Health Care Reform

Lifetime Limits

For plan years beginning on or after September 23, 2010, health plans may not impose any lifetime limits on the dollar value of essential health benefits.  Individuals who had exhausted their lifetime limits must be allowed to re-enroll in the plan.  Regulations impose notice and special-enrollment rules for such individuals.

Note: The prohibition on lifetime limits only applies to certain types of health plans, such as major medical insurance.  It does not apply to HIPAA excepted benefits, such as disability, cancer, hospital indemnity, or accident  insurance.  Click here for more information about the types of benefits that are exempt from the Health Care Reform plan design mandates.

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Lifetime Limit Hot Topics & FAQs

  • Stand-alone HRAs do not comply with the prohibition on annual and lifetime limits.

    FAQs published by the Federal Agencies on January 24, 2013  clarified that employer-sponsored Health Reimbursement Arrangements (HRAs) that  are offered on a “stand-alone” basis (i.e., not in connection with other health  coverage) must comply with the Health Care Reform prohibition on annual or  lifetime dollar limits on coverage.   Because, by definition, an HRA limits the amount of benefits a  participant may receive based on the amount of credits the employer makes available,  an HRA alone cannot comply with the requirement to offer unlimited  coverage.  When an HRA is integrated with  other group health plan coverage, as long as the two together provide unlimited  coverage, the fact that benefits under the HRA by itself are limited does not  violate the law.  The FAQs also provide that, if the employer offers both  an HRA and health coverage, but the employee fails to enroll in the employer’s  coverage, the HRA will fail to comply with the law.  Finally, the FAQs clarified that a  stand-alone HRA used to purchase individual market coverage does not comply  with the rule prohibiting annual or lifetime limits even if the purchased  individual coverage does comply with the rule.

    From a practical standpoint, this means that  stand-alone HRAs are no longer allowed for active employees.  Future guidance is expected to provide that,  whether or not offered on a stand-along basis, unused amounts credited before  January 1, 2014 under the terms of an HRA in effect on January 1, 2013 may  continue to be used by participants.   Retiree-only HRAs (with fewer than two current employees) are exempt  from the Health Care Reform plan design mandates so are still allowed on a  stand-alone basis.   Learn more about the  prohibition on lifetime and annual limits. 

  • What are essential health benefits?

    Answer: Health Care Reform list the following as essential health benefits: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness, disease management, and pediatric services.

    Agency guidance allows states to decide, among benchmark plans, the parameters of essential health benefits for coverage within an Exchange. 

    For purposes of the annual and lifetime dollar limitations, a self-funded plan may use any permissable definition of essential health benefit, including any available benchmark plan.  Click here to learn more about essential health benefits.

  • May plans impose lifetime limits on some benefits?

    Answer: It depends. Plans may impose lifetime limits on non-essential benefits. In addition, plans may impose non-dollar limits (such as service or visit limits) on any benefits. For example, an employer-plan sponsor may decide to only cover one organ transplant during a participant’s lifetime. 

  • Under the special enrollment rules, must the plan allow other family members to enroll or only the individual who had previously reached the plan’s lifetime limit?

    Answer: The plan must provide all eligible family members an opportunity to enroll in the plan for the first plan year beginning on or after September 23, 2010, not just the individual who had previously reached the plan’s lifetime limit.

American Fidelity Assurance Company does not provide tax or legal advice.

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