Affordable Care Act Waivers Update

Affordable Care Act waivers have come into several recent conversations, and I think there is some confusion out there. Thousands of large companies have submitted waiver applications to the Department of Health and Human Services since 2010, and most who have submitted applications received the waiver.  I believe there’s some common misconceptions that this is a waiver to avoid compliance with the Affordable Care Act provisions and I want to touch briefly on just what the waivers are for?

The Affordable Care Act will eliminate annual dollar limits on benefits in 2014 and to meet the requirements, many insurance plans began phasing out annual limits as early as 2010. The law will restrict the sale of plans with low annual limits as early as 2014. The phase out for individual coverage plans:

  • $750,000: for a plan year or policy year starting on or after September 23, 2010 but before September 23, 2011.

  • $1.25 million: for a plan year or policy year starting on or after September 23, 2011 but before September 23, 2012.

  • $2 million: for a plan year or policy year starting on or after September 23, 2012 but before January 1, 2014.

This created an issue for large employers who employ many part time employees. Many employers offer very limited “Mini-med” plans with low annual benefit limits. These plans are typically offered in high turnover environments with part time workers to make coverage costs feasible for the employer and the employee. As the annual limits increased, many employers were faced with increasing premiums to accommodate the annual limit increases. Fearing that many employers would drop current health coverage to avoid costly premium increases, the Affordable Care Act provided a process to submit and grant waivers to these companies until Affordable Insurance Exchanges were created in 2014 to provide other affordable individual coverage options.

Thousands of waivers have been granted and some have been denied, but no one really knows why some have been granted and others have had their applications turned down. Union employers received the lion share of the waivers granted along with large fast food and service industries. The department of Health and Human Services touted the Affordable Care Act as having“flexibility”. As we move into 2014 we’ll have to see if “flexibility” turns into “inconsistency”. It will be interesting to see if employers without the voice of unions and industry giants are offered the same flexibility as provisions are implemented.