One of the ways that insurance companies protected themselves and attempted to keep their premiums competitive before the Affordable Care Act (ACA) was to place a lifetime spending limit on every insured person. These lifetime limits were generally mandated at the state level, and they ranged anywhere from $1 million to $5 million depending on the state. Some states’ lifetime limits were higher, but very few were lower.
The purpose of lifetime limits was to protect insurance companies from having to pay millions of dollars to treat chronically ill patients. Conditions such as cancer or leukemia can often cost hundreds of thousands of dollars per year to treat, and insurance companies could force consumers to pay their own insurance bills once the lifetime limit was reached.
But it’s unlikely that an average consumer would reach her lifetime policy limit. Before Obamacare became law in 2010, approximately 45 percent of all Americans had health insurance plans with no lifetime minimums and 32 percent of all Americans had plans with lifetime limits of $2 million or more.
The Impact of the ACA on Lifetime Limits
The Affordable Care Act includes specific language on lifetime limits. As soon as the ACA became law, insurers were no longer allowed to cap how much they would pay out in benefits to cover the cost of essential health care. This applies to all plans – even grandfathered policies. One of the exceptions under the ACA is the “grandfather clause,” a clause that allows plans created before March 23, 2010 to retain their characteristics. In many cases, this includes plans that don’t cover pre-existing conditions and place limits on annual spending. But even grandfathered plans must eliminate lifetime limits.
While the lifetime limit exclusion applies to all plans, it doesn’t apply to all types of care. This rule only affects essential health benefits. The ACA specifies 10 types of essential benefits, including preventive care, maternity services and drug rehabilitation, among others. Medical care that doesn’t fall under one of these 10 categories would not be protected by the lifetime limit exclusion.
Why Eliminate Lifetime Limits?
You might think that eliminating lifetime limits would force insurers to charge much higher rates to make up the difference, but based on the Obama administration’s research, that’s not the case. The cost to move lifetime limits from $5 million to $10 million would be 0.1 percent for the entire industry. This is a relatively negligible cost for a benefit that does a lot of good for a small percentage of the population.
A cancer patient getting $750,000 worth of treatments each year would run out of coverage after only a short time with lifetime limits. Under the ACA, that patient would continue to receive treatment no matter how much the bills added up. People who are not struck with these diseases may not understand the financial impact they can have, especially if the patient has his insurance taken away. With the new rules under the ACA, that fear of losing coverage when you suffer from a deadly disease or chronic condition no longer exists.
What About Trumpcare?
While Trump was on the campaign trail, he promised repeatedly to repeal Obamacare and replace it with “something better.” But right up until he won the presidential election, Trump never elaborated on what his plan – dubbed Trumpcare – might entail, especially as it relates to more specific aspects of health care reform.
Trump spoke on the campaign trail about keeping the provision of the ACA that protects people with pre-existing conditions, and he also promised to allow parents to extend coverage to their children until those children are 26 years old. But he never addressed the issue of lifetime limits. Because Trump never spoke or wrote about lifetime health insurance limits, we can only speculate what would happen when he and the Congress start dissecting the ACA in January.
If Obamacare were to be completely repealed, then the provisions making lifetime limits illegal would disappear. But Trump does not have the clout in the Senate he needs (he needed 60 Republican senators but only got 52) to fully repeal the ACA without resistance from Democrats. He could undo much of its funding via budget reconciliation, but this doesn’t address key features of the law.
Of all of the things Donald Trump could do to the ACA, putting lifetime limits back into effect would be one of the least damaging things. Donald Trump is famous for keeping his eye on the whims of American voters via social media, which is most likely how he came to realize the popularity of certain aspects, like the provision protecting people with pre-existing conditions. Few people care enough about lifetime limits that this provision hasn’t garnered the same attention. In other words, it’s simply not on Trump’s radar. When it comes time to make changes, lifetime limits may be left on the Congressional cutting floor.