June 22, 2011
Annual Limit Waiver Process Ending; Plans May Apply for Extensions of Existing Waivers
On June 17, 2011, the Center for Consumer Information and Insurance Oversight (CCIIO) in the Department of Health and Human Services (HHS) issued Supplemental Guidance (CCIIO 2011-1D) (“Guidance”)1 that announced that the annual limit waiver program under the Affordable Care Act,2 which began in 2010, would cease accepting applications for waivers on September 22, 2011. The Supplemental Guidance also discussed how plan sponsors that had received waivers could get them extended.
In addition to the Guidance, CCIIO issued new “Technical Instructions for the Waiver Extension and Waiver Application Process.”3 The Technical Instructions provide detailed step-by-step rules as to how to apply for a waiver and/or an extension under the updated process. The CCIIO stopped accepting waiver applications based on prior CCIIO application forms as of June 17, 2011.
Background: The Annual Dollar Limits and the Waiver Program
The Affordable Care Act prohibits annual dollar limits on essential benefits for plan years beginning on or after January 1, 2014. Prior to 2014, plans are permitted to have restricted annual dollar limits. These limits are as follows:
- $750,000 for plan years beginning on or after September 23, 2010, but before September 23, 2011,
- $1.25 million for plan years beginning on or after September 23, 2011, but before September 23, 2012, and
- $2 million for plan years beginning on or after September 23, 2012, but before September 23, 2013.
The Affordable Care Act permitted plans to request a waiver of these annual limits rules if compliance would result in a significant decrease in access to benefits under the plan or a significant increase in premiums. The annual dollar limits and the waiver program were announced in a previous rule that was issued in July 2010.4 Follow-up guidance about the implementation of the waiver program, including the application process, was issued on September 3, 2010, November 5, 2010 and December 9, 2010.5
The purpose of the waiver program is to provide needed short-term relief to plans that have annual limits below the Affordable Care Act restricted annual dollar limit amounts, which were applicable for plan years beginning on or after September 23, 2010.6 The waivers are designed to ensure that individuals with certain coverage, including coverage under limited benefit or mini-med plans, will not be denied access to needed services or experience a significant increase in premiums.
Since the waiver program was implemented, plan sponsors have obtained waivers for a variety of benefit plans, including minimum-benefit plans, plans with annual maximums on a specific essential benefit (e.g., a prescription drug annual maximum) and plans with health reimbursement arrangements (HRAs). Many plan sponsors that sponsored HRAs applied for waivers because existing regulations have not yet provided guidance on how certain HRAs will be treated under the Affordable Care Act. Insurers also received waivers for certain insured minimum-benefit plans.
The new CCIIO process will allow plans with existing waivers to extend them. However, any Plan that seeks an extension or is considering a waiver application but has not yet applied must do so immediately in order to meet the September 22, 2011 deadline.
Plans with Existing Waivers May Extend Them
Beginning June 24, 2011, CCIIO will begin accepting elections for Waiver Extensions for those plans that have applied for and been granted a waiver prior to June 17, 2011. An existing waiver recipient must submit a complete spreadsheet entitled “Annual Limit Waiver – Waiver Extension” (“Waiver Extension Form”) by September 22, 2011, in order to receive the extension.7 An attestation signed by the plan administrator is also required, and the required attestation language is set out in the Technical Instructions. However, the process appears to be simpler than the current waiver application process.
If the plan receives the extension, then the waiver is extended until January 1, 2014. While the Guidance is not clear, the extension should be available until the first plan year that begins on or after January 1, 2014, for non-calendar year plans. The Technical Instructions state that once the extension is filed, the waiver will be considered granted, unless CCIIO contacts the plan. No letter of acknowledgment will be issued with regard to the extension.
Thereafter, plan sponsors that wish to extend their Waiver until 2014 will have to submit an Annual Limit Update, which includes the same information as is provided on the Waiver Extension Form. In particular, the first Annual Limit Update must be submitted by December 31, 2012, and the second Annual Limit Update must be submitted by December 31, 2013.
Plans that obtain a waiver are subject to audit of the data submitted by the plan supporting the application. HHS may withdraw the waiver if the plan does not provide accurate information.
