December 7, 2010
Q: Has the Obama administration allowed corporations to "opt out" of the new health care law?
A: No. The government has granted more than 200 waivers, but these merely give companies a temporary delay before being required to improve the coverage of cheap, bare-bones plans they currently offer.
FULL QUESTION
Is the federal govt giving out "opt out" waivers for health care mandates to either individuals or corporations? I saw a post on [Facebook] that stated the above and someone said 111 waivers have been given out.
This is the post I saw:
How come a lot of Obama’s buddies are quiet about the impact of Obamacare? Because he gave them a waiver to opt out. If Obamacare is so great for the economy and the workers, why is the White House approving opt-out waivers?
FULL ANSWER
We’ve received several questions about whether businesses have been able to opt out of the new health care law. The companies haven’t been granted permission to ignore the entire law, as the Facebook post quoted by our reader might suggest — but many have been given one-year waivers to delay compliance with a key insurance mandate that was put into place this fall. The White House says it instituted the waiver process to enable those companies to continue to provide limited-benefits plans — cheap, bare-bones policies called mini-med plans — until the law is fully implemented in 2014.
White House Press Secretary Robert Gibbs said in an Oct. 7 press briefing:
Gibbs: We want to ensure that in the time that it takes to implement the law and to give people better options, that they don’t find themselves at the mercy of an insurance company jacking up their rates.
Mini-med plans are used by both small and large employers, such as McDonald’s and other restaurant companies, for low-income and part-time employees. These health plans have very limited benefits for very low monthly premiums — employees pay about $20 to $30 per month, according to Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, an industry trade association.
A mini-med plan’s basic benefits might include a prescription drug discount card and coverage for doctor’s visits. These plans can also include surgical and hospitalization benefits, but they usually include dollar limits on coverage, which can be as low as under $100 per day or more than $250,000 for the year, according to an Aug. 13 Kaiser Health News article. A McDonald’s executive said at a Dec. 1 Senate hearing that the annual caps in its mini-med plans range from $2,000 to $10,000.
The new health care law aims to eliminate low annual coverage caps like those over time, and this is where the waiver issue has come in. The law says that annual coverage limits can’t be set lower than $750,000 for new policy years starting between Sept. 23, 2010 and Sept. 23, 2011. That cap will be raised each year until 2014, when the law will require companies to have no annual spending limits on most benefits in health care plans.
Government agencies estimate that nearly 1.7 million people are on plans that have been affected by the new regulation — plans with annual limits of less than $750,000 this year.
Waivers Granted
But, as of Dec. 3, the federal government had approved a total of 222 one-year waivers that allow the insurance plans at companies like McDonald’s, Jack in the Box and Ruby Tuesday, and unions, to ignore the requirement on annual limits. Far from being "Obama’s buddies," as the Internet post claimed, the restaurant industry, through the National Restaurant Association, opposed the legislation.
Companies seeking these waivers claimed the limit regulation would force significant hikes — in some cases, even a 100 percent increase — in premiums, according to an Oct. 6 New York Times article. AHIP’s Zirkelbach told us the regulation could cause seasonal, part-time or temporary workers that are typically covered by limited-benefits plans to lose all of their coverage.
The companies that have been approved for the waivers must reapply for them next year. Waivers are available until 2014.
But mini-med plans are controversial. While they do provide some benefits, critics say they provide only the illusion of insurance coverage. Workers who have an accident or an illness can quickly exceed daily or annual coverage limits and find themselves facing hefty medical bills. At the Dec. 1 Senate hearing on the subject, titled "Are Mini Med Policies Really Health Insurance?," Democratic Sen. Jay Rockefeller of West Virginia said consumers aren’t aware that the plans won’t cover the cost of a major illness. "They don’t have the kind of comprehensive health insurance that protects you from financial ruin if you get sick. … These policies give people a false sense of security; they let them think they have health insurance when they really don’t," he said.
Rockefeller has vowed to subject these plans to “close scrutiny" if companies request exemptions from the health care law’s requirements.
And the annual limit provision isn’t the only aspect of the law that companies with mini-med plans have protested. Beginning next year, insurers also will be required to spend 80 percent to 85 percent of premiums on medical care, and no more than 15 percent to 20 percent on administrative costs. This ratio is called a medical loss ratio, or MLR. Businesses with mini-med plans said those policies couldn’t possibly meet the MLR requirements. McDonald’s said its insurance company would not be able to offer the mini-med plans if it were forced to follow the law, according to a Sept. 30 Wall Street Journal article. The Journal reported that McDonald’s sent a memo to federal officials saying: "Having to drop our current mini-med offering would represent a huge disruption to our 29,500 participants" and that doing so "would leave many without an affordable, comparably designed alternative until 2014." (McDonald’s later said it was not planning on dropping coverage. And a company executive also said the company’s plans had an 86 percent MLR recently.)
