How Reform Will Impact Lifetime And Annual Benefit Maximums

Over the last week, we’ve heard from several clients with questions about how the health care reform legislation will impact them.  Some have been asking about whether their children with pre-existing conditions will be able to get health insurance without having to go through Cover Colorado (the state high risk pool).  Some have asked what the legislation means in terms of their own pre-existing conditions.  Others have asked if they are now safe from the possibility of a rescission.  In general, the answers have been relatively complex, and many of the provisions in the new law don’t take effect for nearly four years.  Luckily we have a solid high risk pool with Cover Colorado, and that will continue to be a good option for people who (because of pre-existing conditions) have to wait until 2014 to be accepted by a  private health insurance carrier.

Another question we’ve had recently has to do with lifetime and annual benefit maximums.  So I read those sections of the Senate Bill and the changes added during reconciliation, to get a good understanding of exactly how the new legislation will impact individual health insurance policies.  In the Senate Bill, on page 16, under “Subpart II – Improving Coverage” is section 2711, regarding lifetime and annual limits.  The bill states that

a health insurance issuer offering group or individual health insurance coverage may not establish lifetime limits on the dollar value of benefits for any participant or beneficiary; or unreasonable annual limits (within the meaning of section 223 of the Internal Revenue Code of 1986) on the dollar value of benefits for any participant or beneficiary.

According to section 1004, these changes would take effect six months following enactment of the legislation.  That seems pretty straight forward in terms of how it will affect policies that are issued after September 23rd 2010.  But what if you already have a policy that has lifetime or annual benefit maximums?

The Reconciliation process ended up with some amendments to section 2711, specifically in terms of how the law would apply to policies that are already in existence.  The Open Congress website has the text with the final amendments.  If you scroll nearly to the bottom, you’ll find a section titled:  “Subtitle B — Health”.  It states that “those provisions of section 2711 relating to lifetime limits… shall apply to grandfathered health plans…”  A little further down the page it states that “those provisions of section 2711 relating to annual limits… shall apply to grandfathered health plans that are group health plans…”  So it appears that for existing health insurance policies, lifetime limits will have to be removed six months following enactment of the legislation, but that annual limits will still be allowed on individual policies until 2014.  Page 19 of the Kaiser Family Foundation side-by-side comparison of the bills has more details about how section 2711 will apply to grandfathered policies.

Understanding the impact of health care reform is not going to be a quick process.  Minna Jung of the Robert Wood Johnson Foundation has a good article in this week’s Health Wonk Review.  She writes that “the job of educating people about what did just happen in the health reform debate, and what will happen, is not over, not by a long shot.”  I couldn’t agree more.  I’m sure Jay and I will be spending many more days poring over the fine print of the law so that we can answer questions from our clients.  Hopefully by the time changes start to go into effect in the fall, we’ll all have a better understanding of how it will all work.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.

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