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Annual Limits

Timeline of Provisions

Annual Limits

Summary

The provision restricts annual limits on the dollar value of Essential Health Benefits. Annual limits may not be less than the following amounts.

For plan years beginning before Jan. 1, 2014:

  • $750,000 on or after Sept. 23, 2010
  • $1.25 million on or after Sept. 23, 2011
  • $2 million on or after Sept. 23, 2012 to Jan. 1, 2014

These restricted annual limits apply on an individual-by-individual basis; however, they do not apply to individual health plans that are grandfathered.

For plan years beginning on or after Jan. 1, 2014, group health plans may not establish any annual dollar limits on essential health benefits.

Video: Lifetime and Annual Limits Under the Affordable Care Act

Under health reform, lifetime and annual dollar limits for all policies will be eliminated in 2014. There also are gradual changes taking place before then. View video

For More Information

Annual Limits Waiver Process (PDF)

Frequently Asked Questions

What is the effective date of the restricted annual limit mandate?

Restricted annual limits on essential health benefits will be allowed according to the following schedule:

  1. For a plan year beginning on or after Sept. 23, 2010, but before Sept. 23, 2011, no less than $750,000 limit on essential health benefits.
  2. For a plan year beginning on or after Sept. 23, 2011, but before Sept. 23, 2012, no less than $1,250,000 limit on essential health benefits.
  3. For a plan year beginning on or after Sept. 23, 2012, but before Jan. 1, 2014, no less than $2,000,000 on essential health benefits.

The complete prohibition on annual limitations for essential health benefits is effective for plan years beginning on or after Jan. 1, 2014.

Are plans allowed to have annual visit or day limits?

The Department of Labor (DOL) has informally commented that frequency limits are generally acceptable. Such limits, however, should not "transcend" into dollar limits. For example, a frequency limit of 10 visits alone may be acceptable, but if the plan also places a cap on reimbursement, such as $50 per visit, the net result would be a $500 annual limit. In such cases, the DOL suggested that tying the payment to reasonable and customary expenses, or similar action, may rectify the annual limit issue.

What is the definition of "essential health benefits"?

The term "essential health benefits" is currently broadly defined under the Patient Protection and Affordable Care Act (the Act) as 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 and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

Does the restriction on annual limits apply to all benefits in the plan?

No. The restriction on annual limits will only apply to "essential health benefits". Plans may enforce annual limits on non-essential health benefits to the extent otherwise allowable by law.

What are "reasonable annual limits" on essential health benefits?

Between now and Jan. 1, 2014, a group health plan and health insurance company offering group or individual health insurance may still maintain annual limits, subject to the following:

  1. For a plan year beginning on or after Sept. 23, 2010, but before Sept. 23, 2011, no less than $750,000 limit on essential health benefits.
  2. For a plan year beginning on or after Sept. 23, 2011, but before Sept. 23, 2012, no less than $1,250,000 limit on essential health benefits.
  3. For a plan year beginning on or after Sept. 23, 2012, but before Jan. 1, 2014, no less than $2,000,000 on essential health benefits.

For non-essential health benefits lower annual limits can still apply to the extent otherwise allowable by law.

What is the definition of "unreasonable" annual limits on the dollar value of benefits?

The original bill referenced "unreasonable annual limits," but was amended. Instead, plans and issuers that intend to utilize annual limits up until Jan. 1, 2014, may only establish a "restricted annual limit" on "essential health benefits".

Are annual limits allowed on state mandated benefits that only require a minimum level of coverage and are beyond the basic definition of health care (e.g., a one-time-only benefit for all outpatient expenses arising from invitro fertilization procedures; $4,000 annual coverage for low protein foods)?

