What Kind of Annual Limit Waivers are Available?

Specifically, the law generally provides that group health plans and health insurance issuers offering coverage to individuals or group health plans may not impose an annual or lifetime dollar limit on essential benefits, as defined in PPACA, effective for plan years beginning on or after September 23, 2010. 

The statute allows the Secretary to permit “restricted annual limits” prior to 2014 to ensure that “access to needed services is made available with a minimal impact on premiums.” 

An Interim Final Regulation (IFR) on the annual and lifetime limit restrictions and other provisions was published in the Federal Register on June 28, 2010.  The IFR provides generally that for plan years beginning before 2014, a group health plan is permitted to have an annual limit on essential benefits, as long as the annual limit is at least: (1) $750,000 for plan years beginning on or after September 23, 2010 but before September 23, 2011; (2) $1.25 million for plan years beginning on or after September 23, 2011 but before September 23, 2012; and (3) $2 million for plan years beginning on or after September 23, 2012 but before January 1, 2014.

On September 3, the Department of Health and Human Services (HHS) released guidance on the restricted annual limit waiver program in the form of a 3-page Insurance Standards Bulletin (“Bulletin”).  Key questions and answers on the waiver program are provided below.

What plans are eligible to apply for a waiver under the program?

The Bulletin provides that a group health plan or health insurance issuer may apply for a waiver from the otherwise applicable restricted annual limits set forth in the IFR if the plan or insurance coverage was offered prior to September 23, 2010.  The background section of the Bulletin (and the preamble to the IFR) notes that so-called “limited benefit” plans or “mini med” plans often have annual limits well below the restricted annual limits in the IFR. 

Does the waiver program apply with respect to the PPACA prohibition on lifetime dollar limits on essential benefits?

No.

What is the deadline for submitting a waiver application?

In general, waiver applications must be submitted to HHS not less than 30 days before the beginning of the plan year.  For plan years that begin before November 2, 2010, the waiver application must be submitted not less than 10 days before the beginning of the plan year.

How quickly will HHS process applications?

In general, HHS will process complete waiver applications within 30 days of receipt.  In the case of plan years that begin before November 2, 2010, HHS will process complete applications no later than 5 days before the beginning of the plan year.

For what time period does a waiver apply?

Commentators had requested that approved waivers apply for all plan years beginning before January 1, 2014.  The Bulletin, however, provides that a waiver approval granted under the waiver program will only apply for the plan year beginning between September 23, 2010 and September 23, 2011, and that a group health plan or health insurance issuer must reapply for any subsequent plan year (prior to January 1, 2014) in accordance with future guidance from HHS.  The Bulletin also notes that HHS may modify the waiver application process based on the information it receives under the waiver program.  

What information must be included in the waiver application?

The following information must be included in the application:

• The terms of the plan or policy form(s) for which a waiver is sought;
• The number of individuals covered by the plan or policy form(s) submitted;
• The annual limit(s) and rates applicable to the plan or policy form(s) submitted;
• A brief description of why compliance with the IFR would result in a significant decrease in access to benefits for those currently covered by the plans or policies, or a significant increase in premiums paid by those covered by such plans or policies, along with any supporting documentation; and
• An attestation, signed by the plan administrator or Chief Executive Officer of the insurer issuing the coverage, certifying 1) that the plan was in force prior to September 23, 2010; and 2) that the application of restricted annual limits to the plans or policies would result in a significant decrease in access to benefits for those currently covered by such plans or policies, or a significant increase in premiums paid by those covered by such plans or policies.

The plan administrator or Chief Executive Officer of the insurer also is required to retain documents in support of the application for potential examination by HHS.

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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html  

Contributors:

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.