ACA Ban on Annual and Lifetime Benefit Maximums Has Caveats

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One of the consumer protections in the Affordable Care Act is a ban on annual and lifetime benefit maximums. Lifetime benefit maximums are no longer allowed at all, even on grandfathered plans. Annual - but not lifetime - benefit limits can still apply to grandfathered individual plans, but not group plans.

That means consumers are no longer at risk of finding themselves in need of cancer treatment with a health plan that has a $300,000 lifetime benefit cap. And people with chronic and complex medical conditions are no longer in danger of being kicked off their plan when their total medical bills reach a certain threshold. 

But there are a few caveats that are important to understand.

Essential Health Benefits

When the ACA was written, lawmakers determined that there were ten types of care that were considered essential. They labeled them essential health benefits, and all individual and small group plans with effective dates of January 2014 or later must include coverage for them (pediatric dental is one of the essential health benefits, but the rules are different for pediatric dental coverage).

The restriction on lifetime and annual benefit maximums only applies to essential health benefits. Granted, virtually all medically-necessary care falls under the umbrella of essential health benefits since some of the categories are quite broad (for example, outpatient care is one of the essential health benefits, and inpatient care is another).

But as an example, adult dental services are not considered an essential health benefit under the ACA. It's very rare to find a health plan that includes embedded adult dental coverage, but they do exist. However, such plans can place a cap on annual and lifetime benefits for adult dental services, since that's not one of the essential health benefits.

Network Matters

The ACA's ban on lifetime and annual benefit limits applies to both in-network and out-of-network care. But health plans are not required to cover out-of-network care. If they do, however, they cannot impose a dollar limit on the annual or lifetime benefits.

HMOs generally only cover care received from in-network providers, except in the case of an emergency that occurs outside the plan's service area, or where the nearest emergency facility isn't part of the HMO's network. But for non-emergency care received outside of an HMO's network, the patient will generally be responsible for the entire bill.

PPO plans typically do cover out-of-network care, but with a higher deductible and maximum out-of-pocket limit for the patient. The ACA's $6,850 cap on out-of-pocket costs in 2016 only applies to in-network care; patients who choose to go outside the network or inadvertently use a non-network provider can end up with much higher out-of-pocket costs. It's also becoming more common for PPO plans to have unlimited out-of-pocket exposure for treatment received outside the plan's network. But if the plan covers out-of-network care for essential health benefits, it cannot impose a lifetime or annual benefit maximum.

Note that it's important to understand the distinction between benefit caps and out-of-pocket caps; a benefit cap is the maximum amount that the insurance company will pay, and that's what is no longer allowed. The out-of-pocket cap is the most that the patient would have to pay during a given year, regardless of how high her total claims are; that's what's capped at $6,850 in 2016 for in-network care for essential health benefits (the cap was $7,150 in 2017; note that this was the maximum allowed at the time - plans can and do have much lower out-of-pocket limits than this).

There Can Still Be Limits, They Just Can't Be in Dollars

The ACA's ban on lifetime and annual benefit limits for essential health benefits applies to limits that are stated in terms of dollars. So health plans can no longer have a $3,000,000 lifetime benefit cap, for example, or a $500,000 annual benefit cap.

But health plans still can - and do - place other limits on how much care they'll cover. For example, a plan can state that it will provide 20 physical therapy visits per year, or 60 days of skilled nursing per year. Even when the care in question falls under one of the essential health benefit designations, carriers can limit the coverage. They just can't do it with a limit that's stated in dollars. So they wouldn't be able to say that you can only have $2,000 worth of physical therapy in a year, despite the fact that they can say you can only have 20 covered visits to a physical therapist during the year.

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