Lifetime and annual dollar limits: what is banned.
Group health plans cannot cap what they will pay for essential health benefits over a lifetime or in a year. Some limits are still allowed, and the line matters when reading plan documents.
What the rule says.
No Lifetime Limits
A group health plan or issuer may not set a lifetime dollar limit on essential health benefits for any individual, in-network or out-of-network. In practice, a plan cannot cap what it will pay over a member’s lifetime for these core benefits. Employers should review plan documents and carrier materials to confirm no such cap appears.
No Annual Limits
The same applies to annual dollar limits on essential health benefits. The ban began for plan years starting in 2014, after a phase-in of restricted limits. Before 2014 many plans used yearly caps, so older documents or templates may still contain them. Employers should check current plan materials and ask the carrier or counsel about anything that looks like a yearly dollar cap.
What Is Still Allowed
Dollar limits on specific covered benefits that are not essential health benefits are allowed where other federal and state law permits. Health flexible spending arrangements are also excepted from the annual limit rule. Which benefits count as essential is a legal question, so employers should not assume a cap is fine. Ask the carrier or counsel to confirm the classification before relying on any dollar limit.
The rule in plain terms.
No Lifetime Dollar Limits
A plan may not set a lifetime dollar limit on essential health benefits for any individual, in or out of network. This protects members with long or costly conditions from exhausting coverage. Employers should look at the summary of benefits and coverage and plan document for any wording that suggests a lifetime maximum.
No Annual Dollar Limits
The same ban applies to annual dollar limits on essential health benefits. Visit limits and similar non-dollar limits are treated differently from dollar caps. Employers should read the benefit schedule closely and ask the carrier or counsel how a particular limit is classified.
The Health FSA Exception
Health flexible spending arrangements offered through a cafeteria plan are exempt from the annual limit rule. This exception applies to the health FSA itself, not to the group medical plan it may sit beside. Employers should confirm how the FSA is set up with their plan administrator.
Other Benefits Can Be Limited
Dollar limits on specific benefits that are not essential health benefits are allowed if federal and state law otherwise permit them. A dental or vision cap is an example of a limit that may be permitted. Employers should still confirm the benefit is not an essential health benefit and check state requirements.
Condition Exclusions
A plan may exclude all benefits for a condition. If it covers any benefits for that condition, the limit rules apply. Partial coverage of a condition can change the analysis, so employers should read exclusions carefully. If a plan covers some treatment but caps it, ask the carrier or counsel how the rule applies.
Which Benefits Count
A plan not required to provide essential health benefits must define them using a state-selected benchmark plan for plan years beginning on or after January 1, 2020. Plans that must define essential benefits use a state-selected benchmark, so the answer can vary by state. Ask the carrier which benchmark it uses and have counsel confirm any close calls.
Source: 45 CFR 147.126.
What plan sponsors can do.
Read The Benefit Schedule
Look for dollar caps on services and ask whether each is an essential health benefit. Mark each dollar amount, then ask the carrier to identify what it limits. Visit counts, coinsurance and out-of-pocket maximums are not the same as dollar caps, so separate them when you review.
Review Supplemental Products
Limits on products that are not group medical plans follow different rules, so keep them separate. Products such as accident, hospital indemnity or critical illness may follow different rules than medical coverage. Employers should list each product, how it is offered and who regulates it, and ask counsel.
Confirm With The Carrier
Ask the carrier or administrator to identify any dollar limit on the plan and the basis for it. Ask for the answer in writing and keep it with plan files. If the response is unclear or conflicts with plan documents, raise it before renewal so any correction can be made on time.
Three questions to settle.
Which Benefits Have A Dollar Cap
Ask for a list. Ask the carrier or administrator for a written list covering every plan, including any riders. Compare it to the plan document and summary of benefits, and flag any differences. Keep the list with your plan records for reference at renewal.
Are Any Of Them Essential Health Benefits
Have the carrier or counsel confirm. Classification depends on the benchmark and the specific service. A written confirmation from the carrier or counsel protects the employer if the plan’s limits are questioned later. Keep the written answer with your plan records.
Does Plan Type Change The Answer
Ask whether grandfathered status or plan type affects the result. Grandfathered plans, self-funded plans and insured plans can be treated differently on some points. Ask the carrier and counsel to confirm which rules apply to your arrangement. Keep the written answer on file.
Common Questions About Dollar Limits
Does this apply to self-funded plans?
The rule applies to group health plans and issuers offering group coverage.
Can a plan limit the number of visits?
Visit limits are a different kind of limit. Ask your carrier or counsel how they are treated for your plan.
What are essential health benefits?
A defined set of benefit categories under the ACA. The scope has its own rules, so ask your carrier.
Are flexible spending accounts affected?
Health FSAs are excepted from the annual limit rule.
Where can I read the rule?
In the federal regulations at 29 CFR 2590.715-2711 and the HHS and Treasury versions.
Is this legal advice?
No. For your plan, involve your counsel. We can help you organize your documents and questions.
Send us your renewal.
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Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
Laws and rules referenced
42 U.S.C. § 300gg-11 — No lifetime or annual dollar limits on essential health benefits.
This page is general information, not legal or tax advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
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