Just got this from Jim Manley, Harry Reid’s chief spokesman, about his office changing the ban on annual limits in the Senate health care bill:

“One of the goals of our bill is to reduce costs to American families who are being crushed by skyrocketing health care costs. We are concerned that banning all annual limits, regardless of whether services are voluntary, could lead to higher premiums. We continue to work with experts on how best to accomplish our goals of preventing insurance companies from imposing arbitrary coverage limits while providing the premium relief American families need and deserve.”

Again, the entire belief on whether this is betrayal or understandable hinges on the word “unreasonable”. The Reid bill’s language bans “unreasonable annual limits (within the meaning of section 223 of the Internal Revenue Code of 1986) on the dollar value of benefits for any participant or beneficiary.” OK, so here’s Section 223 of the Internal Revenue Code. It looks to me that this the definition of an unreasonable plan:

the sum of the annual deductible and the other annual out-of-pocket expenses required to be paid under the plan (other than for premiums) for covered benefits does not exceed –

(I) $5,000 for self-only coverage; and,
(II) twice the dollar amount in subclause (I) for family coverage.

So, if I’m reading this right, an insurance company would be able to cap here. The CMS report just released has this a bit higher, with maximum out-of-pocket limits of $6,645 for an individual and $13,290 for a family.

That’s a load of money to potentially go uncapped, and it could be even more, if someone decided that even less of a cap is “unreasonable”. Saving money on premiums doesn’t mean a lot if the coverage is useless.

UPDATE: I may not have read this totally correctly. I shouldn’t be mixing annual caps with out-of-pocket limits. The caps are on what insurance companies pay; out-of-pocket limits are on what individuals pay. The overall annual cap remains unclear. I’m working on this.

David Dayen

David Dayen