Maximum Benefits Limits: Lifetime, Annual & Per Cause

Instructor: Deborah Schell

Deborah teaches college Accounting and has a master's degree in Educational Technology.

Insurers put limits on amounts that individuals can collect for health and disability insurance. In this lesson, you will learn about lifetime and annual limits and per-cause deductibles.

Meet Angela - she is thinking about purchasing health and disability insurance. Her agent explained that insurance companies place limits on amounts that she could claim for certain illnesses and injuries, but Angela would like more information about how this process works. Let's see if we can help Angela with this problem.

What Are Maximum Benefit Limits?

Maximum benefit limits are put in place by insurance companies to limit the amount that an insured individual can collect for certain illnesses and injuries. For example, limits could be:

  • Lifetime
  • Annual
  • Per-cause

Let's examine each of these limits in more detail.

Lifetime Limit

A lifetime limit is the maximum dollar amount that an insurance company would pay for benefits for as long as an individual was a member of the plan. Since the Affordable Care Act was enacted, insurance companies can no longer apply lifetime limits to essential health benefits, including costs incurred for emergency services, pregnancy and newborn care, prescription drugs, lab services, and pediatric care. Non-essential health benefits could still be subject to lifetime limits.

Let's assume that Angela regularly visits her chiropractor, and her plan deems the visits non-essential. If Angela's plan has a lifetime limit on chiropractic services of $5,000, then she will have to pay for any costs that exceed this amount.

Annual Limit

An annual limit is the yearly maximum amount that the insurance company will pay for the benefits for which you are covered. If Angela has an individual plan or a job-related plan, the Affordable Care Act prohibits her insurance company from imposing an annual limit.

If Angela's plan is grandfathered (meaning costs have not increased or benefits have not been reduced for policyholders and the plan was in place on March 23, 2010), then Angela's insurance company could still impose annual limits on her policy. For example, her plan could have a $750 maximum amount every year that her plan would cover for chiropractic care. Angela would have to pay for any costs over this threshold.

If a grandfathered plan increases annual limits or reduces any of the benefits that it offers, then the plan will lose its grandfathered status and will not be able to impose annual limits on any services.

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