But the initial complaints prompted the Department of Health and Human Services to issue special MLR rules as well, saying that mini-med plans would be able to double their medical costs in calculating their MLRs in 2011. Companies will also have to send quarterly reports to HHS to help the agency determine what to do in coming years.
What Happens in 2014?
HHS may have expanded the lives of these mini-med plans, but they’re not expected to be around beyond 2014, when the law is fully implemented. Steve Larsen, deputy director of HHS’ Office of Consumer Information and Insurance Oversight, acknowledged that "these plans are going to disappear," in a Nov. 25 article in Inside CMS, a health policy publication.
Instead, workers who have these limited plans now will be able to buy their own coverage through state-based exchanges. And low- and mid-income individuals (earning up to 400 percent of the federal poverty level) can receive premium credits and subsidies to help them do that. Plus, in 2014, the law expands eligibility for Medicaid so that those under the age of 65 earning up to 133 percent of the federal poverty level — that’s $14,400 in 2010 for an individual — will qualify for coverage.
Meanwhile, companies like McDonald’s will be subject to more requirements. Businesses that provide insurance and have more than 50 employees will have to pay a fine under the new law of $3,000 for each full-time worker who receives a tax credit to buy insurance through the exchanges. Also, companies will be required to give vouchers for exchange plans to lower-income workers who spend over 8 percent but under 9.8 percent of their income on premiums.
But until 2014, the Obama administration is granting leeway to companies that offer less-than-comprehensive coverage for their employees. Zirkelbach, with America’s Health Insurance Plans, said that the establishment of the waiver process "shows that these regulations have the potential to be very disruptive." If the new mandates go into effect without a certain transition period, he added, "you’re going to create a shock to the system."
– Lara Seligman and Lori Robertson
Sources
National Association of Insurance Commissioners. "Limited Benefit Plans, High Deductible Plans and Health Savings Plans: Contemplating Options When Comprehensive Health Insurance Isn’t Available to You." Jan 2010.
HR and Employment Law White Papers. "Can’t Afford Insurance? Try a Mini-Med Plan." HR.BLR.com. 9 May 2007, accessed 30 Nov 2010.
"Press Briefing by Press Secretary Robert Gibbs." Press release. The White House Office of the Press Secretary. 7 Oct 2010.
Appleby, Julie. "Health Insurance Debate: Is A Little Coverage Better Than None At All?" Kaiser Health News. 13 Aug 2010.
U.S. Department of Health and Human Services. "The Affordable Care Act: Eliminating Limits on Your Benefits." 23 Sept 2010.
Federal Register. "Patient Protection and Affordable Care Act: Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections." 28 June 2010.
U.S. Department of Health and Human Services. "Approved Applications for Waiver of the Annual Limits Requirements of the PHS Act Section 2711 as of December 3, 2010." 3 Dec 2010.
U.S. Department of Health and Human Services. "Insurance Standards Bulletin Series: Information." 3 Sept 2010.
Abelson, Reed. "Waivers Aim at Talk of Dropping Health Coverage." The New York Times. 6 Oct 2010.
Abelson, Reed. "Tackling Mini-Med Policies." Blog post. The New York Times. 23 Nov 2010.
"New Affordable Care Act rules give consumers better value for insurance premiums." Press release. U.S. Department of Health and Human Services. 22 Nov 2010.
U.S. Department of Health and Human Services. "Regulations and Guidance."
Adamy, Janet. "McDonald’s May Drop Health Plan." The Wall Street Journal. 20 Sept 2010.
"Response to WSJ Health Care Article." Press release. McDonald’s.
Adamy, Janet. "Senators Attack McDonald’s Health Plan." The Wall Street Journal. 1 Dec 2010.
"MLR Rule Stops Short Of Waiver For Mini-Meds, Hews Closely To Draft." Inside CMS. 25 Nov 2010.
Focus on Health Reform. "Explaining Health Reform: Benefits and Cost-Sharing for Adult Medicaid Beneficiaries." The Henry J. Kaiser Family Foundation. Aug 2010.
Focus on Health Reform. "Summary of New Health Reform Law." The Henry J. Kaiser Family Foundation. 26 Mar 2010.
