Ban on Health Insurance Annual Caps Could Have Unintended Result

One of the much-touted features of the new health insurance law is its insurance industry restriction on imposing lifetime and annual benefit limits for health plans. Specifically, for plan years beginning on or after September 23 of this year, the Patient Protection and Affordable Care Act (PPACA) prohibits group health plans and insurers from imposing a lifetime dollar limit on essential health benefits. In addition, beginning in 2014, annual dollar limits are prohibited for all essential health benefits. Before 2014, however, group health plans are permitted to impose annual caps on the value of essential health benefits only as determined by the Secretary of Health and Human Services (HHS) though regulations, which have yet to be issued. While these bans on annual caps were designed to improve health coverage, an unintended consequence could be the loss of health insurance for more than 1 million people. As discussed in an article by Jennifer Haberkorn in Politico, this ban “could essentially wipe out a niche insurance market that many part-time workers and retail and restaurant employees have come to rely on.”

According to the article, many part-time, small business, and low-income workers can only afford limited-benefit or “mini-med” plans, which are relatively inexpensive plans that are made possible by, among other things, limiting the number of covered doctor visits or imposing an annual maximum on insurance payouts. If the HHS regulations take a strict view of the annual cap ban, it could prohibit the mini-med plans altogether, or render them so restrictive that insurance companies would need to raise their rates to the point of making them unaffordable. While PPACA will create health insurance exchanges and other tax credits to help low-income individuals obtain coverage, these measures will not be implemented until the year 2014. Thus, if mini-med plans are driven out of business when the cap bans take effect, many part-time and low-wage workers could be without health coverage for nearly three years. While the full impact of PPACA’s ban on annual caps cannot be assessed until the HHS issues its regulations on these provisions, the Politico article estimates that approximately 1.4 million people could be affected.

This entry was written by Ilyse Schuman.

Photo credit: Kent Weakley