The Affordable Care Act (ACA) prohibits group health plans from imposing lifetime or annual dollar limits on the amount of benefits for essential health benefits (EHBs).
This requirement ensures that individuals with significant medical needs are not capped out of coverage simply because they hit a plan’s maximum dollar amount – a common practice before the ACA.
A lifetime or annual dollar limit was a maximum dollar amount a plan would pay for certain benefits for a covered individual, either over the course of a plan year (annual limit) or over the entire period of coverage (lifetime limit).
Lifetime Limits
- Ban Effective: Plan years beginning on or after September 23, 2010.
- Rule: Plans may not impose any lifetime dollar limits on the value of essential health benefits.
- Application: Applies to all group health plans, including fully insured, self-funded, level-funded, grandfathered, and non-grandfathered plans.
What Counts as an “Essential Health Benefit” (EHB)
The ACA defines 10 broad categories of EHBs (e.g., hospitalization, prescription drugs, maternity and newborn care, mental health services).
- Fully insured small group plans must cover all EHBs as defined by the state’s EHB benchmark plan.
- Large group, self-funded, and level-funded plans are not required to cover all EHBs, but if they do cover an EHB, they cannot impose dollar limits on that benefit.
Important Note: Plans may still impose non-dollar limits, such as visit limits (e.g., 30 physical therapy visits per year) or other non-monetary quantitative limits, as long as they comply with other applicable rules (like Mental Health Parity and Addiction Equity Act [MHPAEA] for mental health).
Non-Essential Health Benefits
Plans may continue to impose lifetime or annual dollar limits on benefits that are not considered EHBs, as long as those limits are clearly defined and communicated.
Grandfathered Plans
The prohibition on lifetime and annual dollar limits applies to grandfathered plans as well, except that grandfathered individual policies were exempt from the annual limit rules prior to 2014.