Lifetime Maximum Benefit: How it works in the U.S.
The lifetime maximum insurance benefit is the maximum dollar amount that your insurance company will pay out during your lifetime for non-essential healthcare services.
Lifetime maximum benefit clauses included in health care policies do not apply to essential services. Although many types of insurance policies use lifetime maximums such as long-term care insurance and dental insurance, a lifetime maximum benefit is generally associated with health insurance.
Changes to Lifetime Maximum Benefits Since the Affordable Care Act (ACA)
The ACA, also known as the Patient Protection and Affordable Care Act (PPACA), eliminated lifetime maximum benefit clauses in healthcare policies where they pertain to essential services.
*The only exceptions to the laws are when it comes to grandfathered health plans. In these cases, the insurer would have to notify you if you have a grandfathered plan.
No Lifetime Maximum Benefit for Essential Services in Health Insurance
Since 2010, policies issued on or renewing after September 23, 2010, are required to have no lifetime benefit maximums. The Affordable Care Act legislation also removes the ability for health care insurers to place yearly maximums on essential services.
This has changed healthcare insurance substantially as it means that people can now have access to urgent medical care and treatment without having to worry about exceeding a limitation. It is noteworthy, however, that this is subject to the definitions by the insurance companies about what essential services are. What may seem essential to an individual may not be considered so per the definition of the act.
The following list includes examples of essential services:
- Ambulatory patient services, Emergency services
- Pregnancy, maternity, and newborn care
- Mental health and substance use disorder
- Rehabilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
Health Insurance that May Have Lifetime Maximum Benefits or Maximum Yearly Benefits
Dental and Vision coverages included in health care plans may have yearly maximum benefits and lifetime maximum benefits. Although oral and vision care is considered essential for children, they are not considered essential services for adults.
Do Lifetime Maximum Benefits Vary by State?
Lifetime maximum benefits for essential services are not permitted in any state*. There are no lifetime maximum benefits or yearly maximum benefits clauses for essential services anywhere in the United States since 2010 and the new legislation*. Lifetime maximum benefits for non-essential services may vary by state and also by each individual health insurance plan.
More expensive plans may provide more coverage, which is why it is important to not only shop around for prices but also to compare items like maximum benefits (both yearly and lifetime) per plan before selecting your health insurance plan.
A lower lifetime maximum benefit on non-essential services could cost you significantly more long term if you end up paying medical costs out of your pocket once the yearly or lifetime maximum is reached.
How a Lifetime Maximum Benefit May Be Applied
One should know the lifetime maximum benefit in their health insurance plan and what services it might apply to.
Example: Linda received a phone call from her health insurance company that she was about to reach her lifetime maximum benefit. The insurance company explained that once she reached her lifetime maximum benefit they would no longer cover her non-essential treatment or medication costs because her insurance benefits would no longer be available.
Are Lifetime Maximum Benefits a Concern?
You should always become familiar with the policy limits and exclusions of your health insurance policy. The lifetime or yearly maximum benefits are a concern of every policyholder because they indicate at which point your insurance stops paying for medical services and the costs fall on you. However, since the Affordable Health Care Act, the concern for lifetime maximum benefits has diminished because it no longer applies to essential services.
The definition of essential services, and the role the new legislation has played in helping people with health insurance get fair and adequate protection has definitely changed the level of concern in this aspect of health insurance coverages.
Having access to essential services without restrictions like maximum lifetime benefits substantially improves the quality of life insured people can have and the benefits people receive today, as opposed to prior to the reforms in 2010.
Understanding the coverages on your health plan can help you choose the best health insurance for your situation.