Finding the right health insurance can be challenging. This is especially true when you’re faced with terms like “lifetime maximum benefits,” “annual limits,” and “out-of-pocket maximums.”
Luckily, Enhance Health is here to help you understand how lifetime and annual limits have changed under the Affordable Care Act (ACA) and what that means for you as a policyholder.
This article explores annual and lifetime maximum benefits, how they’ve changed, and what you can expect from insurance companies today.
Lifetime Maximum Benefits Explained
Lifetime maximum benefits refer to the amount a health insurance company agrees to pay on behalf of a member throughout their life.
Most insurance companies implemented lifetime maximum benefits before the Affordable Care Act (ACA). This meant that if you reached a predetermined coverage limit, your insurance company would refuse to pay for further treatment, no matter how life-threatening your condition was.
Once your healthcare costs exceeded the determined limit, you were responsible for all your future healthcare costs.
Under the ACA, health insurance plans are prohibited from setting a lifetime maximum on essential benefits. Essential health benefits include:
- Emergency services
- Ambulatory patient services
- Prescription drugs
- Maternity and newborn care
- Mental health services
- Rehabilitation services
- Laboratory services
- Preventative healthcare
- Pediatric services
Annual Limits Explained
Previously, health plans set an annual dollar limit on their yearly spending for covered medical services.
Insurance companies set these limits to keep costs manageable and prevent excessive payouts. Once you reached your policy’s annual limit, you became responsible for covering all further medical expenses until the start of the following policy year.
The ACA gradually phased out annual limits on essential health benefits until they were completely banned.
Under the ACA, insurance plans are prohibited from imposing lifetime limits on essential health benefits, ensuring that individuals can receive medical care without fear of exhausting their coverage.
All individual and job-based health plans, including grandfathered plans, are safeguarded against lifetime limits on coverage. A grandfathered plan is a health insurance policy established on or before March 23, 2010.
These plans can maintain certain features that don’t comply with the law, but they’re still safeguarded against annual limits. The only exception is grandfathered individual health plans, which are not covered.
Advantages Of Lifetime Maximum Benefits
Maximum lifetime benefits were implemented to protect insurance companies.
- These limits allowed them to control costs and predict their potential financial exposure more accurately.
- These limits also helped them to maintain their financial stability. This could contribute to more affordable premiums for all policyholders.
- Additionally, companies could provide coverage for more people by imposing a lifetime limit.
Disadvantages Of Lifetime Maximum Benefits
The main disadvantages of lifetime limits are on the policyholder’s side. These include:
- Financial Hardship: If a person has a chronic illness and reaches their limit, they will be responsible for all further healthcare costs. This could lead to financial hardship or bankruptcy.
- Negative Health Outcomes: Once a limit is reached, the policyholder may not be able to get the necessary treatments, leading to negative health outcomes and even death.
- Impacts Chronic Illness: Lifetime maximum benefits also disproportionately affect people with chronic illnesses or severe medical conditions.
- Neglecting Health: People nearing their lifetime maximum might avoid seeking necessary care for fear of hitting their limit.
Types Of Lifetime Maximum Benefits
Before the ACA was implemented, it was common for people to face lifetime maximum benefits with their health insurance policy. These limits drove some patients to avoid care entirely, as they worried they would use up all their available coverage and be left in dire financial situations.
Overall Lifetime Maximum
An overall lifetime maximum limit was the most common limit on insurance policies. It refers to the total amount an insurance company would pay for all combined health insurance needs.
The insurance company would cover all your medical costs up to a predetermined amount. This includes regular doctor’s visits, hospitalizations, surgical procedures, ambulance services, therapy sessions, and other medical expenses.
Once your lifetime maximum limit was reached, it was up to you to cover all your medical expenses.
Most people did not exceed this limit. However, those dealing with serious or chronic illnesses like cancer or long-term heart conditions could reach this limit quickly. Consistent treatments, expensive medications, and extended hospital stays are costly.
Specific Benefit Lifetime Maximum
Specific benefit limits refer to limits that some policies would set as a lifetime maximum for particular services or types of care, such as physical therapy sessions or mental health treatments.
Once the lifetime limit for that specific service was reached, the policyholder would be responsible for all further costs if they wanted that service.
For example, if a policy benefit lifetime maximum were $50,000 for physical therapy, the insurance would only cover therapy costs until you reached the $50,000 limit.
Similarly, if someone reached their maximum for mental health treatment, they would have to cover the cost of all further treatments.
How Does The ACA Impact Lifetime Limits And Annual Limits?
The ACA has significantly impacted insurance coverage limits. Insurance companies may no longer impose lifetime dollar limits on essential health care benefits.
The change in law has allowed people with severe or chronic illnesses to maintain insurance coverage for the rest of their lives.
This is especially crucial for people who may need expensive, long-term treatments such as those for cancer or other serious diseases, where medical care becomes extremely expensive very quickly.
Regarding annual limits, the ACA prohibited companies from imposing annual dollar limits on the amount of coverage you receive for essential health benefits.
When May A Lifetime Maximum Limit Apply?
Insurance companies can still put yearly or lifetime dollar limits on spending for healthcare services that aren’t considered essential health benefits.
Non-essential Health Benefits
These are medical services or treatments that are not vital for maintaining good health or treating severe medical conditions. They vary by healthcare plan and can change over time.
Review your specific health insurance plan to understand which services are covered and which ones may be considered non-essential or elective.
Grandfathered Health Plans
Insurance companies can still offer grandfathered plans to those already enrolled before March 23, 2010. However, they cannot enroll new members and have it considered grandfathered.
Employers Who Self-insure
Large companies may provide self-funded health plans. This means they are not required to follow certain rules of the ACA, such as the ban on lifetime limits.
These plans are regulated by the federal Employee Retirement Income Security Act (ERISA), not state insurance laws. ERISA does not have the same ban on lifetime limits as fully insured plans covered by the ACA.
The healthcare market and laws are constantly changing. While this usually means insurance is improving, it can also mean that knowing the ins and outs of finding a policy is challenging.
If you’re looking for a new health insurance plan, Enhance Health can help you pick the best one for your particular circumstances.
We’ll review your job, income level, health, and more to determine which plan best fits your needs and budget. Health insurance is something that everyone needs and is essential to your health and finances. Don’t wait to find your plan; contact our healthcare experts at Enhance Health and get started today!