HHS Issues New Guidance on Annual Benefit Limit Restriction Waivers for Mini Med Plans

The Department of Health and Human Services’ (HHS) Office of Consumer Information and Insurance Oversight (OCIIO) has released supplemental guidance (pdf) on applying for waivers of annual benefit limit restrictions for mini med plans. The Affordable Care Act imposes certain limitations on restricting the annual dollar limits for essential health coverage. Under the new law, the annual limit restrictions will be gradually phased out, and by 2014, all employer plans and new individual market health plans will be prohibited from imposing such dollar value limitations. These restrictions impact limited benefit plans known as “mini med” health plans that usually offer low-cost coverage but often include annual limits below the required threshold. To preserve such plans, which are usually used by low-wage, part-time, and seasonal employees, the HHS’s interim federal regulations (IFR) set forth a program whereby the restricted annual limit requirements would be waived if compliance with the restrictions would result in a significant decrease in access to benefits or a significant increase in premiums. This waiver program will be in place until 2014. Guidance (pdf) governing the waiver process was released in September.

According to the OCIIO, after the September guidance was issued, questions still remained about the scope and applicability of the waiver program. Therefore, supplemental guidance was issued and accomplishes the following:

• Establishes transparency and disclosure requirements for plans that receive waiver approvals;
• Clarifies that states can apply for a waiver on behalf of health insurance issuers in the state under certain circumstances, and establishes a process for a state waiver request;
• Describes factors that are considered in analyzing a waiver application;
• Discusses the application of the medical loss ratio provisions of Section 2718 of the Public Health Service Act (PHSA); and
• Reiterates the requirement that waiver applicants are subject to record retention and audit requirements.

With respect to the transparency and disclosure requirements, the HHS states that plans whose waivers have been approved must inform their enrollees of the waiver and that, as a result, the health insurance coverage they receive does not meet the standards imposed by the interim regulations. Among other things, this notice to enrollees must “include the dollar amount of the annual limit along with a description of the plan benefits to which it applies.” The HHS intends to create and post on its website a model notice “in the near future.”

The HHS explains in the new guidance that it has received questions regarding the standards it uses to assess waiver applications. As previously discussed, the applicant must show that compliance with the regulations would result in a “significant decrease in access to benefits” or a “significant increase in premiums.” To clarify this test, the agency notes that although the applications are assessed on a case by case basis, certain factors will be considered, including the following:

• The application’s explanation as to how compliance with the restriction on annual limits would result in a significant decrease in access to benefits. Such a decrease in access could result from the dropping of coverage by a plan or plan insolvency if the waiver is not granted.
• The policy's current annual limits. Plans with higher annual limits would be expected to experience lower premium increases to become compliant with the IFR’s restricted annual limit requirement than plans with lower limits.
• The change in premium in percentage terms. The lower the percentage increase estimated to achieve compliance, the less likely compliance with the IFR would be found to be “significant.”
• The change in premium in absolute dollar terms. While the percentage increase noted above can be relevant to the determination of whether an increase is “significant,” for policies with very low premiums, an increase in premiums on a percentage basis may still translate to a small increase in absolute dollar terms and therefore may not be “significant.”
• The number and type of benefits affected by the annual limit. Some policies have limits on only some essential health benefits, such as prescription drugs. For example, while increasing the annual limits on prescription drugs to $750,000 may increase the portion of the premium related to drug coverage significantly, it may not significantly increase the overall cost of health insurance for enrollees.
• The number of enrollees under the plan seeking the waiver.

The HHS also mentions that many plan sponsors have asked for a similar waiver program to be instituted with respect to the application of the medical loss ratio (MLR) requirements to mini med plans. The new health care law mandates that health insurers, depending on the size of the insurance market, spend between 80 and 85% of premium revenue on reimbursement for clinical services or activities that improve health care quality, or provide a rebate to their enrollees. Insurers have argued that this requirement adversely affects mini med plans, as the administrative costs are generally the same as those involved in other types of health plans, but the premium base is relatively low, resulting in low MLRs that do not meet the regulatory standards. In response to this concern, the HHS states that it intends to issue regulations implementing MLR provisions that will take into account the special circumstances surrounding mini med plans.

This entry was written by Ilyse Schuman.