Annual and Lifetime Dollar Limits Q&A

 

Lifetime Dollar Limits

When does the prohibition on lifetime dollar limits go into effect? Do lifetime dollar limits apply to grandfathered plans or only to new plans?

  • Lifetime dollar limits on essential health benefits are prohibited for plan years beginning September 23, 2010. This applies to all plans new and renewing on or after September 23, 2010, including grandfathered plans.
  • Plans may apply lifetime per-beneficiary limits on any “non-essential” health benefits.
  • Benefits may be entirely excluded for a condition without being subject to lifetime limit rules.
  • Special enrollment rights were provided for individuals who had reached a lifetime limit on a prior plan year before the requirement was effective.

Annual Dollar Limits

When does the prohibition on annual dollar limits go into effect?

  • For plan years beginning January 1, 2014, plans (excluding grandfathered individual plans) will be prohibited from placing annual dollar limits on essential health benefits. 
  • Grandfathered individual policies may keep the annual dollar limits that were in effect as of March 23, 2010.
  • Day, visit and frequency limits are not subject to the annual dollar limit rules.
  • Plans may have per-beneficiary annual dollar limits on any non-essential health benefits.
  • Benefits may be entirely excluded for a condition without being subject to annual dollar limit rules.
  • To provide a transition period, the regulations allowed plans to include restricted annual dollar limits on essential health benefits, which increase until they are eliminated completely in 2014. This table identifies the minimum restricted annual limits allowed by the law for plan years beginning on or after the dates shown:

 

Plan Year Begins Minimum Annual Limit
9/23/10 $750,000
9/23/11 $1,250,000
9/23/12 $2,000,000


Can a plan accumulate all benefits (essential and nonessential) toward the restricted annual dollar limit?

No. The regulation states that a plan may only take essential health benefits into account when determining whether an individual has received benefits that meet or exceed the restricted annual dollar limit.

Are lifetime and annual dollar limits on out-of-network services permitted in plans that offer coverage for in-network and out-of-network services?

No. The regulations do not exempt out-of-network benefits from the restriction on lifetime and annual limits. The DOL has confirmed verbally that the annual dollar limit restriction and the annual/lifetime limit prohibition apply to out-of-network benefits.

Waiver from Restricted Annual Limit Requirements

The regulations authorized the Secretary to establish a program for plans to obtain waivers from the restricted annual limits if compliance with the limits would result in a significant decrease in access to benefits or increase in premiums.

What is the process for applying for a waiver and what must be shown to qualify?

The application must include:

1. The terms of the plan or policy form(s) for which a waiver is sought;
2. The number of individuals covered by the plan or policy form(s) submitted;
3. The annual limit(s) and rates applicable to the plan or policy form(s) submitted;
4. A brief description of why compliance with the interim final regulations would result in a significant decrease in access, to benefits for those currently covered by such plans or policies, or significant increase in premiums paid by those covered by such plans or policies, along with any supporting documentation; and
5. An attestation, signed by the plan administrator or Chief Executive Officer of the issuer of the coverage, certifying a) that the plan was in force prior to September 23, 2010; and b) significant decrease in access to benefits for those currently covered by such plans or policies, or a significant increase in premiums paid by those covered by such plans or policies.

In 2011, CCIIO allowed carriers and employers to extend their waivers for the remainder of the waiver period (2011 through 2013) rather than having to reapply for a new waiver each year.

All waiver extension forms and applications for waivers from the annual dollar limits requirements had to be filed with CCIIO between June 24, 2011 and September 22, 2011. CCIIO will not entertain any waiver applications or extensions after that date.

Waiver recipients are required to provide an annual Notice of a waiver from the Annual Limit Requirement.   This Notice must be updated and sent to eligible participants and subscribers annually.  The guidance provides for Model Notice language around this requirement and can be found at: http://cciio.cms.gov/resources/files/06162011_annual_limit_guidance_2011-2012_final.pdf

More details about the waiver process, record retention and notice requirements can be found in the HHS bulletins available at: http://cciio.cms.gov/resources/regulations/index.html#alw 

Who is responsible for applying for the waiver, Aetna or the plan sponsor? 

Aetna has received a waiver for its fully insured Strategic Resource Company (SRC) plans. Self-funded plan sponsors must apply for the waiver for their self-funded plans. HHS has accepted some applications directly from plan sponsors for insured plans as well.

How are Health Reimbursement Accounts (HRAs) impacted by the annual dollar limit requirements and the waiver process?

HRAs that are integrated with other health coverage are not impacted by the annual dollar limit requirements so long as the other coverage meets the requirements.

Interim guidance was also issued with regard to HRAs, with respect to the waiver process.  HRAs that were in effect prior to Sept. 23, 2011, are exempt from the waiver requirement and are permitted to continue annual dollar limits provided that the plan comply with any record retention and the annual notice requirements, described above.

Subsequent guidance released by the Departments has clarified that in order to comply with the annual dollar limit requirements the HRA must be "integrated" with other coverage as part of a group health plan.

Essential Health Benefits

What is an essential versus a non-essential health benefit?

  • The regulators have allowed a good faith compliance standard, requiring a reasonable and consistent interpretation to apply until regulations further defining essential health benefits were issued.
  • Essential health benefits include the following 10 broad categories of benefits: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse services; prescription  drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services (including oral and vision care).
  • The final rule on essential health benefits was issued. For the first two years, the approach for essential health benefits will be defined by a state benchmark plan (either selected by state based on options, or defaulted under the federal rules). These benchmark plans will need to be supplemented in some cases, to the extent a benefit category is missing. There are special rules that address this situation; examples include habilitiative benefits and pediatric vision/pediatric dental benefits.
  • More detail on the state benchmark plans can be found on the HHS website at: http://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html

Do large group health plans or grandfathered plans have to include essential health benefits?

No. Large group health plans, self-funded plans, and grandfathered plans are not required to include essential health benefits as coverage requirements. However, to the extent such plans cover any essential health benefits, any annual dollar lmits or lifetime dollar limits must be removed.

Which benchmark plan should be used for a large group health plan, self-funded plan or a grandfathered plan to determine compliance with annual and lifetime dollar limit requirements?

According to guidance issued, the Departments of Labor, Treasury and HHS will allow such plans to use a permissible definition of essential health benefits, as authorized by HHS, including any available benchmark option, supplemented as needed to ensure all ten categories are reflected.

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