Lifetime and annual limits  Obamacare Lifetime and Annual Limits

In years past, most health insurance policies had limits or “caps” on the benefits they would pay. These limits were on any health plan participant (individual or family) – either over a lifetime or in a plan year. If someone exceeded that limit, benefits ended. While this rarely occurred, it resulted in major financial troubles for the few people it hit. The new law does not allow lifetime limits on”essential health benefits”. The law also restricts annual limits from now until 2014, when their use will become more limited. However, the law doesn’t prevent a plan from excluding all benefits for a condition.

Lifetime limits
Employers must eliminate lifetime limits on essential health benefits.

Effective
This applies to all health plans, including grandfathered plans.

Grandfathered plans will lose their grandfathered status if they impose an overall annual or lifetime limit on the dollar value of essential benefits if their plan did not include that limit prior to March 23, 2010. Plans can keep their grandfathered status if they convert lifetime limits into an annual limit at a dollar value that is lower than the lifetime limit on March 23, 2010.

Annual limits
Employers must eliminate annual limits by 2014. Until then, plans may place only “restrictive” annual limits on essential health benefits. The limits have been set for plan years that begin:

  • 9/23/2010 to 9/22/2011 – $750,000 annual limit
  • 9/23/2011 to 9/22/2012 – $1.25 million annual limit
  • 9/23/2012 to 12/31/2013 – $2 million annual limit

Annual limits must apply on an individual-by-individual (not family) basis.

Essential Health Benefits defined
According to the law, the list of essential health benefits must include:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

The government has not released the final regulation on essential benefits. Until it does, the government will take into account an employer’s “good faith effort” to comply with reasonable consistent interpretation.