What Is an Annual Maximum Benefit?

The term “annual maximum benefit” refers to the maximum amount an insurance plan will spend on your covered care during the plan year. It may also be called a coverage limit or benefiꦿt cap. 

This is often confused with an “out-of-pocket maximum,” which is a cap on how much you have to spend out of pocket before your insurance covers the rest. Comprehensive health insurance plans are restricted from imposin🥀g benefit caps on certain kinds of care these days, but many other kinds of health and dental plans still use them.

An annual maximum ⛎benefit is just one of several types of coverage൲ limits. Understanding how these work could prevent billing headaches and save you thousands of dollars in surprise expenses. 

How Maximum Benefits Work 

Think of your maximum benefit as a bank account your insurer sets aside to pay your claims. When yoไu or your healthcare provider submi🍒ts a care claim to the insurer, any amount the insurer pays is deducted from your account.

Once you reach your maximum benefit dollar amount, your theoretical account is empty. You then pay any other claims 澳洲幸运5官方开奖结果体彩网:out of pocket, as you are personally responsible for charges over the 🐻maximum benefit.

Depending on your insurance coverage, a maximum benefit may be based on the service provided or the policy length. For instance, a maximum benefit for 澳洲幸运5官方开奖结果体彩网:short-term health insurance is usually for the policy term or period. For 澳洲幸运5官方开奖结果体彩网:dental insurance, it’s a caleꦡndar year. In those cases, your maximum re🐎sets at the start of a new plan year or term. 

Some policies also feature lifetime maximum benefits, which are the most the insurance company will ever pay toward your individual covered ca🍌re. For instance, some dental plans that cover orthodontia have a lifetime maximum they will pay toward that care.

Maximum Benefit Amounts and Limitations

Different annওual maღximum benefits may apply, depending on whether you see an in-network or out-of-network provider. 

Other limits may also be involved.🉐 For example, your plan can limit which procedures are covered, a procedure’s coverage percentage or flat-rate reimbursement, or how many times you can have the procedure performed. 

Imagine you have a dental procedure for $1,000, and your annual maximum is $1,000. Your plan only covers 50% of that procedure’s costs. This means your plan will only pay $500 of t✤he bill, leavinꦓg you with $500 remaining to spend from your annual maximum limit. 

Types of Maximum Benefits 

Maxꦦimum benefits can work somewhat differently depending on the insurance type and procedure. Here’s how.

Adult Dental Annual Maximum Benefit 

Dental plans are usually offered through preferred provider organizations (PPOs) or health ꦡmaintenance organizations (HMOs). A PPO plan typicallꦰy features an annual maximum ranging from $1,000 to $2,000. However, they can run as high as $5,000 and up with more generous employer plans. Some very generous employer dental plans have an unlimited annual maximum benefit.

According to the National Association of Dental Plans, about 63% of dental PPOs have a maximum annual benefit of $1,500 or more. Some companies or plans allow you to ಌcarry over some unused a🌌nnual maximum to the following year’s account. 

Dental HMO plans typically do not have an annual maximum, and can be found on our list of the be♒st dental insurance plans with no annual maximum. 

Dental plans for children don’t have an annual maximum benefit limit because dental coverage is defined under the 澳洲幸运5官方开奖结果体彩网:Affordable Care Act (ACA) as an es🌜sential health benefit for children. Instead, the plans will have an out-of-pocket maximum (as explained below). 

Orthodontia Maximum Benefit

澳洲幸运5官方开奖结果体彩网:Orthodontia plan coverage can feature a lifetime annual maximum. The lifetime annual max is the dollar amount a plan will pay over your lifespan. Like other dental work, you will also pay a copay or a percentage of the cost for braces.  The maximum amount is typically around $1,000 to $3,000 and never resets. 

Short-Term Insurance Maximum Benefits

Short-term🦹 insurance is designed to offer temporary, limited coverage. Benefit maximums usually rely on the policy term (such as three months) rather than a standard coverage year. Short-term insurance can set maximums for specific procedures, such as $3,000 for mental health care or $75 for a private nurse visit at home.  

Short-term insurance plans almost always feature a lifetime maximum benefit, such as $500,000 or $1 million per person. After the pl🍷an spends that amount on covered care 🌟over your lifetime, it will pay nothing else. 

Vision Insurance Maximum Benefits

Vision insurance typically features annual maximum benefits, also called an “allowance,” as a fixed dollaౠr amount you can spend on glasses (frames and lenses) or contacts. This is the most the insurer will put toward the glasses or contacts. Laser surgery benefits typically carry a lifetime fixed limit. 

Medicare Advantage Maximum Benefits

Some Medicare Advantage plans may include dental, vision, or other benefits. These extra coverages may have annual maximums. A Kaiser Family Foundation study found that almost 60% of Medicare Advantage enrollees in more expansive plans have a maximum dental benefit of $1,000 or less.

