Can a Group Health Plan Add an Annual Dollar Limit on Benefits?

We recently were asked if an employer can make a benefit plan design change to their self-insured group health plan to impose a $1.5 million annual dollar limit on benefits?

I enjoy questions like this as it gives me the opportunity to remind everyone that group health plans and insurers are not allowed to impose annual dollar limits on essential health benefits for any individual, so your plan cannot be modified to include such a limit. While restricted annual limits were allowed for plan years prior to January 1, 2014, they are now prohibited. However, limits can still be set on specific covered benefits that are not classified as essential health benefits, as long as such limits comply with other federal and state regulations.

“Essential health benefits” are defined to include certain broad categories (such as emergency services, hospitalization, and prescription drugs) and the items and services within those categories. Although self-insured health plans (and insured plans in the large group market) are not obligated to cover all essential health benefits (unlike insured plans in the small group market), they are still prohibited from imposing annual dollar limits on any essential health benefits they do offer. Group health plans that do not cover all essential health benefits have significant flexibility in defining which benefits are considered essential for the purpose of the dollar-limit prohibition, usually by referring to state benchmark plans. The Centers for Medicare and Medicaid Services provide relevant information on state benchmark plans on their website.