What Are the Limits of PPACA’s Annual and Lifetime Limits?

August 10, 2010 (PLANSPONSOR.com) - On June 28, 2010, the Departments of Health and Human Services, Labor, and Treasury published a new Interim Final Rule (IFR) addressing several provisions of the Patient Protection and Affordable Care Act (PPACA). 

 

By PS

From this IFR, we have already addressed a number of questions related to the new rules prohibiting rescissions and pre-existing condition exclusions (see What About PPACA’s Restrictions on Pre-Existing Conditions?, What are the PPACA’s Restrictions on Coverage Rescission?).  Among other things, the IFR provides guidance on a provision in PPACA generally prohibiting health plans from imposing annual and lifetime limits on certain “essential” benefits. 

This week we turn to the application of those limits.

Do these rules apply to grandfathered plans?

Yes, these restrictions apply to both grandfathered and non-grandfathered plans.  They also apply to both self-funded and insured plans (generally group and individual coverage).  However, grandfathered individual policies still will be permitted to impose annual limits (but can no longer impose lifetime limits on essential benefits).

Do these rules apply to HRAs, FSAs, and HSAs?

The IFR clarifies that the new annual/lifetime limit rules are not applicable to a health flexible spending account (health FSA), medical savings accounts (MSAs), or health savings accounts (HSAs).  The IFR also is not applicable to a health reimbursement arrangement (HRA) that is “integrated with other coverage” or to retiree-only HRAs.  The agencies requested comments as to whether the annual/lifetime limits rule should apply to stand-alone non-retiree HRAs.

Can a group health plan continue to impose lifetime limits?

For plan years beginning on or after 9/23/10, a group health plan no longer can impose lifetime limits on essential benefits.

Can a group health plan continue to impose annual limits?

For plan years beginning on or after 9/23/10, a group health plan only may impose restricted annual limits on essential benefits (see below).  Starting in 2014, group health plans may no longer impose any annual limits on essential benefits.

Prior to 2014, a group health plan is permitted to have an annual limit on essential benefits, as long as the annual limit is at least:

  • $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).

What are essential benefits?

The IFR does not define "essential health benefit" beyond the following categories that are listed in PPACA: 

  • 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
  • Pediatric services, including oral and vision care.

Until further guidance is issued, the IFR says the agencies will take into account "good faith efforts" to comply with a "reasonable interpretation" of the term "essential health benefits."   

Can a plan still impose other treatment/visit limits?

As the IFR is written, the limit applies only to annual or lifetime dollar limits and does not extend to specific treatment limits, like day or "number of visit" limits. 

If an individual already has met their lifetime maximum, must the plan allow them back in?

Yes, the IFR states that individuals who already have reached a lifetime maximum (and are still otherwise eligible under the plan) must be given an opportunity to re-enroll in coverage.  The re-enrollment period must be at least 30 days and begin no later than the effective date of the requirement, so the beginning of the first plan year beginning on or after 9/23/10.  (This requirement is similar to the re-enrollment rights for adult children under the age 26 rule.)

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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.

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