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Guest Article

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(From the December 20, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

More Clarity on Restrictions That Apply to "Mini-Med" Waivers

New guidance makes clear that for group health plans and issuers with waivers of the annual limit requirement under the Patient Protection and Affordable Care Act (PPACA) the waiver generally applies only to policies that were in place before September 23, 2010. Only two limited exceptions apply: in the case of insurers in States that obtained a waiver due to pre-existing State law that requiring low-annual-limit policies to be offered, and in the case of group health plans with policy waivers who seek to purchase a new policy from a different issuer who also has a waiver. A model notice was also released that plans and issuers with PPACA waivers can use to meet their disclosure requirement.

PPACA Waivers in General

The PPACA allows group health plans and insurance issuers to apply for a waiver of the new annual limit requirements in the case of "limited benefit" or "mini-med" plans, which typically have annual limits lower than the PPACA-prescribed minimum. A waiver can be requested for plan or policy years beginning on or after September 23, 2010, and require a showing that compliance with the PPACA's higher limit would significantly decrease access to benefits or significantly increase premiums paid by those currently covered under the plan. A waiver is granted for a single year at a time, and no waivers will be granted for years beginning on or after January 1, 2014 when the PPACA's complete prohibition on annual dollar limits on the total value of essential health benefits goes into effect.

Shortly after the waiver application program opened, the Department of Health and Human Services (DHHS) expanded it to allow a State to apply for a waiver on behalf of its health insurance issuers if the State had a law in effect before September 23, 2010 that required the issuers to offer low-annual-limit policies. At the same time, the DHHS established disclosure requirements by which plans and issuers that receive a waiver are required to notify eligible participants and subscribers that a waiver was obtained and that the coverage does not meet the PPACA's minimum annual limits for essential health benefits.

Two Circumstances Where Issuers May Sell New Non-Conforming Policies

In Supplemental Guidance dated December 9, 2010, the DHHS made clear that PPACA waivers "generally apply only to policies already in place before September 23, 2010," and the intention of health insurance issuers to issue new non-conforming policies because they have procured a waiver was misplaced. According to the Department:

The purpose of the IFR [interim final regulation] authority to waive annual limit requirements was not to permit new non-compliant insurance policies to be sold, but, for the period prior to 2014, to minimize disruption of existing coverage, or in some cases State-established markets, where the application of restrictions on annual limits would significantly decrease access to, or the costs of, existing coverage.

Therefore, except in two limited circumstances, issuers may not provide new policies to group health plans or sell them in the individual market after September 23, 2010 unless the policies meet the PPACA's requirements regarding annual limits. The two exceptions are:

  • State-Mandated Policies - Issuers that offer low-annual-limit policies under State laws under a waiver of the PPACA annual limit requirements may continue to sell those policies through September 23, 2011. Either the State or the insurer would have to obtain another waiver to continue to sell the policies after that date. The purpose of this exception is to accommodate State efforts to maintain access to coverage that was in place before the new annual limits took effect.
  • Change in Issuer for Group Policies - Group health plans that have a policy with a waiver are permitted to purchase a new policy from a different issuer that also has obtained a waiver of the annual limit requirements. The purpose of this exception is to align the waiver restrictions with other recent DHHS guidance that allows grandfathered health plans to change issuers without losing grandfathered status.

    Under this exception, a plan sponsor may purchase a new group policy with annual limits below the PPACA requirements after December 9, 2010 and before September 23, 2011 if:

    1. the plan sponsor was offering group health insurance coverage to its employees before September 23, 2010 for which the issuer obtained a waiver of the annual limits requirement;
    2. the new issuer from which the group health plan is obtaining the new policy also obtained a waiver for the new policy; and
    3. the annual limits of the new policy are not lower than the annual limits of the previous policy (unless the issuer is no longer offering the coverage the plan sponsor had before September 23, 2010, in which case the sponsor may obtain a replacement policy with a lower annual limit if other comparable coverage with the same level of annual limits as the prior policy is not available). Note that the change to a lower annual limit would cause the loss of grandfathered status.

    Further, the new issuer must obtain from the plan sponsor an attestation that the above enumerated criteria are satisfied, along with a copy of the prior policy outlining the terms of the prior coverage.

Notice to Participants and Subscribers

Following up on the requirement that plans or issuers must inform eligible participants and subscribers of the fact that a waiver was obtained and the plan or policy does not meet the minimum annual limits requirements for essential health benefits, the DHHS also released Supplemental Guidance on Transparency. The guidance includes model language (which must be displayed in bold 14-point type) and instructions on delivery. The notice must be delivered by February 7, 2011 for plan or policy years that begin before February 1, 2011. For plan or policy years that begin on or after February 1, 2011, the notice must be provided as part of any informational materials and in plan or policy documents that are sent to enrollees.

A Fact Sheet on the recent guidance was also released. The Fact Sheet and both Supplemental Guidance mentioned above may be found at:

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.

BenefitsLink is an independent national employee benefits information provider, not formally affiliated with the firms and companies who kindly provide much of the content and advertisements published on this Web site, including the article shown above.
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