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Life Health > Health Insurance > Health Insurance

Mini-Med Plans: Noose Now a Little Loose

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Sellers of limited-benefit medical plans say they need more flexibility from the Office of Consumer Information and Insurance Oversight (OCIIO).

Steve Larsen, the OCIIO oversight office director and a former Maryland insurance commissioner, has described the limited-benefit plan annual benefits limit waiver program in a recent insurance standards bulletin.

A group health plan or health insurance issuer can apply for a waiver from the new federal restrictions on annual major medical plan benefits limits if the plan was offered before Sept. 23, 2010, for a plan or policy year beginning between Sept. 23, 2010, and Sept. 23, 2011, Larsen says.

Larsen says the waiver application should include:

- The annual limits and rates applicable to the plan or policy forms submitted.

- A description of why compliance with the new annual benefits limits would increase the cost or decrease the availability of the affected limited-benefit products.

- An attestation, signed by the plan administrator or chief executive officer of the issuer of the coverage, certifying that the plan was in force before Sept. 23, 2010, and certifying the applying annual benefits limit restrictions to the plans would hurt the plans.

Brian Robertson, executive vice president of Fringe Benefit Group, Austin, Texas, a company that sells limited-benefit plans, says in a commentary on the Larsen bulletin that PPACA provisions other than the annual benefits limit provisions also could make writing limited-benefit products difficult or impossible, and that it’s not clear how many limited-benefit plans carriers will get relief through the annual benefits maximum waiver program.


Three agencies — the Internal Revenue Service, an arm of the U.S. Treasury Department; the Employee Benefits Security Administration, an arm of the U.S. Labor Department; and the OCIIO, an arm of the U.S. Department of Health and Human Services (HHS) – teamed up in June to release a 196-page batch of interim final rules and guidance.

The rules and guidance implemented provisions in the Affordable Care Act – the legislative package that includes the Patient Protection and Affordable Care Act (PPACA) – that Congress included in an effort to help patients. The regulatory materials dealt with topics such as major medical benefits maximums, rescissions of major medical policies, and provisions for limited-benefit medical plans, which are also known as “mini med plans.”

Insurers developed the plans to provide small amounts of low-cost coverage for temporary workers, part-time workers who otherwise might be unable to afford, or even qualify to buy, conventional major medical coverage.

Critics of the mini med products argue that the owners often are unsophisticated consumers who end up thinking they have far more coverage than they really have.

Supporters of the products contend that they provide enough coverage to meet the needs of relatively healthy insureds and may help insureds with more serious problems enter the system as insured patients.

Under the provisions of the new PPACA regulations, conventional major medical plans will have to offer annual benefits maximums of at least $750,000 for plan or policy years beginning on or

after Sept. 23, 2010, and before Sept. 23, 2011.

The minimum annual limits for conventional plans will increase to $1.25 million Sept. 23, 2011, and to $2 million Sept. 23, 2012.

Federal agencies reported in June that they would make special allowances for mini med plans, to keep the new PPACA restrictions on benefits maximums and other PPACA provisions from making mini med plans impossible to sell.

The agencies said the OCIIO would set up a waiver program to help mini med plan providers cope with restrictions on annual benefits maximums.


Robertson says PPACA provisions other than the new annual benefit maximum rules that could hurt mini med programs include a ban on use of pre-existing condition limitations, a requirement that programs that provide dependent coverage offer coverage for adult children up to age 26, and new minimum medical loss ratio rules.

Providers of individual policies are supposed to spend at least 80% of revenue on medical care and quality improvement programs.

Those requirements could end the possibility of writing or renewing “expense incurred,” or “coinsurance based,” limited medical programs, Robertson says.

The application schedule given in the Larsen annual benefit maximum rules waiver program bulletin would give carriers little time to apply for waivers, and there is no guarantee that the government will actually grant waivers, Robertson says.

“Will the exception be provided only on annual limits?” Robertson asks. “If so, how will pricing be impacted by the no pre-existing condition requirement? Will carriers be subject to minimum loss ratios requirements? How will broker compensation be affected?”

Lawyers in the Charlotte, N.C., office of McGuireWoods L.L.P., also have talked about the uncertainty associated with the waiver application process in their analysis of the Larsen bulletin.

“Because all waiver approvals are subject to the discretion of HHS, sponsors of insured and self-insured plans that are applying for waivers should also consider alternative arrangements, in the event that the waiver application is not approved,” lawyers at the firm say in their commentary.

Employers and brokers may be able to deal with those questions by using fixed indemnity supplemental benefits products, because those products are not filed as true health insurance products and are not subject to PPACA requirements, Robertson says.


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