The Truth About Health Care Waivers

In recent days, there has been some confusion about the ability for businesses and insurance plans to receive blanket waivers from following the new consumer-focused rules of the road in the Affordable Care Act – the health reform law.  As we continue to move forward with implementation, and work with the business community, insurance industry, state leaders, consumers and everyone else with a stake in improving our health care system, it is important that we set the record straight.  

Here are the facts:

Today, over 165 million Americans get their health insurance through an employer—comprising nearly 70 percent of America’s insured population.  Employers offer health insurance as a way to attract the best and brightest candidates in the work force.   Employer-based insurance is the most common and efficient source of insurance coverage, which is why the Affordable Care Act takes steps to strengthen the employer-sponsored insurance market and make it easier and affordable for businesses to offer coverage to their workers.

However, not all coverage offered by employers is the same.  Employers who hire full time middle to high income workers tend to offer more comprehensive plans that cover essential health benefits (hospital care, physician visits, preventive services, among others) and provide sufficient security against financial risk of illness and accidents for their employees.  These employers offer more comprehensive coverage because workers are more likely to be able to pay their share of the premium. Workers at these firms are also more likely to work at the company for an extended period of time, making it good business sense for employers to invest in their workers’ long-term health since good health is linked to increased productivity. The law ensures this system continues, while helping to lower health care costs and providing financial support for employers who offer coverage to their retirees too young for Medicare through the Early Retiree Reinsurance Program.

Unfortunately, many workers don’t have this kind of quality coverage. Employers who hire lower wage, part time or seasonal workers are more likely to offer limited benefit plans.  Retail or chain restaurant employers frequently offer limited benefit plans that contain less comprehensive coverage and annual dollar limits on how much workers can receive in health coverage. The premiums for these limited benefit policies (known as mini-meds) are significantly lower than for policies with comprehensive coverage and are more affordable for lower wage workers and their families. In exchange for the low premiums, these policies generally come with high deductibles and annual dollar caps as low as $2,000.  In addition, in many cases, employees are paying the full cost of the insurance policy, with no help from their employer. 

The good news is that mini-meds will be eliminated in 2014, thanks to provisions that phase out insurance companies’ use of annual limits between now and 2014.   The “phase out” has already begun to kick in, and in 2014 when annual limits are completely eliminated, consumers be able to purchase health insurance in state-based Exchanges -- new competitive marketplaces – where consumers and small businesses can shop for private coverage and will have the market power similar to large employers.

The bad news is that today mini-meds are often the only affordable option for many low-wage workers because retail and chain restaurants rarely offer their workers options beyond these plans.  And because mini-meds are built around annual limits, estimates from employers and insurers indicate that beginning the phase out of annual limits this year would cause mini-med premiums to rise by more than 200 percent, forcing employers to drop coverage and sending many low-wage workers to purchase insurance on the more expensive individual insurance market, where they would get an even worse deal than what they have today.  The result would be a whole new population of uninsured Americans.  

To ensure that we protect the coverage that these workers have today until better options are available for them in 2014, the law allows HHS, in extreme cases, to issue temporary waivers from the phase out of annual limits. There are some important facts to remember about these temporary waivers:

• The waivers only apply to one provision of the law – the provisions phasing out annual limits. Insurance companies and employers that receive waivers must comply with all other parts of the Affordable Care Act.

• The waivers last one year. Insurance companies must reapply for the waivers each year between now and 2014 when annual limits on coverage will be completely prohibited  and individuals will have more affordable and better private insurance choices in the competitive Exchange markets.

• All employers and insurers that offer mini-med plans may apply for a waiver if they demonstrate that there will be large increases in premiums or a significant decrease in access to coverage without a waiver. You can read a list of employers and insurers that have received waivers here.

HHS also took an additional step to ensure these workers know more about mini-med policies and the limited coverage they may be buying. The Administration is requiring the issuers of limited benefit plans to notify consumers in plain language that their plan offers extremely limited benefits and direct them to www.HealthCare.gov, where they may be able to find better coverage options. The Administration has also restricted the sale of new mini-med policies, except under some limited circumstances. You can read more about this new announcement here.

We’re committed to implementing the Affordable Care Act quickly and carefully, and as we do, we’re building a bridge to 2014 when Americans will have access to affordable, quality health care options.

Stephanie Cutter is Assistant to the President for Special Projects