Changes to PPACA Waiver Procedures
On June 17, 2011, the Department of Health and Human Services (“HHS”) issued new guidance regarding the waivers from the annual limit restrictions that are available under the Patient Protection and Affordable Care Act (“PPACA”). It is available at the waiver website: http://cciio.cms.gov/programs/marketreforms/annuallimit/index.html.
Note: This new guidance makes significant changes to the procedural aspects of the waiver program. The substantive requirements for waivers (e.g., what plans need to request a waiver, what thresholds must be met, etc.) remain the same. We addressed the substantive requirements for health reimbursements arrangement (“HRA”) waivers in a prior Client Alert available https://www.hitesmanlaw.com/news_events/alert_101103.shtml.
Background. PPACA prohibits most group health plans from imposing annual limits on “essential health benefits.” This annual limit prohibition is being phased in over a three (3) year period ending with 2014. During that time, restricted annual limits (in three increasing amounts) on essential health benefits may be retained. Beginning with the first plan year beginning on, or after, January 1, 2014, plans must be fully compliant with PPACA requirements that prohibit annual limits on “essential health benefits,” regardless of whether they have obtained a waiver as described below.
Waiver Program. HHS established the waiver program in September 2010. Certain plans for which compliance with the restricted annual limits would (1) cause a loss of benefits, or (2) cause a significant increase in the cost of benefits, may request a waiver from the annual limit restrictions. Examples include mini-med plans, limited benefit plans, and certain HRAs that are not otherwise exempt from the annual limit restrictions under existing guidance. Under the original program, waivers were valid for only one plan year. Plan sponsors were required to re-apply for a waiver each new plan year starting prior to January 1, 2014.
Many plans that are not able to comply with the restricted annual limits have applied for and received waivers through the program, including several hundred HRAs. [For a list of waivers approved as of March 4, see http://cciio.hhs.gov/resources/files/hra_03042011.pdf.]
Changes to Waiver Program. The June 17th guidance significantly changes the procedural aspects of the original waiver program. Although waivers are still available for all plan years beginning prior to January 1, 2014, the process and requirements for obtaining the waiver and the obligations of plans that have received a waiver have changed.
Extensions of Existing Waivers. Plans that received waivers prior to June 17, 2011, must apply for an extension of the waiver by September 22, 2011. HHS began accepting applications for extension on June 24, 2011. An application form and instructions for completing and filing the application for an extension are available at the waiver website: http://cciio.cms.gov/programs/marketreforms/annuallimit/index.html.
If the extension is granted, the waiver as extended will be valid through the end of the last plan year beginning prior to January 1, 2014. In other words, there is no longer a requirement to re-apply for the waiver for each subsequent plan year. However, there is a new annual reporting requirement, which is described below.
New Applications. Under the guidance, HHS will cease accepting new applications for waivers on September 22, 2011. Any plan that wishes to obtain a waiver and has not already done so must submit an application on or before that date.
Note: This includes plans that should have requested a waiver in the past. If obtained under this portion of the guidance, the waiver would relate back to first plan year for which the plan should have requested a waiver (e.g., the plan year beginning on, or after, September 23, 2010, and before September 23, 2011).
An application form and instructions for completing and filing the application are available at the waiver website: http://cciio.cms.gov/programs/marketreforms/annuallimit/index.html.
If a new application for a waiver is granted, it will be valid through the end of the last plan year beginning prior to January 1, 2014. In other words, there is no longer a requirement to re-apply for the waiver for each subsequent plan year. However, there is a new annual reporting requirement, which is described below.
Note: The status of waiver applications pending on June 17th is unclear. The guidance indicates such applicants are treated as new applicants, which means if the waiver is granted it will be valid through the end of the last plan year beginning prior to January 1, 2014 (without having to request an extension). However, it is unclear whether such applicants will be required to supplement their applications with the new application form that must be used by those submitting new applications after June 17th. Stay tuned for additional guidance in this area.
Annual Updates. Any plan that either (1) receives an extension of an existing waiver, or (2) receives an initial waiver after June 17th, must file with HHS “annual limit updates” for each subsequent year. Such updates are due by December 31, 2012, and December 31, 2013. At this time, it appears that the waiver extension application form will be used for this purpose.
Annual Notices. The new guidance requires plans that have received waivers provide an annual notice to plan participants. The notice must be provided along with or as part of plan or policy materials that describe the terms of coverage (e.g., SPDs) for each plan year for which the waiver applies. Model language for such notice is included in the new guidance. Unlike most model language, this model language must be used unless written permission is obtained from HHS to use different language.
Note: Plans that received waivers on or before June 17, 2011, are not required to comply with the new annual notice requirements with respect to the current plan year. They must comply with the notice requirements contained in the original HHS guidance. However, for future plan years (e.g., those beginning on or after September 23, 2011), these plans must comply with the new notice requirements.
Record Retention. The guidance indicates that HHS has authority to audit the records of all waiver recipients to ensure data submitted in the waiver or extension application was accurate. All waiver applicants must retain records necessary to support the information contained in their applications.
Action Items. In light of this new guidance, employers sponsoring group health plans should take the following steps:
- Determine which plans are subject to the annual limit restrictions. If the employer sponsors an HRA, the employer should consult with its counsel regarding whether the HRA may be subject to the restrictions.
- Identify which of those plans may qualify for a waiver.
- If a waiver has not been previously requested for the plans identified in steps 1 and 2, apply for a waiver (using the new application procedures) by no later than September 22, 2011.
- If approved, the waiver is valid through the end of the last plan year beginning prior to January 1, 2014.
- If a waiver has already been obtained for the plans identified in steps 1 and 2, apply for an extension of that waiver by no later than September 22, 2011.
- If approved, the waiver is valid through the end of the last plan year beginning prior to January 1, 2014.
- If a waiver has been previously requested for the plans identified in steps 1 and 2, but as of June 17th, the application was still pending, recognize there are issues regarding whether additional steps may be needed to obtain a waiver through 2014 and when the annual notice requirements first apply. Watch for future guidance and/or communication from HHS regarding these issues.
- If a new waiver or an extension is obtained, distribute annual notices using the “model language” and file the annual limit updates as required.
Please contact us if you have any questions or if you need assistance with any of the foregoing action items.
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The information contained in this ALERT is intended for general information purposes only and does not constitute legal advice relative to a specific situation.