Annual or lifetime limits on health insurance coverage can be a concern when you have an illness or medical condition that requires expensive treatment that continues over an extended period of time. Once the limit is reached, the patient and family may have to finance the cost of continuing the treatment. But the Patient Protection and Affordable Care Act from the health reform legislation provides some relief.
This act prohibits health insurers from imposing lifetime limits on the dollar value of benefits paid under a health care plan. This prohibition on lifetime limits takes effect six months after the enactment of the legislation, which is September 23, 2010. Starting in 2014 health insurers will also be prohibited from placing annual limits on the benefits they pay.
For health care plan years prior to January 1, 2014, health insurers can place only restricted annual limits on benefits that are considered “essential services”. The Secretary of Health and Human Services, and not the health insurance companies, will define what those restricted annual limits are. As pointed out by Stephen Huth in Health Reform Talk, these essential services include hospitalization, emergency services, ambulatory patient services, laboratory services, prescription drugs, chronic disease management, rehabilitative services and devices, maternity and newborn care, pediatric services, and mental health services. Health insurers are not prohibited from placing annual limits on benefits that are not considered essential health services.
As part of the effort to ensure that beneficiaries can keep their current health care plan if they like it, the Departments of Health and Human Services, Labor, and Treasury issued a regulation for health coverage in effect on March 23, 2010 to provide additional protections for beneficiaries. This regulation provides that insurers cannot tighten any annual dollar limit in place as of March 23, 2010, and plans that do not have an annual limit cannot add a new one unless they are replacing a lifetime limit with an annual dollar limit that is at least as high as the lifetime limit.
Health insurers must abide by this regulation, which contains various other provisions to protect beneficiaries, if they want to maintain their “grandfathered” status with regard to health reform. As indicated in a Fact Sheet on the HealthReform.gov website, insurers have an incentive to maintain their status. They do this by making the changes that apply to all health care plans, whether grandfathered or not, and innovating and containing costs by making routine changes. But if the insurer decides to significantly cut benefits or increase out-of-pockets costs, they lose their grandfathered status and would have to provide new consumer protections, such as covering recommended preventive services with no cost sharing, and guaranteeing access to OB-GYNs and pediatricians.
In summary, lifetime limits on coverage are prohibited as of September 23, 2010 for all health care plans, whether they are new or grandfathered plans. Annual limits are prohibited starting in 2014, and in the meantime, only restricted annual limits can be placed on benefits that are considered “essential services”. And existing plans cannot tighten an annual limit or add an annual limit if they do not currently have one, without risking their status.
Cathy Miller, “Health Reform – A Continuing Education” – InternetCE
Fact Sheet: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans – HealthReform.gov
Health Reform Q&A: Annual Cap Limit Removals – MedBen
Stephen Huth, “No Lifetime or Annual Coverage Limits” – Health Reform Talk