Wave goodbye to waivers

The Centers for Medicare and Medicaid Services (CMS) has announced that, after September 22, 2011, no new applications (or requests for extensions) for waivers from the annual limit restrictions under the Patient Protection and Affordable Care Act will be considered.

Additionally, any plans receiving these waivers will have to alert consumers that the plan has restrictive coverage, including low annual limits that could result in high out-of-pocket spending if you need hospital or other high-cost services.

In 2014, annual limits for new health plans will be banned as high-quality, affordable, and comprehensive health insurance plans are made available through Health Insurance Exchanges. Until then, annual limits are phased out in order to preserve access to needed benefits and the affordability of coverage. CMS has granted temporary waivers from the annual limits provision of the law for plans that demonstrate that compliance with the phase-out of limits would result in a significant decrease in access to benefits or a significant increase in premiums.

Plans with low annual limits (e.g., $10,000) are most likely to need waivers to prevent a significant increase in premiums or decrease in access to coverage to comply with the current limit of $750,000. Many of these plans have already received a waiver. Plans with higher annual limits are less likely to qualify for a waiver because complying with the new rules is unlikely to lead to a significant increase in premiums or decrease in access to care. Still, the policy gives all plans and issuers with restricted annual limits below $2 million a reasonable opportunity to apply for a waiver.

“In 2014, thanks to the Affordable Care Act, all Americans will have access to high-quality, affordable, and comprehensive health insurance,” said Steve Larsen, Director of the Center for Consumer Information and Insurance Oversight, which oversees the program at CMS. “Mini-med plans do not provide comprehensive health coverage but unfortunately they are the only insurance options some consumers have today. These waivers have ensured that over 3 million people, 2 percent of all privately insured Americans, can keep the limited coverage they have as we transition to a better insurance marketplace.”

This guidance imposes new, more stringent disclosure requirements and requires health plans with waivers to tell consumers that their health care coverage is subject to an annual dollar limit lower than what is allowed under the law. Insurers also must include the dollar amount of the annual limit along with a description of the plan benefits to which the limit applies. Plans also must show how the annual limit would affect a consumer who was hospitalized to help people understand how far their coverage will reach if they become seriously ill. Finally, plans with waivers must attest annually to their compliance with the consumer disclosure requirement.

In addition, CMS has released updated lists of insurance plans whose applications for a waiver have been approved or denied. That information is available by city and state at cciio.cms.gov/resources/files/approved_applications_for_waiver.html.

As the health law required, in September 2010, insurance plans began phasing out their annual limits. Today, most plans cannot impose an annual limit that is lower than $750,000. Beginning in September, that allowable limit increases to $1.25 million and to $2 million for plan years beginning in September 2012. Some plans currently have annual limits above $750,000 and below $2 million. Actuarial analysis suggests that most of these plans can meet the increased annual limit of $1.25 million with minimal premium increases (less than one percent). Similarly, increasing annual limits from $1.25 million to $2 million the following year is predicted to have a small impact on premiums.