The Affordable Care Act of 2010 changed the healthcare and health insurance landscape. One of these was their requirement that every health plan offers essential health benefits. Another was the prohibition of lifetime and annual limits on such benefits.
That’s great news for people seeking health insurance. But do you understand what it means for you? What are health insurance lifetime and annual limits? When are they applicable? These are two of the most common questions around this issue. You’ll find the answers here and much more.
Keep reading to learn how these limits apply to you, and how to handle them.
Definition Of Maximum Benefits
Maximum benefits can be annual benefits (maximum for the coverage year), or lifetime benefits (maximum for life). Let’s examine each of these health insurance maximums more closely.
Lifetime Limits
Lifetime limits refer to the maximum amount the insurer will spend on a health plan’s covered benefits while an individual is enrolled in that plan.
If you are enrolled in a health plan, even if it is for many years, the lifetime maximum or lifetime limit is a dollar amount maximum applied to the entire period. This cap on the total lifetime benefits you’ll get from your insurer can also apply to specific benefits.
Annual Limits
Annual limits refer to the maximum amount that the insurer will spend on a health plan’s covered benefits for the coverage year. So each year that you are enrolled in that plan, the annual maximum or annual limit is a dollar amount applied to that specific coverage year.
When Can A Maximum Benefit Apply?
There are two scenarios in which maximums may apply.
- First, there are the ‘grandfathered’ health plans. These are health plans signed up for before the ACA took effect in 2010. They are not required by law to follow ACA rules, including those regarding maximum limits on covered benefits.
- Next, there are the ACA-regulated health plans. With these, maximums or limits may still apply to any benefits that are not one of the essential health benefits. These maximums may vary from one plan to the next.
Once you have reached a maximum or limit, you will pay for those benefits out of pocket.
Do Lifetime Maximum Benefits Vary By State?
Just as the policy structure, pricing, benefits and coverage offered can vary from one plan to the next, they can vary by state. So yes, it is possible that lifetime maximum benefits, when applied to specific benefits, will vary too.
However, across the US (and therefore, in every state) there is a ban on annual dollar limits and lifetime dollar limits for ‘essential health benefits’.
No Lifetime Maximum Benefit For Essential Services
Thanks to the ACA, there is no lifetime maximum benefit for essential services.
Each health plan on the ACA Health Insurance Marketplace must offer a set of ten specific essential health benefits. And regardless of how many years you are on any ACA-compliant health plan, these core essential benefits will be unlimited.
The Ten Health Benefits (EHB) Of The ACA
If you are not familiar with the ACA’s ten essential health benefits, they are services, treatments, and items that fall into the following categories:
- Ambulatory patient services
- Emergency medical services
- Hospitalization
- Maternity care and newborn care
- Mental health care, substance use disorder treatments, behavioral health services
- Prescription medications
- Rehabilitative and habilitative services (and devices)
- Laboratory services
- Preventive care and wellness services, including chronic disease management
- Pediatric services, including vision care and oral care
The ACA’s Ban On Annual Dollar Limits
Benefit limits mean large potential out-of-pocket expenses for policyholders. If a limit or maximum is reached, the policyholder has to pay out-of-pocket for further related treatment. However, the ACA stepped in and reduced this burden on policyholders across the US.
In 2014, the Affordable Care Act banned annual dollar limits on ACA-compliant health insurance plans. Therefore, no benefits can have an annual dollar limit in any coverage year. And over your lifetime, while enrolled in any plan, only certain benefits (not the essential ones) may be limited.
That’s just another way that the ACA has made health insurance more affordable, regardless of costly pre-existing conditions or other financial constraints.
Advantages & Disadvantages Of Policy Maximums
While it would appear at first glance that there can be no advantages, and only disadvantages, of policy maximums, this is incorrect. There are both advantages and disadvantages of policy maximums.
Advantages Of Policy Maximums
Lifetime maximums and annual limits primarily disadvantage policyholders. But there are a few potential advantages for insurance providers:
- Cost Control: Policy maximums help insurance companies manage their financial risk by capping the amount they have to pay out in benefits over a policyholder’s lifetime or within a single policy year.
- Risk Mitigation: By setting policy maximums, insurance providers can protect themselves against catastrophic claims and unpredictable healthcare costs.
- Pricing Flexibility: Policy maximums allow insurance companies to tailor coverage options and premiums based on the level of risk associated with different policyholders. Individuals with lower coverage needs or healthier lifestyles may choose plans with lower maximums, resulting in more customized and cost-effective insurance options.
- Incentivizing Preventive Care: Knowing that there is a limit to their coverage may encourage policyholders to maintain their health and prevent costly medical expenses.
Disadvantages Of Policy Maximums
Lifetime maximums and annual limits in health insurance can impose several disadvantages for policyholders:
- Coverage Limitations: Lifetime maximums and annual limits can cause insufficient coverage, especially for individuals with chronic or expensive medical conditions requiring ongoing treatment.
- Financial Burden: Exceeding your coverage limits can lead to significant financial strain, especially if the medical condition is severe or requires expensive treatments.
- Limited Access to Care: Policyholders may avoid seeking necessary medical care or treatment to avoid reaching their coverage limits. This can cause delayed or inadequate treatment, leading to worsened health outcomes.
- Risk of Underinsurance: Lifetime maximums and annual limits may not adequately cover the cost of certain medical procedures or treatments, leaving individuals underinsured and vulnerable to high out-of-pocket expenses.
What To Do About Lifetime Limits
Be realistic about your needs when selecting a health insurance policy. If you see that a lifetime limit applies to a benefit that you will likely need, shop around for another policy without that limit.
If the limit applies to a benefit that you don’t need right now but may need in the future (because of a family history of a particular illness), consider getting another policy instead.
With some careful planning, it is possible to avoid or at least mitigate the effects of lifetime limits on health insurance benefits.
Conclusion
The ACA has gone a long way to limit the effects of limits and maximums on health insurance.
By banning all annual dollar limits, and lifetime dollar limits on EHBs, we can all enjoy more peace of mind with less out-of-pocket expense. But there’s another way to have peace of mind and pay less for your healthcare. Trust the experts at Enhance Health for help to find the right health insurance plan.
The ACA aims to make health insurance accessible to all, and that’s our mission, too. Give us a call today, because when it comes to helping Americans get the best deal on insurance, our dedication knows no limits.
