The Patient Protection and Affordable Care Act (Affordable Care Act), requires the Secretary of Health and Human Services (HHS) to impose restrictions on the imposition of annual limits on the dollar value of essential health benefits in a new or existing group health plan for plan years beginning on or after September 23, 2010 and prior to January 1, 2014. Interim final regulations published on June 28, 2010, established these restricted annual limits, along with the possibility for a waiver from these restricted annual limits as granted by HHS if complying with the interim final regulations would result in a significant decrease in access to benefits or a significant increase in premiums.


On September 3, 2010, HHS provided some initial guidance on the waiver process.  On November 5, 2010, HHS updated that guidance, the provisions of which applicable to group health plans are summarized below. Plans seeking a waiver should be sure to make their best case and, if granted, implement as appropriate.


Notice Requirement. As a condition of receiving a waiver of the annual limits requirements, group health plans must notify each participant that the plan does not meet the restricted annual limits for essential benefits set forth in the interim regulations due to the waiver obtained by the plan. Notice requirements: 

·        Include the dollar amount of the annual limit along with a description of the plan benefits to which it applies.

·        Prominently display the notice in clear, conspicuous 14-point bold type.

·        State the waiver applies for only one year.

·        HHS will soon be issuing a model notice language for health insurance issuers which will be posted on the website in the near future at:


Factors Considered. HHS has stated that all applications will be reviewed on a case-by-case basis. However, the Bulletin lists several factors that may be considered as each application is reviewed to determine whether compliance with the interim regulations would result in a “significant decrease in access to benefits” or a “significant increase in premiums.” The Bulletin sets out the following factors:


  • The application’s explanation as to how compliance with the restriction on annual limits would result in a significant decrease in access to benefits.
  • The policy’s current annual limits. Higher annual limits would be more likely to experience lower premium increases to comply with the restricted annual limit requirement than plans with lower limits.
  • The change in premium in percentage terms. The lower the percentage increase to comply, the less likely compliance with the restricted annual limit requirement would be found to be “significant.”
  • The change in premium in absolute dollar terms. A large percentage increase may only translate to a small increase in absolute dollar terms and therefore may not be “significant.”
  • The number and type of benefits affected by the annual limit. Some policies have limits on only some essential health benefits, such as prescription drugs, and may not significantly increase the overall cost of health insurance for enrollees.
  • The number of enrollees under the plan seeking the waiver.  

Mini-Med Policies and Medical Loss Ratio Requirement.  Because the premium and cost structure of mini-med policies create significant challenges for those plans in regard to satisfying the medical loss ratio requirements, expect to see medical loss ration regulations addressing, among other things, a special methodology that takes into account the special circumstances of mini-med plans in determining how administrative costs are calculated for medical loss ratio purposes.


Record Retention and Audits. As a condition for obtaining a waiver, HHS retains audit authority over applicants. In the event of an audit, if it is determined that the data submitted to HHS in support of a waiver contain material mistakes or omissions, HHS may in its discretion deny future waiver requests.