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Health Care Reform: Lifetime and Annual Limits Rules

Interim final regulations have been issued by the Department of Health and Human Services (HHS), Department of Labor, and Treasury for annual and lifetime limits within group health insurance plans.

Lifetime Limits
Under the Affordable Care Act, a plan may not impose a lifetime dollar limit on essential benefits provided to an individual.  This requirement is effective for plan years beginning after September 23, 2010, so for plans with calendar year renewals, it would be effective January 1, 2011.  This requirement applies to both grandfathered and non-grandfathered plans.

According to the Act, essential health benefits include, at a minimum, items and services in the following categories: ambulatory patient services; emergency services; hospitalization, maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Interestingly, the regulations provide no further guidance on the definition of “essential health benefits” except to say that, until HHS issues such guidance, the regulatory agencies will take into account good-faith efforts to comply with the “guidelines” set forth in the Act.

A group health plan may still impose lifetime limits on non-essential health benefits. Thus, the key will be for the health plan to determine which benefits are “essential.”

Special Enrollment Notice
For those who have already reached their lifetime limit on essential benefits, the health plan will need to provide them a notice to let them know that the lifetime limit no longer applies, and (assuming they are still eligible) they have a 30 day special enrollment period to re-enroll in the plan.  This notice must be provided no later than the first day of the plan year beginning on or after September 23, 2010.  The DOL has issued model language for this notice.

Annual Limits
Prior to January 1, 2014, both grandfathered and non-grandfathered plans may impose a “restricted” annual limit on the dollar limit of essential benefits provided to an individual.  The annual limit is restricted in that it provides a three year phase-out.  The annual limit may not be less than:

  • $750,000 for any plan year beginning from September 23, 2010 to September 22, 2011
  • $1.25 million for any plan year beginning from September 23, 2011 to September 22, 2012
  • $2 million for any plan year beginning from September 23, 2012 to December 31, 2013
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