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Lifetime and annual limits under the Affordable Care Act

The Affordable Care Act (PPACA) prohibits health plans from putting a lifetime dollar limit on most benefits you receive. The law also restricts and phases out the annual dollar limits a health plan can place on most of your benefits — and does away with these limits entirely in 2014.

What this means for you

Prior to the enactment of the PPACA, many health plans set a dollar limit on their yearly spending for your covered benefits called an annual limit. Most plans also set a dollar limit on what they would spend for your covered benefits during the entire time you were enrolled in that plan called a lifetime limit. You were required to pay the cost of all care exceeding both the annual limit and the lifetime limit.

Under the PPACA, lifetime limits on most benefits are prohibited in any health plan or insurance policy issued or renewed on or after September 23, 2010.

The PPACA restricts and phases out the annual dollar limits that all job-related plans, and individual health insurance plans issued after March 23, 2010, can put on most covered health benefits. Specifically, the law says that none of these plans can set an annual dollar limit lower than:

  • $750,000: for a plan year or policy year starting on or after September 23, 2010 but before September 23, 2011.
  • $1.25 million: for a plan year or policy year starting on or after September 23, 2011 but before September 23, 2012.
  • $2 million: for a plan year or policy year starting on or after September 23, 2012 but before January 1, 2014.

No annual dollar limits are allowed on most covered benefits beginning January 1, 2014.

Important details

Plans can put an annual dollar limit and a lifetime dollar limit on spending for health care services that are not considered “essential.”

If the new rules apply to your plan, they will affect you as soon as you begin a new plan year or policy year on or after September 23, 2010. (For example, if your policy has a calendar plan year, the new rules would apply to your coverage beginning January 1, 2011).

If you have a “grandfathered” individual health insurance policy, your health plan is not required to follow the new rules on annual limits. (A grandfathered individual health insurance policy is a plan that you bought for yourself or your family; that you did not receive through your employer; and that was issued on or before March 23, 2010.) If you’re not sure whether your plan is grandfathered, ask your insurance company.

The ban on lifetime dollar limits for most covered benefits applies to every health plan whether you buy coverage for yourself or your family, or you receive coverage through your employer.

Some plans may be eligible for a waiver from the rules concerning annual dollar limits, but only if complying with the limit would mean a significant decrease in your benefits coverage or a significant increase in your premiums.

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