Plans Applying for New Waivers After June 17, 2011
Beginning June 24, 2011, CCIIO will accept new waiver applications for those plans that had not applied for or been granted a waiver prior to June 17, 2011. A new waiver applicant must submit a complete spreadsheet entitled “Annual Limit Waiver – New Application” by September 22, 2011, in order to receive the waiver.8 An attestation signed by the plan administrator is also required, with the required attestation language in the Technical Instructions. The process for a new waiver appears to be similar to that currently in effect.
The Annual Update and audit requirements described with respect to extensions also apply to new waivers.
The Technical Instructions contains a series of questions and answers about the filing process and deadlines, which should be reviewed before a Waiver Extension or new application is filed.
Summary of Deadlines
The table below summarizes the waiver deadlines:
|Summary of Deadlines
|New Waiver Applications||
|June 24, 2011||CCIIO begins accepting new application forms||CCIIO begins accepting elections for waiver extensions|
|September 22, 2011||Deadline to submit a new application form||Deadline to submit a waiver extension form|
|December 31, 2012||Deadline to submit a first annual limit update||Deadline to submit a first annual limit update|
|December 31, 2013||Deadline to submit a second annual limit update||Deadline to submit a second annual limit update|
Guidance on Notice Requirement for Plans that Receive a Waiver
Plans that receive a waiver of the annual limits rule must send a notice to each participant in the plan that the plan does not meet the restricted annual limits for essential benefits under the Affordable Care Act because it has received a waiver of the requirement. The notice must include the dollar amount of the annual limit along with a description of the plan benefits to which it applies, and will be required to be prominently displayed in clear, conspicuous 14-point bold type on the front of the materials.
The Supplemental Guidance extends this notice requirement and makes it an annual one. The annual notice must be provided to plan participants for each plan year for which the waiver applies. The Guidance provides model notice language.
Implications for Group Health Plans
Plans no longer need to apply for a waiver each year, but the new Guidance places significant responsibility on plan sponsors to:
- Apply for a new waiver or extension prior to September 22, 2011,
- Provide the CCIIO with annual updates on the plan,
- Send participants an annual notice about the waiver, and
- Retain supporting information to respond to an audit (if necessary).
The waiver program has been critically important to help group health plans transition to the new Affordable Care Act annual limit mandates. Plan sponsors should assure that they are in compliance with the waiver rules, but should also prepare for 2014, when annual limits will no longer be permissible.
A recent letter to Congress by the Government Accountability Office (GAO) found that those plans granted waivers of annual limits generally would have experienced a premium increase of at least 10 percent if they had been forced to implement the new annual limits.9 Consequently, losing the waivers could prove costly. Plan sponsors should consider steps such as redesigning limits on individual essential benefits or obtaining stop-loss insurance as necessary to address the additional costs associated with removing the annual limits.
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As with all aspects of laws and regulations, plan sponsors should seek guidance from legal counsel when applying for a waiver. Sibson Consulting can be retained to work with plan sponsors and their attorneys develop their waiver application or extension request.
- The Supplemental Guidance is available on the CCIIO website. (Return to the Capital Checkup.)
- The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)
- The Technical Instructions for the Waiver Extension and Waiver Application Process is available on the CCIIO website. (Return to the Capital Checkup.)
- For information about that guidance, refer to Sibson's July 2010 Bulletin, “Latest Agency Regulations Address the Affordable Care Act's Rules for Group Health Plans.” For more information about the limits, refer to Sibson's May 2010 Health Care Reform Insights, “Prohibition on Lifetime and Annual Limits.” (Return to the Capital Checkup.)
- The September 3, 2010 guidance, the November 5, 2010 guidance and the December 9, 2010 guidance are available on the HHS website. (Return to the Capital Checkup.)
- Guidance on the waiver program, which was issued on September 3, 2010 and is available on the HHS website, was discussed in Sibson Consulting's September 8, 2010 Capital Checkup, “Guidance on Annual Limit Waivers Released.” (Return to the Capital Checkup.)
- The “Annual Limit Waiver – Waiver Extension” spreadsheet can be accessed from the CCIIO website. (Return to the Capital Checkup.)
- The “Annual Limit Waiver – New Application” spreadsheet can be accessed from the CCIIO website. (Return to the Capital Checkup.)
- The June 14, 2011 letter is available on the GAO website. (Return to the Capital Checkup.)
Capital Checkup is Sibson Consulting's periodic electronic newsletter summarizing activity in Washington with respect to health care and related subjects. Capital Checkup is for informational purposes only. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.