Annual Limits

What are annual limits?

An annual limit is the total amount of money that a health insurance company will cover for your care in one calendar year.

How common are annual limits in current policies?

Currently, a minority of health insurance plans apply annual limits which affect about 17 million people. According to HHS, annual limits are used by the following types of plans:

  • 8% of large employer plans
  • 14% of small employer plans
  • 19% of individual policies 

How will the law change annual limits?

The use of annual limits will be phased out and end in 2014.

How will the annual limit changes be phased in?

To limit premium increases, the regulations implement a three-year phase-in of the restrictions on annual limits of essential benefits. The restrictions, which apply on an individual-by-individual basis, are as follows:

  • For plan years beginning on or after September 23, 2010 through September 23, 2011, the annual limits on the dollar value of benefits may not be less than $750,000.
  • For plan years beginning on or after September 23, 2011 through September 23, 2012, the annual limits on the dollar value of benefits may not be less than $1.25 million.
  • For plan years beginning on or after September 23, 2012 through January 1, 2014, the annual limits on the dollar value of benefits may not be less $2 million.

Future regulations will be developed to define these terms.  How these terms are defined is very important for people with disabilities.  The Arc and UCP will work to make sure that rehabilitative and habilitative services and devices definitions includes a broad listing of therapies that might needed by people with disabilities as well as durable medical equipment and other services and supports. 

Do annual limits changes apply to Flexible Spending Arrangements (FSA) or Medical Savings Accounts (MSA)?

No. FSAs and MSAs are generally not considered group health insurance.  These programs are not affected by this provision of the Affordable Care Act. 

Do the lifetime limit changes apply to all health insurance plans?

No. As with pre-existing exclusions, there is one exception.  Individual health insurance plans are exempted.  Individual health insurance plans are policies that individuals buy on the open insurance market (they do not include employer sponsored plans).