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Guest Article

Deloitte logo

(From the September 13, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Procedures Are Open for Waiver of Annual Limit Requirements


Under procedures recently released by the Department of Health and Human Services, group health plans and issuers can now apply for annual waivers from the restricted annual limits imposed by the Patient Protection and Affordable Care Act (PPACA). The waivers are primarily addressed toward "limited benefit" or "mini-med" plans, which often have annual limits below the restricted annual limits that are scheduled to become effective beginning September 23, 2010. The procedures make clear that the waivers will be available only for plan years beginning before January 1, 2014 (when annual limits are prohibited altogether on essential health benefits).

Plans Are Restricted from Imposing Annual Limits on "Essential Health Benefits"

Effective with the plan year beginning on or after September 23, 2010, group health plans - regardless of whether they are insured or self-funded, grandfathered or non-grandfathered - are prohibited from imposing lifetime limits on "essential health benefits." The plans are also limited in their ability to impose annual limits on "essential health benefits" - until the plan year beginning on or after January 1, 2014, when annual limits on "essential health benefits" are prohibited altogether.

Interim final regulations were published on June 28, 2010 to flesh out these PPACA restrictions on lifetime and annual limits. Before the first plan year beginning in 2014, plans may impose an annual limit on essential health benefits, but it cannot be less than the minimum amount established for the year as indicated in the following table.

Restricted Annual Limits on Essential Health Benefits
Plan Year
Lowest Permitted Annual Limit
Beginning on or after September 23,2010
but before September 23, 2011
$750,000
Beginning on or after September 23, 2011
but before September 23, 2012
$1.25 million
Beginning on or after September 23, 2012
but before January 1, 2014
$2 million

The term "essential health benefits" has not yet been fully defined, but the Departments of Health and Human Services, Treasury and Labor have stated that they will take into account an entity's "good faith" efforts to comply with a reasonable interpretation of the term in enforcing the new PPACA provisions. The PPACA statute makes clear, however, that "essential health benefits" will at least include the following categories: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder benefits, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive wellness services and chronic disease management, and pediatric services including oral and vision care.

Waivers of the Restrictions on Annual Limits Can Be Requested

The June 2010 regulations stated that, under procedures to be released, the restrictions on annual limits could be waived by the Department of Health and Human Services (DHHS) if compliance would result in a significant decrease in access to benefits or a significant increase in premiums. The waivers are primarily addressed toward "limited benefit" or "mini-med" plans, which often have annual limits below the restricted annual limits that are scheduled to become effective beginning September 23, 2010. As described by DHHS, these plans "often offer low-cost coverage to part-time workers, seasonal workers, and volunteers who otherwise may not be able to afford coverage at all."

The waiver procedures were released by the DHHS in a Memorandum dated September 3, 2010. The procedures make clear that the waivers will be available only for plan years beginning before January 1, 2014 (when annual limits are prohibited altogether on essential health benefits), the waivers will be granted only on a year-to year basis (i.e., waivers approved under the Memorandum will apply only for the plan year beginning between September 23, 2010 and September 23, 2011), and the DHHS reserves the right to modify the waiver approval process.

Under the Memorandum, group health plans or insurers can request a waiver for plans or coverage that was offered prior to September 23, 2010, by submitting an application at least 30 days before the beginning of the plan year (or, if the plan year begins before November 2, 2010, at least 10 days before the beginning of the plan year). As indicated above, applications under the Memorandum can be made only for plan years beginning between September 23, 2010 and September 23, 2011. The application must include:

  1. The terms of the plan or policy;
  2. The number of individuals covered;
  3. The applicable annual limits and premium rates;
  4. A brief description of why compliance with the restricted annual limits will result in a significant decrease in access to benefits for those currently covered, or a significant increase in premiums paid by those covered, along with supporting documentation; and
  5. An attestation signed by the plan administrator, or chief executive officer of the issuer, certifying (i) the plan was in force prior to September 23, 2010, and (ii) the restricted annual limits would result in a significant decrease in access to benefits for those currently covered, or a significant increase in premiums paid by those covered.

According to the Memorandum, the waiver applications will be processed within 30 days of receipt (or no later than 5 days before the beginning of the plan year for plan years beginning before November 2, 2010). Applications can either be submitted in hard copy or emailed to the address specified in the Memorandum.


Deloitte logoThe information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact:

Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955.

Copyright 2010, Deloitte.


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