The Lifetime Benefits Cap on Health Insurance Policies Often Needs Updating

In today's Washington Post, Chris Lee has a story about lifetime maximums in health insurance policies. Sometimes, these caps are as little as $1 million--particularly for individual health insurance polices.

As health care policy goes, this is not a widespread issue. The number of people who incur medical costs over $1 million or $2 million is quite small and most health insurance coverage is at much higher levels.

But with health care costs doubling since 2000, a few health insurers have increased prices but they have not necessarily increased their standard lifetime caps. That means more and more people with catastrophic costs find themselves under-insured.

Ironically, providing insurance for the big health care claims is often the easiest part of the health insurance business:

• Catastrophic coverage is pure insurance--not just first dollar reimbursement.
• Catastrophic reinsurance is readily available to health plans at a reasonable cost.
• The industry does a very good job of managing the large and complex high cost claims.

It's time to review the lifetime caps with an eye toward keeping those up-to-date with the rising cost of health care.

That goes for employer sponsors and individuals as well as insurers.

I would recommend a cap of no less than $5 million.