WAIVERS TO THE ANNUAL LIMITS REQUIREMENT

Summary

The Patient Protection and Affordable Care Act (Affordable Care Act), requires the Secretary of Health and Human Services (HHS) to specify the minimum “annual limits” on the dollar value of “essential health benefits” for any participant or beneficiary in:

  1. a new or existing group health plan or
  2. a new policy in the individual market

for 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 except in the case of grandfathered individual market policies and group health plans and health insurance coverage that meet the definition of an “excepted benefit” pursuant to section 2791 of the PHS Act, section 732 of ERISA, or section 9831 of the Internal Revenue Code (e.g., limited scope dental or vision benefits).

What are the Annual Limits?

The interim final regulations published on June 28, 2010 provided that the restricted annual limits on the dollar value of essential health benefits cannot be lower than:

  1. $750,000 for plan or policy years beginning on or after September 23, 2010 but before September 23, 2011;
  2. $1.25 million for plan or policy years beginning on or after September 23, 2011 but before September 23, 2012; and
  3. $2 million for plan or policy years beginning on or after September 23, 2012 but before January 1, 2014.

These minimum annual limits apply on an individual basis (i.e., any overall annual dollar limit applied to families may not operate to deny a covered individual the minimum annual essential health benefits for the plan year).
Getting a Waiver from the Annual Limits

The interim final regulations also provided that these 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.

On September 3, 2010, HHS issued a Memorandum providing guidance on the scope and process for applying for such a waiver.  The Memorandum states that “A class of group health plans and health insurance coverage, generally known as “limited benefit” plans or “mini med” plans, often has annual limits well below the restricted annual limits set out in the interim final regulations. These group plans and health insurance coverage often offer lower-cost coverage to part-time workers, seasonal workers, and volunteers who otherwise may not be able to afford coverage at all.”  The HHS Memorandum established the waiver process in order to ensure that individuals with certain coverage, including coverage under limited benefit or mini-med plans, would not be denied access to needed services or experience more than a minimal impact on premiums.

The Memorandum also states that this waiver process does not impact any State law requirement addressing annual benefit limits in group health plans, or group and individual health insurance coverage.

The Waiver Process

A group health plan or health insurance issuer may apply for a waiver from the restricted annual limits only if such plan or the coverage offered by such issuer was offered prior to September 23, 2010. For plan or policy years beginning between September 23, 2010 and September 23, 2011, the plan or insurer must submit an application to HHS not less than 30 days before the beginning of such plan or policy year.  (For plan or policy years that began before November 2, 2010, the plan or insurer was required to submit an application not less than 10 days before the beginning of such plan or policy year.)

A waiver is good for a period of only one year.  To obtain a waiver for future years, a group health plan or health insurance issuer must reapply for any subsequent plan or policy year prior to January 1, 2014 (when this waiver process expires).

A waiver application form is available at:  http://www.hhs.gov/ociio/regulations/waiver_application_instructions.pdf

What the Waiver Application must Include

The waiver application must include:

  1. The terms of the plan or policy form(s) for which a waiver is sought;
  2. The number of individuals covered by the plan or policy form(s) submitted;
  3. The annual limit(s) and rates applicable to the plan or policy form(s) submitted;
  4. A brief description of why compliance with the interim final regulations would result in a significant decrease in access to benefits for those currently covered by such plans or policies, or significant increase in premiums paid by those covered by such plans or policies, along with any supporting documentation; and
  5. An attestation, signed by the plan administrator or Chief Executive Officer of the issuer of the coverage, certifying a) that the plan was in force prior to September 23, 2010; and b) that the application of restricted annual limits to such plans or policies would result in a significant decrease in access to benefits for those currently covered by such plans or policies, or a significant increase in premiums paid by those covered by such plans or policies.

The plan administrator or Chief Executive Officer should keep documentation to support the waiver application, in case HHS subsequently reviews the application.
 
Timeframes for Processing Waiver Applications and Duration of Waiver

HHS said it generally will process complete waiver applications within 30 days of receipt, so plan sponsors and insurers should make every effort to submit waiver applications at least 30 days before the beginning of the plan year.  (For plan or policy years that began before November 2, 2010, HHS said it would process waiver applications no later than 5 days in advance of such plan or policy year, if complete waiver applications were timely submitted.)

As noted above, any waiver granted by HHS applies only for one plan or policy year.  The first year for which a waiver can apply is the plan or policy year beginning between September 23, 2010 and September 23, 2011. Thereafter, a group health plan or health insurance issuer that wants a waiver for a subsequent year must reapply for any subsequent plan or policy year prior to January 1, 2014, when this waiver program expires.  HHS may in the future modify this waiver approval process after reviewing the information it receives in connection with the waiver process and other relevant information.

Requirement to Notify Participants if the Plan/Policy has Received a Waiver
HHS issued supplemental guidance on December 9, 2010 providing model language that group health plans and health insurers must use to notify plan participants if the plan or insurer has received a waiver of the annual limits requirements in the Affordable Care Act (ACA). In addition to providing model language, the HHS guidance also specifies when the notice must be provided (within the next 60 days for plans and insurers that have already received the waiver) and that the notice must be prominently displayed in 14-point bold type on the front of plan informational materials and documents. The model notice is reproduced in full below and is available here.
 
The Model Notice Issued by HHS
The Affordable Care Act prohibits health plans from applying arbitrary dollar limits for coverage for key benefits. This year, if a plan applies a dollar limit on the coverage it provides for key benefits in a year, that limit must be at least $750,000.

Your health insurance coverage, offered by [name of group health plan or health insurance issuer], does not meet the minimum standards required by the Affordable Care Act described above. Instead, it puts an annual limit of:
[dollar amount] on [all covered benefits]
and/or
[dollar amount(s)] on [which covered benefits - notice should describe all annual limits that apply].

In order to apply the lower limits described above, your health plan requested a waiver of the requirement that coverage for key benefits be at least $750,000 this year. That waiver was granted by the U.S. Department of Health and Human Services based on your health plan's representation that providing $750,000 in coverage for key benefits this year would result in a significant increase in your premiums or a significant decrease in your access to benefits. This waiver is valid for one year.

If the lower limits are a concern, there may be other options for health care coverage available to you and your family members. For more information, go to: http://www.healthcare.gov/.

If you have any questions or concerns about this notice, contact Lisa-klinger@leavitt.com.

Where to Apply for a Waiver or Get More information:
 
A group health plan or health insurance issuer that:

  1. wishes to obtain a waiver of the restricted annual limit requirements, and
  2. provides coverage that would meet the above criteria

may apply for such waiver by submitting the items referenced above within the timeframe described above to HHS, Office of Consumer Information and Insurance Oversight, Office of Oversight, attention James Mayhew, Room 737-F-04, 200 Independence Ave. SW, Washington, DC 20201 or emailing the items to healthinsurance@hhs.gov (use “waiver” as the subject of the email).

If you have any questions or want additional information, contact the Office of Consumer Information and Insurance Oversight at (301) 492 4100 or email at healthinsurance@hhs.gov (use “waiver” as the subject of the email).