coverage will determine the members’ rights. The court found that the February 19 Document terms were clearly called to the company’s attention and the district court’s factual findings on inquiry notice are sound and not clearly erroneous. In addition, the court found that Aetna did not violate New York law that requires all contracts for insurance to contain the full terms of the contract, unless a contract is a “schedule of rates” on file with the state, because the rates from the 2014 plan were on file with the Department of Financial Services.

Second, with respect to Fisher’s claim under the 2015 Health Insurance Plan, the district court found that Aetna’s denial of coverage for EffexorXR was arbitrary and capricious and remanded the claim to Aetna for reconsideration. On remand, Aetna reversed its decision to not reimburse Fisher for the difference between the cost of the generic medication and the copayment for the medication and sent her payment, which Fisher refused to cash. The court found that Fisher is not entitled to a judgment for her copay differential because Aetna agreed to pay Fisher the differential and attempted to pay her.

Third, the court found that Fisher was required to satisfy the family out-of-pocket limit under the terms of the insurance plan where the Affordable Care Act (ACA) was silent on the question of which limit—individual or family—applies to an individual covered under a family policy. The Department of Health and Human Services (HHS) passed in 2015 a rule that “beginning in 2016, insurance providers cannot require any individual, including those with family coverage, to spend more than the individual out-of-pocket limit established under the Act – a limitation commonly known as an ‘embedded individual out-of-pocket limit.’” The court found that the final rule adopted in 2015 for health insurance plans in 2016 does not apply retroactively for Fisher’s claims under the 2014 and 2015 health insurance plans. The court found that the rule is legislative, not interpretive, so the out-of-pocket limits for plans in effect before 2016 should be governed by the terms of the policy, and not the 2015 Rule.

Lastly, the court determined that the ACA does not require Aetna to apply the brand-generic cost differential to Fisher’s out-of-pocket limit because her purchases of EffexorXR were not a covered service under the terms of the ACA. Aetna advised that Fisher could seek a medical-necessity waiver of the Choose Generic provision which would result in Fisher just paying the copay, but Fisher never sought a medical-necessity waiver. Because Fisher did not obtain the waiver, the EffexorXR could not be considered medically necessary and qualify as a covered service under the policy. Therefore, it falls under the exceptions to cost-sharing in 42 U.S.C. § 18022(c)(3)(B) and does not count toward Fisher’s out-of-pocket limit.

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