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Lifetime and Annual Limits

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Restrictions on annual and lifetime limits

A primary purpose of health insurance is to help cover the cost of health care.  However, until health reform, insurance companies were able to place annual and lifetime limits on coverage.  These limits left many Minnesotans with serious illness unable to get health care at the time when they most needed these services. 

Health reform eliminates lifetime dollar maximums on most health plan benefits and places restrictions on annual dollar limits.  The changes to annual limits are phased in over several years.  Health plans must provide annual dollar limits of at least:

  • $750,000 for plan years that start between September 23, 2010 and September 23, 2011;

  • $1.25 million for plan years that start between September 23, 2011 and September 23, 2012;

  • $2 million for plan years that start between September 23, 2012 and January 1, 2014.

No annual dollar limits are allowed on most covered benefits effective January 1, 2014.

The requirement to eliminate lifetime dollar limits applies to all plans.  The annual limit restrictions apply to employer-based health plans, and to individual health insurance plans issued after March 23, 2010.  Some plans are eligible for a waiver from the rules concerning annual dollar limits.  To get the waiver, plans must show that increasing their annual limit would require a significant increase in premiums or decreased access to coverage.

Can health plans have a lifetime maximum on benefits?

No. Health insurance plans cannot place a dollar limit on the total amount that the policy will pay during a lifetime for each person. 

What about lifetime limits on specific types of benefits within a policy? Are those permitted?

No. Not if the benefit is considered to be an essential health benefit under federal health reform. There cannot be a lifetime dollar limit placed on either the total benefits under a policy or any separate type of service considered to be an essential benefit.  (Note: The list of essential health benefits is anticipated to be released by federal agencies in 2012.)

What are essential health benefits under federal health reform?

The U.S. Department of Health and Human Services (HHS) has been consulting with the U.S. Department of Labor, health experts and the insurance industry to determine which services are considered essential health benefits. The following types of services are specifically mentioned in the federal health reform law as essential health benefits:

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

Plans cannot place lifetime limits on essential health benefits and only grandfathered individual plans can include annual limits on essential health benefits. We will update this FAQ when more details regarding essential health benefits are available.

Can health plans have a lifetime maximum on benefits?

No. Health insurance plans cannot place a dollar limit on the total amount that the policy will pay during a lifetime for each person. 

What about lifetime limits on specific types of benefits within a policy? Are those permitted?

No. Not if the benefit is considered to be an essential health benefit under federal health reform. There cannot be a lifetime dollar limit placed on either the total benefits under a policy or any separate type of service considered to be an essential benefit.  (Note: The list of essential health benefits is anticipated to be released by federal agencies in 2012.)

What are essential health benefits under federal health reform?

The U.S. Department of Health and Human Services (HHS) has been consulting with the U.S. Department of Labor, health experts and the insurance industry to determine which services are considered essential health benefits. The following types of services are specifically mentioned in the federal health reform law as essential health benefits:

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

Plans cannot place lifetime limits on essential health benefits and only grandfathered individual plans can include annual limits on essential health benefits. We will update this FAQ when more details regarding essential health benefits are available.

Can a plan have lifetime or annul limits based on number of visits or days of treatment instead of dollar amounts?

Yes. The restrictions on lifetime and annual limits apply to dollar limits only. Health plans may continue to limit visits to health providers and the number of days in the hospital. As long as the visit or day limit does not amount to a dollar limit (for example, by combining a dollar limit on each day or visit with a limit on the number of days or visits), plans are able to have day limits.

Can the Minnesota Comprehensive Health Association (MCHA) have a lifetime dollar limit on benefits?

Yes. High risk pools like MCHA are not required to eliminate their lifetime limit on benefits. MCHA's deductible plans have a $5,000,000 lifetime limit.


 

What changes do health plans have to make to annual limits?

The restrictions on annual limits under health reform are being phased in through 2014. Specifically, plans cannot set an annual dollar limit lower than:

• $750,000 for plan years that begin between 9/23/10 and 9/23/11.
• $1.25 million for plan years that begin between 9/23/11 and 9/23/12.
• $2 million for a plan years that begin between 9/23/12 and 1/1/14.

No annual dollar limits are allowed on most covered benefits beginning on January 1, 2014.

I have been informed that my plan is a grandfathered plan. Do grandfathered plans have to change their lifetime and annual limits?

The requirements related to lifetime limits apply to all individual and employer-based plans, including grandfathered plans. The restrictions on annual limits apply to all group coverage through an employer or union, including grandfathered plans. Only grandfathered individual plans can include annual limits.

What about MinnesotaCare? Does MinnesotaCare have to change its annual limit?

No. The restrictions on annual limits apply to private health insurance purchased in the individual market and to employer-based health plans.  As a state government program, MinnesotaCare is exempt from the restrictions on lifetime or annual limits. MinnesotaCare has a $10,000 yearly limit on inpatient hospital stays for single adults.

I understand that some plans applied for waivers from the annual limit requirements. How do I find out if the plan I am covered under received a waiver?

We have posted a listing of Minnesota employers and unions that have received waivers on the Lifetime and Annual Limits page.

I am a plan sponsor and have not applied for a waiver of the annual limit requirements. How do I apply for a waiver?

Waivers are not available after September 22, 2011.