by James A. Woehlke, Esq., CPA
General Counsel / COO, MBL Benefits Consulting Corp.

The Patient Protection and Affordable Care Act (the ACA*) was enacted on March 23, 2010. The ACA limits the ability of group health plans to cap coverage on either an annual or lifetime basis. The Administration issued guidance on this (and several other) requirement(s) in the form of interim final regulations on June 28, 2010.

The ACA prohibits lifetime caps in all plans effective for plan years beginning on or after September 23, 2010.

In addition, annual caps are prohibited on “essential health benefits”, but for plan years beginning before 2014 “restricted annual limits” are permitted on these benefits. Plans may continue to impose limits for nonessential health benefits. The regulations define essential health benefits with reference to as-yet-unissued regulations interpreting ACA § 1302(b), which lists the following benefits as being essential:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

Until additional regulations are issued, plan sponsors are permitted to use a rule-of-reason approach with regard to what constitutes essential health benefits. However, plan sponsors are required to apply the definitions they use on a consistent basis.

The regulation sets the following interim “restricted annual limits”:

Plan years beginning on or after . . . But before . . . Annual Limit
9/23/2010 9/23/2011 $750,000
9/23/2011 9/23/2012 $1,250,000
9/23/2012 1/1/2014 $2,000,000

The limits operate on an individual basis; there is not a separate set of limits for families.

If a plan participant had exceeded a lifetime limit prior to the effective date of this ACA provision and otherwise still qualified for coverage, the participant must be notified that lifetime limits no longer apply and coverage is once again available. If not currently enrolled in the plan, the individual needs to be given the opportunity to re-enroll no later than the first day of the plan year beginning after September 22, 2010.

The prohibition on annual and lifetime limits applies to both new and grandfathered plans. If a grandfathered plan has no limit and subsequently imposes one, even one of the pre-2014 permitted limits, grandfathered status is lost.

If you have questions about the new limitations on annual and lifetime caps, please contact your MBL Benefits consultant or the author at

* For simplicity, the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act are collectively referred to as the Affordable Care Act, or ACA.

Additional resources available at

Official publication of interim final regulations on annual and lifetime caps:

From the Proskauer Rose law firm,

Rev. 8/30/2010.

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