Yes, No and Maybe All Covered in New Federal Health Law

By Ronald E. Bachman

If ObamaCare is upheld as constitutional, Americans will spend a lifetime trying to understand the complexities and contradictions. Worse, every American is likely to be in violation of some aspect of the law at some time.

An example of the complexity is the confusion surrounding lifetime limits on benefit coverage. Under the new federal law, coverage cannot include lifetime limits on plan coverage. Or can they?  Maybe yes, maybe no.

The lifetime coverage mandate applies to any individual covered by an insurance plan or a self-insured contract providing group or individual health coverage. It is effective for plan years beginning on or after Sept. 23, 2010. For most plans, this date is likely to be Jan. 1, 2011.

Lifetime limits? Maybe no: The law mandates that group and individual health coverage cannot have dollar  restrictions on lifetime limits for government-defined essential benefits.  

Annual limits? Maybe yes:  Prior to January 1, 2014 plans may establish “restricted annual limits” on the dollar value of “essential health benefits.” 

Confusion?  A plan using a “restricted annual limit” must ensure that there is access to needed services.  The law states, “In defining the term ‘restricted annual limit’ the Secretary of Health & Human Services (HHS) shall ensure that access to needed services is made available with a minimal impact on premiums.”   

Uncertainty?  As of October 2010, HHS has not clarified “restricted annual limits” or established standards for determining “access to needed services.” 

No details? The law only defines “essential health benefits” in broad categories:

  1. Ambulatory patient services.
  2. Emergency services.
  3. Hospitalization.
  4. Maternity and newborn care.
  5. Mental health and substance use disorder services, including behavioral health treatment. Note: Mental health parity is required under the legislation.
  6. Prescription drugs.
  7. Rehabilitative and habilitative services and devices.
  8. Laboratory services.
  9. Preventive and wellness services and chronic disease management.
  10. Pediatric services, including oral and vision care.

Major uncertainty? By October 2010, HHS had not defined “essential health benefits” beyond the general service categories listed above.

Limits? Maybe yes: Plans can place dollar annual limits or dollar lifetime limits on covered benefits that are not “essential health benefits.”  

More Limits? Maybe Yes: The law states only that plans cannot use dollar lifetime limits for “essential health benefits.” Prior to the law some plans used dollar limits for certain benefits (e.g. home health, physical therapy, hospice care). Plans may be able to implement day limits, visit limits, episodic limits or other allowed coverage restrictions even for benefits classified as “essential health benefits.”

Lifetime Limits? No for Mental Health and Substance Use: Affecting potential “essential health benefit” limits is a separate section of the law requiring application of the previously passed Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The MHPAEA restricts the use of annual, lifetime, visit, day and episodic limits that are different from medical surgical limits. Therefore, even if a non-dollar limit is allowed for other essential benefits, it is unlikely that a non-dollar limit on mental health or substance abuse would meet the standards of MHPAEA.

Nancy Pelosi said, “We will have to pass the law to see what is in the law.”  But, confusion reigns as Americans try to see what is in the law. Because of the nebulous terms, lack of regulatory guidance and differing legal opinions and interpretations, compliance will be nearly impossible.

The result is a nation of “health reform violators,” where penalties and fines can be levied against any disfavored plan or group. The selective political targeting and harassment of insurers, specific employers, business associations and individuals who raised questions and challenged the law is already visible. Why expect implementation enforcement of fines and penalties to be any different? 

HHS states that, “Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law.”

Who defines “good faith” before the penalty is imposed? If this sounds arbitrary to you, welcome to the world of political influence and government-controlled health care.


Ronald E. Bachman FSA, MAAA, is President and CEO of Healthcare Visions, Inc. and a Senior Fellow at the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. He is also a Senior Fellow at the Center for Health Transformation, the Wye River Group on Health and the National Center for Policy Analysis. Nothing written here is to be construed as necessarily reflecting the views of the Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (October 29, 2010). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.