HHS to end exemptions for limited benefit plans

More than 1,400 health plans have been exempted from the reform law's $750,000 annual minimum coverage requirement.

By Doug Trapp — Posted June 27, 2011

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Federal health officials in September will stop accepting requests for exemptions to a national health reform law minimum coverage requirement despite the fact that they have approved nearly every such request so far.

The reform law prohibits health plans from imposing coverage limits below $750,000 this year. The minimum will increase twice more until the law ends nearly all coverage limits starting in 2014.

However, the Dept. of Health and Human Services can allow health plans with more restrictive limits to continue if an insurer, employer, union or other plan sponsor can prove that the coverage floor would lead to significant premium increases or more limited enrollment. HHS had exempted more than 1,400 applicants from the coverage requirement and rejected fewer than 70 applications as of June 17.

Steve Larsen, director of the HHS Center for Consumer Information and Insurance Oversight, announced June 17 that the department no longer will accept waiver applications after Sept. 22. The policy change is in part due to the fact that HHS officials expect relatively few plans to seek waivers as the minimum coverage requirement increases from $750,000 to $1.25 million on Sept. 23 and to $2 million on Sept. 23, 2012. An actuarial analysis suggests that most plans will need to increase premiums by less than 1% during either transition, according to HHS.

Employers, unions and others who have received waivers can apply for extensions, Larsen said. The renewal process will be much shorter than the initial waiver application. Businesses started after Sept. 22 will not be eligible for any waivers.

Two leading Republicans on Capitol Hill accused HHS of ending the waiver process to halt what they described as the controversy surrounding it. "They are shutting it down because it's become clear that the only way to keep what you have and like is to be exempted from the very law they said would lower costs," said Sen. Orrin Hatch (R, Utah) and House Ways and Means Committee Chair Dave Camp (R, Mich.) in a June 20 joint statement.

HHS has granted waivers to plans covering nearly twice as many people as expected and is ending the waiver process to take attention away from this, said Ed Haislmaier, a senior research fellow in health policy for the Heritage Foundation, a conservative think tank based in Washington, D.C. HHS anticipated in its coverage requirement regulation in June 2010 that plans representing about 1.7 million people would be affected by the $750,000 annual floor, but HHS so far has granted waivers for plans with 3.2 million enrollees. "This is a PR strategy that went bad," Haislmaier said.

Larsen denied that HHS is closing the waiver process for any political reasons. "This is the course we mapped out a year ago," he said.

Some Republicans also had accused HHS of disproportionately granting the annual coverage waivers to applicants who are typically friendly to Democrats, such as unions. However, the Government Accountability Office concluded that HHS used the same criteria to judge all waiver requests. HHS tended to approve waiver requests from plans that projected premium increases of 10% or more, whereas the department denied most requests from plans that predicted premium increases of 6% or less, according to a GAO analysis released June 14.

Larsen described the exemptions granted so far as modest.

"It's a very, very small percentage of the market, because most plans comply with the annual limit restrictions," Larsen said. He said most of the approved requests were for plans with very low annual coverage limits, such as $10,000 in some cases.

These plans "do not provide comprehensive health coverage, but unfortunately they are the only insurance options some consumers have today," Larsen said.

HHS is requiring these plans to explain their coverage limits more clearly. One comparison the plans must offer is how much cost-sharing their enrollees would pay for an average hospital stay compared with the national average for insured people.

Linda Blumberg, PhD, senior fellow in the Urban Institute's health policy center, said she isn't convinced HHS needed to grant waivers to so-called mini-med plans, which have very low annual coverage caps. "The administration is bending over backwards a little bit to appease the concern of a lot of carriers," she said.

The annual coverage requirements do not apply to existing individual market health plans grandfathered in under the health reform law. HHS did not give the exact number of grandfathered plans, but officials said the number will decrease as the plans lose this status by changing benefits or increasing costs.

Democrats and Republicans often have sparred over the value of plans with restrictive coverage limits, usually sold in the individual market. Many Democrats see them as flimsy health coverage for people who would want better coverage if they could afford it. Many Republicans, however, see mini-med plans as basic health coverage for people who do not want a more comprehensive health plan.

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Good odds for waiver requests

The Dept. of Health and Human Services has granted most requests by health plans, unions and businesses for exemptions from the health system reform law's restrictions on annual coverage limits. The $750,000 annual coverage minimum will increase to $2 million on Sept. 23, 2012. Of the 1,505 one-year waiver requests sent to HHS as of June 17:

  • 1,433 were granted to employers, unions and others covering more than 3.2 million people because they demonstrated that increasing annual coverage limits would force significant premium increases or enrollment restrictions.
  • 68 were denied, for employer and union plans covering 165,869 people.
  • Four are pending requests, for plans covering 7,115 members.

Source: "Helping Americans Keep the Coverage They Have and Promoting Transparency," Center for Consumer Information & Insurance Oversight, Centers for Medicare & Medicare Services, June (link)

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