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Grasping the High Costs of Lifetime Insurance

Until lifetime limits are eliminated, be prepared

By David Linney | 02.23.2010
Originally Published March 2010
Capitol Hill

See also: Learn how to manage your health insurance lifetime limits.

For many individuals with bleeding disorders, high-cost factor products can threaten health insurance lifetime limits. A lifetime limit refers to a maximum dollar amount that an insurance policy will expend for a policyholder’s benefits over the “lifetime” of the policy. Once a lifetime limit is “used up,” an insurance plan is almost always terminated. No one wants that.

As part of healthcare reform, the US Congress may eliminate lifetime caps in insurance plans. The US House and Senate each passed its own version of health care reform at the end of 2009. In early 2010, Congress was meeting to try to work out the differences between the two versions of the bill. The Senate bill would eliminate lifetime caps six months after enactment for new plans, but existing, grandfathered plans could continue to have lifetime caps indefinitely. The House bill would eliminate lifetime caps in all plans immediately. The Senate bill would eliminate annual limits in 2014 for new plans, while the House bill would prohibit annual caps beginning in 2013 for new plans and 2018 for existing plans.

[Steps for Living: Health Insurance]

Until lifetime limits are eliminated, be prepared. You should understand lifetime limits, ways to manage costs and your insurance options to prepare yourself for meeting your lifetime limit. Before you can try to manage lifetime limits, it is important to first understand how lifetime limits are set and how they may change.

There are two types of insurance plans—those with a lifetime limit and those without. If yours has no limit, using it up will never be an issue. A number of employer plans, Medicare and Medicaid offer plans without lifetime limits. In contrast, some employer and individual health plans have defined lifetime limits—for example, $1 million, $2 million, $3 million.

Lifetime limits can vary, depending on whether your employer purchases health insurance directly from a health insurance company or is “self-insured.” Small to medium-sized employers usually purchase a group insurance plan directly through a health insurance company. In this scenario, the insurance company assumes the financial risk for medical claims costs. These employers can get a new lifetime limit when they purchase a new plan through a new health insurance company. At times, they can increase the amount of the lifetime limit through their current health insurance company with a plan change (usually at the time of the plan’s renewal).

Larger companies may decide to “self-insure” because they have a larger number of employees and can thus “spread the risk.” That means if a company has many employees, not all of them are likely to need the same amount of healthcare at the same time. These larger employers may establish and administer their own insurance plan benefits and generally use a third-party administrator to process claims. Employers that self-insure may change plan administrators and also start a new lifetime limit. Occasionally, they may increase the plan’s lifetime limit. On the other hand, when they change plan administrators, they may keep the same lifetime limit and carry over the lifetime limit dollar amount that has been “used” by an individual.

How Factor Products Are Covered

It is important for consumers to understand how their insurance plan covers factor product and if there is a lifetime limit that will be affected.

Factor products are most commonly covered as a “medical benefit” by the health insurance plan. Their costs, as well as other medical care costs for hospitalization, emergency room visits, doctor visits, lab tests, etc., can apply to your health insurance lifetime limit. 

Less commonly, factor products are covered as a “drug benefit” by some drug plans. The trend, however, is for there to be an increase of coverage of factor products through drug plans. This is good news for someone with a bleeding disorder, because most drug plans generally do not have a lifetime limit. One drawback is that a very limited number of drug plans have an annual dollar limit. An even smaller number apply drug costs against the health plan lifetime limit.

In rare instances, factor products can be covered as both a medical benefit of the health plan and a drug benefit of the drug plan.

Know Your Limits

Before you can manage your lifetime limits, it is important to know your lifetime limit dollar amount and how much you have already used. Contact your insurance company and ask:

  • Do I have a lifetime limit? What is it? Is it $1 million, $2 million or some other amount?
  • How much of my lifetime limit have I used?

Keep track of the used amount. If you get close to your cap, you most likely will not be notified. Further, your insurance will be terminated when you hit your limit. So it is vital to keep track of your annual and cumulative health insurance spending. Staying on top of your insurance plan’s limit means you can be proactive before you reach your cap. Learn how to manage your health insurance lifetime limits.