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Health Insurance Glossary

Definitions for common health insurance terms

annual limit

DEFINITION: Some health plans have traditionally had caps on the amount that they would pay in any given year. Even if the lifetime maximum benefit of the plan had not been reached, if the insured’s claims reached the annual limit, the insurance would stop paying claims for the rest of the year.

The ACA prohibits this practice starting in 2014, for all essential benefits. There’s a transition period between 2010 and 2013 when annual limits are being phased out, with annual limits required to be at least $750,000 initially, growing to $2 million in 2013. After that, no annual limits are allowed for essential benefits.

In the past, health plans designed for college students typically had very low annual limits. Student plans will have to do away with annual limits as of 2014, but during their transition period from September 23, 2012 to the end of 2013, they may impose a $500,000 annual limit.