The restriction on annual limits will only apply to essential health benefits. The interim final rule (IFR) does not prevent a group health plan, or a health insurance issuer offering group health insurance coverage, from placing annual limits with respect to any individual or specific covered benefits that are not essential health benefits to the extent that such limits are otherwise permitted under applicable federal or state law. However, where a state mandate regarding an "essential health benefit" includes a dollar limit on an essential benefit that is less than the restricted annual limit, the application of the federal requirement under the Act would pre-empt the state mandate. To the extent state laws mandate a minimum level of coverage for an essential benefit, such state mandate would not conflict with the provisions of the Act, therefore technically the requirements of both laws should be met where the plan must follow state mandates.

Which optional benefits have annual limits that fall within the definition of essential benefits?

The Secretary of Health and Human Services (HHS) is required to define essential benefits to include the following categories: ambulatory patient services, emergency services, hospitalization maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including oral and vision care.

Can plans replace dollar limits with visit or other limits in high risk cases?

The question of whether plans will be allowed to have annual visit or day limits are not directly addressed by the law or the interim final rules. The DOL has informally commented that frequency limits are generally acceptable. Such limits, however, should not "transcend" into dollar limits. For example, a frequency limit of 10 visits alone may be acceptable, but if the plan also places a cap on reimbursement, such as $50 per visit, the net result would be a $500 annual limit. In such cases, the DOL suggested that tying the payment to reasonable and customary expenses, or similar action, may rectify the annual limit issue.

Does the law apply to both fully insured and self-funded group plans?

Yes. This provision applies to group health plans, both self-funded and fully insured group coverage. Individual insured plans that are grandfathered are not subject to the restricted annual limits provision.

Do grandfathered plans have to implement the restricted annual limits?

Grandfathered plans that are group health plans and group health insurance coverage (but not individual insurance coverage) are subject to the restricted annual limits provision. The prohibition on annual limits specifically still applies to grandfathered health plans on the first plan year on or after Sept. 23, 2010, despite the fact that most other provisions are entitled to grandfathering indefinitely. Individual health insurance coverage that is a grandfathered plan would not have to implement the restricted annual limits.

Could a plan that didn't have annual limits prior to the Act now put annual limits in place (for example, up to $750,000 for 2011) that meet the requirements?

This falls into an overlapping area – grandfathered status. Applying an annual limit where there previously was not a lifetime or annual limit in the plan would likely result in the loss of grandfather status (as this is a reduction in benefits from the previous plan). However, where a plan already had a lifetime maximum, under certain circumstances, the plan may be able to transfer that maximum to an annual maximum without the loss of grandfather status.

Grandfather status would be lost to a plan with respect to annual limits when:

  1. A group health plan, or group or individual health insurance coverage, imposes an overall annual limit on the dollar value of benefits (and, on March 23, 2010, that plan did not impose an overall annual or lifetime limit on the dollar value of all benefits); or
  2. A group health plan, or group or individual health insurance coverage, that imposed an overall lifetime limit on the dollar value of all benefits as of March 23, 2010 (but no overall annual limit) adopts an overall annual limit at a dollar value that is lower than the dollar value of the lifetime limit on March 23, 2010; or
  3. A group health plan, or group or individual health insurance coverage, that, on March 23, 2010, imposed an overall annual limit on the dollar value of all benefits decreases the dollar value of the annual limit (regardless of whether the plan or health insurance coverage also imposes an overall lifetime limit on the dollar value of all benefits).
If the product offers coverage for network and non-network services, can annual limits be placed on the non-network benefits as long as the network benefits comply with the "no limits" regulations?

The DOL has informally clarified that the restriction and eventual prohibition on limits in regard to essential benefits applies to both network and non-network services.

Do these limits apply to pharmacy benefits or just medical benefits?

These limits apply equally to pharmacy and medical benefits since both are benefits and both are included in the categories of essential health benefits. Annual limit provisions apply to group health plans and group and individual health insurance coverage (for discussion of Grandfathered plans, see above).

Therefore an overall pharmacy maximum would need to be removed. However, a limit on fertility drugs, for example, can be retained since infertility treatment is considered a non-essential health benefit.