Private Health Insurance:

Waivers of Restrictions on Annual Limits on Health Benefits

GAO-11-725R: Published: Jun 14, 2011. Publicly Released: Jun 14, 2011.

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The Patient Protection and Affordable Care Act (PPACA), which became law in March, 2010, generally prohibits health insurance issuers and group health plan sponsors from imposing annual limits on the dollar value of "essential" covered health benefits beginning on January 1, 2014, but allows restricted annual limits, as defined by the Secretary of Health and Human Services (HHS), on the value of those benefits until that time. In setting these annual limits, HHS is statutorily required to ensure that individuals' access to needed services remains available with a minimal impact on plan premiums. In June 2010, HHS set restrictions on annual limits for each plan year from September 2010 through December 2013. To mitigate a potential impact on individuals' access or premiums for existing plans with benefit limits below these amounts, HHS established a waiver program based on the statutory requirement. Under the program, issuers or other group health plan sponsors could apply for a waiver from the annual limits set by HHS if they attested and presented evidence that meeting the annual limits would result in diminished access to benefits or a significant increase in premiums. To implement various provisions of PPACA, including those related to annual limits, HHS created what is now called the Center for Consumer Information and Insurance Oversight (CCIIO). CCIIO is now a part of the Centers for Medicare & Medicaid Services (CMS). The Department of Defense and Full-Year Continuing Appropriations Act for Fiscal Year 2011 directed GAO to report on annual limit waiver requests. Specifically, we examined (1) the number of applications that CCIIO received for an annual limit waiver and how many of these were approved or denied and (2) the reasons provided by CCIIO for approvals and denials of annual limit waivers.

We found that as of April 25, 2011, CCIIO received a total of 1,415 applications for a waiver of restrictions related to annual limits on health benefits, and approved most of these applications. For 1,347 of the applications, or over 95 percent, CCIIO approved waivers covering all plans in the applications. For another 25 applications, CCIIO approved waivers for some plans and denied waivers for others within the same application. CCIIO denied waivers covering all plans in 40 applications. Three applications were pending at the time of our review. Approximately 3 million people were covered in approved plans and approximately 153,000 people were covered in denied plans. The total number of people covered in the approved plans represents about 2 percent of people covered by private health insurance plans in 2009. CCIIO granted waivers on the basis of an application's projected significant increase in premiums or significant reduction in access to health care benefits. According to CCIIO officials, applications with a projected premium increase of 10 percent or more tended to be approved while applications with a projected premium increase of 6 percent or less tended to be denied. Applications with a premium increase between 7 and 9 percent warranted additional staff reviews to determine if the application met the agency's criteria. In corroboration, among our 5 percent sample of approved applications, we found that CCIIO granted waivers mostly for applications that projected the annual limit restriction would result in a significant premium increase of more than 10 percent, in addition to a significant decrease in access to benefits. Conversely, most of the denied applications projected a premium increase of 6 percent or less. In reviewing a draft of this report, HHS provided technical comments, which we incorporated as appropriate.

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