More Answers on Annual & Lifetime Limits

March 29, 2011 (PLANSPONSOR.com) - We have received a number of recent questions on the new PPACA requirements regarding annual and lifetime limits. 

 

By PS

PPACA provides that, for plan years starting on or after 9/23/10, a plan no longer may impose lifetime limits on “essential health benefits” and may only impose “restricted” annual limits on certain health benefits.

What exactly are the differences for annual limits between 2010 and 2014?

Starting for the 2011 plan year, a group health plan is not permitted to have any lifetime limits on “essential health benefits” and is only permitted to have an overall annual limit of:

  • $750,000 for the 2011 plan year (which begins on or after 9/23/10, but before 9/23/11);
  • $1.25 million for the 2012 plan year (which begins on or after 9/23/11, but before 9/23/12); and
  • $2 million for the 2013 plan year (which begins on or after 9/23/12, but before 1/1/14).

Starting in 2014, group health plans may no longer impose any annual limits on essential health benefits.  

Does the limit on annual maximums apply to all benefits?

The requirements regarding annual and lifetime limits apply to “essential health benefits.”  PPACA defines “essential health benefits” to include the following categories and instructs the Secretary of HHS to further define these areas:  (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services; (6) prescription drugs; (7) rehabilitative and habilitative services and devices;(8) laboratory services; (9) preventive and wellness services and chronic disease management; (10) pediatric services, including oral and vision care.

Obviously these terms are very broad and could be read to encompass almost any benefit.  So, plans will have to make judgment calls as to what likely would fall into each of these categories until further guidance is issued.  The regulation governing annual and lifetime limits says that, until such guidance is issued the agencies will take into account “good faith efforts” to comply with a “reasonable interpretation” of the term “essential health benefits.” 

PPACA does not allow dollar value annual limits – is it still permissible to have visit or treatment limits?

Yes – it appears so.  The requirement only applies to dollar limits, so it appears that a plan still may have a visit or treatment limit, such as a limit on number of days or visits (regulators informally have confirmed this).  Note that if a provision has a dollar limit on the cost of the visit, along with an annual limit on the number of visits, these limits could be read together to be an overall annual dollar limit.  Also – there may be other laws that need to be considered, such as the mental health parity rules, when imposing limits.

======================================= 

Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions 

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html  

Contributors:

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

«