Lifetime and Annual Limits (Part 2)

by Clarke & Company Benefits Posted on: April 2, 2015Categories: HR & Compliance

The Affordable Care Act (ACA) prohibits health plans from imposing lifetime and annual limits on the dollar value of essential health benefits. This mandate became effective for plan years beginning on or after Sept. 23, 2010. However, “restricted annual limits” were permitted for essential health benefits for plan years beginning before Jan. 1, 2014.

On June 28, 2010, the Departments of Health and Human Services, Labor and the Treasury issued interim final rules regarding the ACA’s prohibition on lifetime and annual limits.

Enrollment Opportunities

The interim final rules included a transition rule for re-enrolling individuals who previously met a plan’s lifetime limit. Eligible individuals who lost plan coverage as a result of a lifetime limit must have received an enrollment notice and an opportunity to re-enroll in the plan.

The notice and enrollment opportunity must have been provided no later than the first day of the first plan year beginning on or after Sept. 23, 2010. Anyone who was eligible for the enrollment opportunity must have been treated as a special enrollee eligible to enroll in all of the benefit packages available to similarly situated individuals upon initial enrollment.

Restricted Annual Limits

The interim final rules established a three-year phased approach for restricted annual limits. Annual limits could not be less than the following amounts for plan years beginning before Jan. 1, 2014:

$750,000 for plan years beginning on or after Sept. 23, 2010, but before Sept. 23, 2011;
$1.25 million for plan years beginning on or after Sept. 23, 2011, but before Sept. 23, 2012; and
$2 million for plan years beginning on or after Sept. 23, 2012, but before Jan. 1, 2014.

These were minimums for plan years; plans were permitted to use higher annual limits or impose no limits. The limits applied on an individual-by-individual basis, so that any annual limit on benefits applied to families could not cause an individual to be denied the minimum annual benefit for the plan year.

In addition, the interim final rules allowed HHS to develop a temporary waiver program for plans that could demonstrate that complying with the restrictions would result in:

A significant decrease in access to benefits; or
A significant increase in premiums.

HHS granted a number of waivers and then closed the waiver program to new applications effective Sept. 22, 2011. Waivers and/or extensions received before that date could be effective until plan years beginning on or after Jan. 1, 2014, when all annual limits for essential health benefits are prohibited.

Waiver recipients were required to provide an annual notice informing each participant that the plan or policy did not meet the restricted annual limits for essential benefits because it received a waiver of that requirement, as well as annual updates to HHS regarding plan information and benefits.

Lifetime and Annual Limits (Part 2)