HHS seeks balance in health reform mandates

Washington -- The Dept. of Health and Human Services continues to try to stabilize existing health coverage and squeeze more value from insurance as the department implements the national health system reform law. In doing so, it has promoted the necessity of increased regulation of health insurers while justifying exemptions from those rules that it has granted to hundreds of plans.

By the start of 2012, more than 1,100 health plans covering nearly 4 million people had received HHS exemptions through 2013 from annual coverage requirements mandated in the health reform law. The law prohibits health insurers from imposing annual coverage limits of less than $1.25 million in 2012 and $2 million in 2013. The law ends all such limits in 2014 regardless of any waivers that had been in place.

The HHS Center for Consumer Information and Insurance Oversight said it granted the annual limit waivers to maintain stable coverage for businesses, unions and others that offered limited-benefit plans. Nearly all businesses' health coverage meets the health reform law's annual limit requirements, but a small percentage of plans do not, according to the center. Many of the exemptions were granted for plans with annual coverage limits as low as $10,000.

The HHS center allowed annual limit waivers to union health plans, self-insured businesses, health insurance issuers, state-mandated plans and others. The agency stopped accepting waiver requests in September 2011 and had finalized all of its decisions in January. The office also denied waiver requests from 96 plans that cover more than 1 million people.

Cracker Barrel Old Country Store Inc. was one of the companies whose exemption request was accepted by HHS. Julie Davis, a spokeswoman for the restaurant chain, said the annual limits waiver it received through 2013 was essential for the company to continue providing any health coverage to its thousands of employees. "If we didn't have the waiver, it would not have been good," Davis said.

Some Republican lawmakers have accused HHS of ending the issuance of new waivers because the growing number of requests was proving embarrassing for the Obama administration and demonstrating that the reform law's mandates would not work. But CCIIO Director Steve Larsen said in June 2011 that his office had planned to stop accepting requests a year before the office announced it would.

American Medical Association President Peter W. Carmel, MD, said the Association remains concerned about the continuing role played by limited-benefit health insurance plans, which often have high out-of-pocket costs for its subscribers. Employees who are offered this coverage also should have other, more robust health insurance options, he said.

"It is critical for all patients to have affordable insurance plans that fully meet their health care needs," Dr. Carmel said.

At least one expert in health insurance markets wonders what will happen to these limited-benefit plan enrollees once the waivers expire. "In 2014, these people are obviously all going to lose coverage if you keep this provision," said Ed Haislmaier, a senior research fellow in health policy for the Heritage Foundation, a conservative think tank based in Washington. "So the question then becomes: Is there something there as a replacement?"

The early benefits of health reform

Although millions of people largely still are experiencing the status quo when it comes to their health coverage, HHS insists that many more already are seeing the benefits of new health insurance reforms.

Beginning in 2011, the health reform law required most insurers to spend at least 80% of their premiums on actual health care or quality improvement. Health plans also must disclose their spending ratios to subscribers. Health insurers who do not meet the 80% requirement are required to pay rebates to enrollees the following year.

"Some of these insurance companies have already changed their behavior by lowering premiums or spending more on medical care and quality improvement," HHS Secretary Kathleen Sebelius said on Feb. 16. "The remainder will need to refund this money to their customers this year."

Seventeen states and Guam asked HHS to relax the 80% requirement for fear that it would lead individual and small-group health plans to exit their markets. HHS approved or partially approved eight requests and denied the remaining 10. The outcome means that health insurers will be required to pay back $323 million in rebates for spending too much on administrative costs, according to the department.

Starting in 2014, insurers will have competition from new nonprofit health plans created by the reform law. The Consumer Oriented and Operated Plans, or CO-OPs, must use any profits to lower premiums, or improve benefits or health care quality for enrollees. Enrollees must be given a say in the plans' governance.

HHS announced on Feb. 21 that it is providing a combined total of nearly $640,000 in startup loans to seven CO-OPs. The loans -- which range from $56,000 to $113,000 -- will be paid incrementally as plan goals are met, and they must be repaid with interest. HHS, which has $3.8 billion worth of CO-OP loan funding authorized by the health reform law, will continue to accept CO-OP applications on a rolling basis.

One of the loan recipients, Common Ground Healthcare Cooperative, was established after more than three years of research into creating affordable health insurance in southeastern Wisconsin. It will serve a seven-county area centered in Milwaukee, but it plans to expand statewide within five years. The CO-OP was founded by Common Ground, a collaboration of 44 small businesses, congregations, nonprofits, colleges and labor unions to address local social issues in a nonpartisan way.

"As a small-business owner, I grew tired of the exorbitant increases in health insurance costs with no real additional value," said Bob Connolly, the CO-OP's board president and a fundraising consultant to faith-based organizations. "Common Ground Healthcare is a solution to the region's cry for help."