HHS seeks balance in health reform mandates

Insurers face new nonprofit competition and tighter administrative spending limits, but more than 1,100 plans are allowed to maintain limited benefits through federal exemptions.

By — Posted March 12, 2012

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

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."

Back to top


Health plans get a pass on insurance reforms -- for now

In September 2010, the health system reform law required insurers to start phasing out annual coverage limits, but hundreds of plans with more limited benefits received federal waivers from the requirements. As of January 2012, more than 1,700 plans had at least partial exemptions, and more than 1,100 had full waivers through 2013, after which all annual coverage limits must cease. The department denied 96 other waiver requests.

Plan type Exemptions
Self-insured employers 722
Health reimbursement arrangements* 491
Multi-employer plans 417
Health insurance issuers 50
Non-Taft Hartley union plans 34
State-mandated policies 5
Association plans 3

*HHS accepted these waivers before issuing an automatic exemption policy on grandfathered HRAs in August 2011.

Source: "Annual Limits Policy: Protecting Consumers, Maintaining Options, and Building a Bridge to 2014," Center for Consumer Information & Insurance Oversight (link)

Back to top

External links

"Annual Limits Policy: Protecting Consumers, Maintaining Options, and Building a Bridge to 2014," Center for Consumer Information & Insurance Oversight (link)

"Medical Loss Ratio: Getting Your Money's Worth on Health Insurance," Dept. of Health and Human Services (link)

"New Loan Program Helps Create Customer-Driven Non-profit Health Insurers," Dept. of Health and Human Services (link)

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn