United States: Health Reform: Government Guidance on Waivers of Annual Limits Requirements for Mini-Med Plans

This is the 11th in a series of WorkCite articles concerning the recently enacted Patient Protection and Affordable Care Act and its companion bill, the Health Care and Education Reconciliation Act of 2010 (referred to collectively as the Act). This WorkCite deals specifically with a bulletin recently issued by the HHS Office of Consumer Information and Insurance Oversight (OCIIO) regarding how to apply for a waiver of the annual dollar limits requirements that will soon become effective under the Act.

Background

Historically, many group health plans and individual policies have included caps on the dollar amount of reimbursements that the plan or policy would pay per year. The Act imposes restrictions on annual limits on the dollar value of essential health benefits for participants or beneficiaries in new or existing group health plans and new policies in the individual market. The restriction applies to plan or policy years beginning on or after September 23, 2010, and prior to January 1, 2014. For plan or policy years beginning on or after January 1, 2014, no annual limits on essential health benefits are permitted.

Note: The annual dollar limit restrictions apply to grandfathered group health plans, but do not apply to grandfathered individual market policies.

A recap of the restrictions on annual limits, which are explained in an interim final regulation (IFR) issued June 28, 2010, is set forth below.

The restriction on annual dollar limits could have a significant adverse effect on the class of group health plans and insured individual health policies, generally known as limited benefit or mini-med plans and policies, that contain annual limits well below the restricted annual limits set out in the IFR. These limited benefit or mini-med group plans and policies often offer lower-cost coverage to part-time workers, seasonal workers, and volunteers who otherwise may not be able to afford coverage at all. Also, many student health plans offered by colleges and universities fall within this category.

Waiver Opportunity

Recognizing that participants covered under limited benefit or mini-med plans and policies could be denied access to needed services or experience if the cost of coverage under those plans and policies were increased to cover "essential health benefits," the IFR contemplates a waiver process for plan or policy years beginning prior to January 1, 2014. Specifically, the IFR provided that the restricted annual limits may be waived by the Secretary of HHS, if compliance with the interim final regulations would result in a significant decrease in access to benefits or a significant increase in premiums.

Waiver Process

On September 3, 2010, OCIIO released Bulletin 2010-1, which details the process for requesting the waiver. The bulletin explains that a group health plan or health insurance issuer may apply for a waiver from the restricted annual dollar limits for the plan or policy year beginning between September 23, 2010, and September 23, 2011, but only if the plan or the coverage was offered prior to September 23, 2010. The waiver application must be submitted no fewer than 30 days (in the case of a plan or policy year that begins before November 2, 2010, no fewer than 10 days) before the beginning of such plan or policy year.

The waiver application must include:

• The terms of the plan or policy for which a waiver is sought;
• The number of individuals covered by the plan or policy;
•  The annual limit(s) and rates applicable to the plan or policy;
• A brief description of why compliance with the interim final regulations would result in a significant decrease in access to benefits or significant increase in premiums, along with any supporting documents; and
• An attestation by the plan administrator or chief executive officer of the issuer of the coverage, certifying that (i) the plan was in force prior to September 23, 2010, and (ii) the application of restricted dollar annual limits would result in a significant decrease in access to benefits for, or a significant increase in premiums paid by, those covered by the plans or policies.

The applicant should retain documents in support of this application for examination by HHS.

HHS will process complete waiver applications within 30 days of receipt; however, complete applications submitted for plan or policy years beginning before November 2, 2010, will be processed no later than five days in advance of such plan or policy year.

Note: This means that calendar year plans will need to file their waiver applications no later than December 1, 2010.

Note: A waiver approval applies only for the plan or policy year beginning between September 23, 2010, and September 23, 2011. As a result, the group health plan or health insurance issuer must reapply for any subsequent plan or policy year prior to January 1, 2014.

Waiver applications must be submitted to the following address: HHS, Office of Consumer Information and Insurance Oversight, Office of Oversight, attention James Mayhew, Room 737-F-04, 200 Independence Avenue S.W., Washington, D.C. 20201. In the alternative, the application may be e-mailed to healthinsurance@hhs.gov.

Note: It is important that insured plans research applicable state law, because the waiver process does not preempt state law requirements addressing annual benefit limits in group health plans and individual health policies.

Recap of Annual Dollar Limits

The restricted annual limits on the dollar value of "essential health benefits" cannot be lower than:

• For plan or policy years beginning on or after September 23, 2010, but before September 23, 2011, $750,000;
• For plan or policy years beginning on or after September 23, 2011, but before September 23, 2012, $1.25 million; and
• For plan or policy years beginning on or after September 23, 2012, but before January 1, 2014, $2 million.

Essential Health Benefits

HHS, DOL, and the Treasury Department have not yet issued guidance on the definition of "essential health benefits." The preamble to the IFR provides that, for plan years or policy years beginning before the issuance of regulations defining "essential health benefits," the agencies will take into account good faith efforts to comply with a reasonable interpretation of the term "essential health benefits."

Action Items

We expect that, in the case of insured limited benefit or mini-med plans, insurers will want to take responsibility for filing waiver applications. Absent a waiver, an insurer may not be able to offer the plan (without the prospect of substantial penalty) after the effective date of the new rule. Nonetheless, all employers that sponsor such plans should confirm that their insurers will make timely waiver applications.

Employers that sponsor self-insured limited benefit or mini-med plans will need to work with their plan administrators to ensure that timely applications are submitted.

Moreover, because all waiver approvals are subject to the discretion of HHS, sponsors of insured and self-insured plans that are applying for waivers should also consider alternative arrangements, in the event that the waiver application is not approved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.