Eliminating Lifetime and Annual Limits

One of the first Affordable Care Act (ACA) reforms that will take effect is the prohibition on Lifetime and Annual Limits. In fact, incremental elimination of these Limits has already begun. For all non-grandfathered plans beginning after September 23, 2010, health insurance carriers must raise the Annual or Lifetime Limit to $750,000.00. All non-grandfathered plans beginning after September 23, 2011, must have a limit of no less than $1.25 million. All non-grandfathered plans beginning after September 23, 2012 must have a limit of no less than $2 million. Finally, all non-grandfathered plans beginning after January 1, 2014 must adhere to the complete prohibition on Lifetime and Annual Limits. According to HealthCare.gov, "A grandfathered health insurance policy is a plan that you bought for yourself or your family; that you did not receive through your employer; and that was issued on or before March 23, 2010" (1). 


Prior to this prohibition, health insurance carriers could include either a lifetime or an annual limit on the amount of money they would cover for each beneficiary, or each plan. For example, a plan with a $2,000,000 annual limit (national average in 2009), would exempt the insurance carrier from paying any benefits once a beneficiary had spent $2,000,000 in covered medical costs in a plan year. Many carriers would even terminate the plan once that limit had been reached. The Employer Health Benefits Annual Survey of 2009 reports that 63% of large employer insurance plans, 52% of small employer insurance plans, and 89% of individual plans had lifetime or annual limits. 


If you have a plan/policy that reaches its limit between now and January 1, 2014, and are otherwise still eligible under the plan (you've been paying your premiums, and have not knowingly and intentionally committed fraud), health insurance coverage must be provided with a notice that the lifetime limit no longer applies (2).


The catch to this reform is that after January 1, 2014 health insurance plans only have to cover what the ACA has designated as "Essential Health Benefits." These are the only benefits to which the Prohibition applies. Insurance carriers may still place an annual spending limit on coverage for non-essential medical services.


Some health insurance carriers may also be able to obtain a waiver for the Prohibition, if it will cause premiums to increase significantly, or significantly reduce the quality of care or access to medical resources.




NEXT: Understanding Essential Health Benefits in ACA