HHS Issues Guidance on Renewing Annual Limit Waivers under Affordable Care Act

padlocked money3.JPGThe Department of Health and Human Services’ Centers for Medicare & Medicaid Services (CMS) has issued new guidance for health care plans seeking to renew waivers on annual benefit limits below $1.25 million for plan years starting after September 23, 2011 and below $2 million for plan years starting after September 23, 2012.

The Affordable Care Act requires health plans to gradually phase out annual dollar limits on essential health coverage by 2014. Restrictions on benefit limits particularly 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. In order to maintain such plans, which are usually used by low-wage, part-time, and seasonal employees, the HHS’s interim federal regulations set forth a program whereby the restricted annual limit requirements would be temporarily 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.

The CMS issued guidance on this waiver program in September 2010. In November and December 2010, the agency released supplemental guidance on applying for waivers of annual benefit limit restrictions for mini med plans. The most recent guidance issued on June 17 extends the duration of waivers that have been granted through 2013 for plan years beginning before January 1, 2014, provided that the plan complies with the program’s consumer notification requirements. Plans already receiving waivers from the annual limit requirements will have until September 22, 2011 to reapply.

The new waiver process “imposes more stringent disclosure requirements and requires a new version of this consumer notice that will make the information easier for families to understand.” Currently, plans that receive waivers under this program are required to annually notify their consumers that the health care coverage’s dollar limit provided by the plan is less than that ordinarily required under the health care law. The guidance explains that such notice will now require plans to “illustrate how the annual limit would impact a consumer who was hospitalized, so families can understand how far their coverage will reach if they become seriously ill.”

At this time, non-grandfathered plans cannot impose an annual dollar limit less than $750,000 on essential health benefits. After September 23, 2011, this limit will increase to $1.25 million, and then to $2 million the following year. According to the guidance, some plans have annual limits between $750,000 and $2 million. The CMS claims that these plans should be able to meet these limits with minimal (less than 1%) premium increases. Therefore, the agency states, it is “unlikely” that these plans will qualify for the annual limit waiver, but that “if the circumstances of a particular plan indicate that it will need a waiver from these requirements to prevent a significant increase in premiums or decrease in benefits, the plan can apply for a waiver before September 22, 2011.”

Photo credit: Kent Weakley

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.