Supplemental Health Insurance Maximum Benefits

Supplemental health insurance plans are designed to cover only particular situations such as hospitalization, a retu🗹rn of cancer, accidents, heart attack and stroke, critical illness, or another specific covered disease.

These policies typically feature a ꧒maximum benefit amount that you can choose. This is the maxi𓆏mum the plan will ever pay toward your care after a specific condition or procedure occurs. 

If you need care or experience a life event covered by the plan, the plan pays you a percentage or fixed amount up to your policy maximum. The a🥂mount may be low💖, such as $5,000 to $50,000. Or the plan may cover care up to a fixed dollar amount per day or year.

Annual Maximum Benefit vs. Out-of-Poܫcket Maximum

Understandably, many people confuse these two terms and concepts, as both involve the word “maximum.” However, the primary difference concernsꦓ whether you or the insurer pays after reaching the maximum described. 

I🐽f you reach a maximum annual benefit or a maximum benefit, you pay any additional covered service costs for the rest of the term or year. If you reach an out-of-pocket maximum (or OOP), the insurance company pays additional covered service costs for the term or the year.

With an ACA-compliant healthcare plan, your out-of-pocket maximum or out-of-pocket limit is the most you pay for covered care in a plan year. For 2024, the out-of-pocket 澳洲幸运5官方开奖结果体彩网:Marketplace plan limit is set at a maximum of $9,450 for an individual and $18,900 for a family.

Your deductible and coinsurance or copays go toward meeting this out-of-pocket maximum. After you reach yꦬour out-of-pocket maximum, the insurance company picks up the cost for any additional covered care. 

Advantages and ൩Disadvantages of Annual Maximu🐻m Benefits

Annual maximum benefits could be criticized for the low dollar amount limits—depending on circumstances, it doesn’t take long to reach the maximum amount. As a result, plans with low max coverage offer limited protection against major expenses and potential 澳洲幸运5官方开奖结果体彩网:medical debt. 

In a diffi𒉰cult year, you could pay a significant amount out of pocket for your premium and deductible, yet still deplete your annual maximum—and then pay even more in remaining costs.

However, the cost of most coverage that accompanies lower limits tends to be less expensive than traditional healthcare. For example, 澳洲幸运5官方开奖结果体彩网:dental insurance premiums run around $7 to $87 per month for an individual plan while a 澳洲幸运5官方开奖结果体彩网:Marketplace healthcare plan costs an average of $477 per month. 

Example of Annual Maximum Benefit

In Janu♊ary, Elle enrolls in a dental plan with 100% coverage for preventive services, 50% coverage for basic c💧are such as filling cavities, and 20% coverage for major services such as root canals. Her plan has a $1,000 annual maximum benefit. 

In January, she visits the dentist for a fully covered cleaning and exam. At the visit, the dentist discovers three cavities needing fillings. However, Elle must wait six months for her non-preventive dental coverage to begin unless she has a 澳洲幸运5官方开奖结果体彩网:no-waiting-period dental plan. 

When her coverage begins after six months, she returns for the fillings. The process is more involved than expected, and the ca🔯vity work bill totals $1,000. The insurance company pays 50% of costs, or $500. Elle has $500 left iꦅn her annual maximum benefit for future expenses during the calendar year.

But in November, she returns to the dentist with severe tooth pain. Elle learns she needs an urgent tooth extraction and an implant, with an estimated c🌃ost of $3,000. While 20% of this cost is $600, Elle only has $500 left in her maximum benefit for the year. The insurance company contributes $500, and Elle must pay the remaining $2,500 balance out of pocket. 

Next January, her annual maximum benefit amount reseꦬts to $1,000.  

History of Annual Maximum Benefits 

Before the Affordable Care Act was enacted in March 2010, health insurance companies routinely set annual maximum benefit limits and lifetime l♈imits. Back then, after you reached a specific dollar limit, the insurance company no longer paid for covered care. You had to pay any remaining balance out of pocket.

Today, due to the ACA, all individual and job-based health plans cannot feature lifetime limits on coverage. Some 澳洲幸运5官方开奖结果体彩网:grandfathered individual health plans can still have annual limits. 

Traditional health plans can still set some annual and lifetime dollar limits for healthcare services𒈔—on services 🦩not considered essential health benefits. However, many services fall into the essential benefits category, including emergency services, lab services, preventive care, prescription coverage, mental health services, pregnancy and childbirth, and more.

Frequently Asked Questions (FAQs)

The Bottom Line

Understanding the annual maximum benefits helps you plan when to get care and set expect♓ations for what you will get in return for your monthly premium. A low annual maximum can be a problem if you expect to need many services and procedures throughout the year. Conꦬversely, you may spend too much on premiums by buying a very high limit if you rarely need care.