HHS: Limited plans better than nothing

November 1, 2010

HHS is providing some breathing room before employers and insurers have to meet new requirements

NATIONAL REPORTS-The U.S. Department of Health and Human Services (HHS) is providing some breathing room before employers and insurers have to meet new requirements for more comprehensive coverage. HHS hopes this will prevent sponsors from dropping coverage altogether.

The issue escalated in late September when McDonald's said it would have to drop its mini-med plan unless it received a waiver. Its health plan for some 30,000 hourly restaurant workers has limited benefits, and does not meet requirements for higher annual caps. The plans have either a $2,000 or $10,000 maximum annual benefit.

McDonald's also anticipates that its carrier will need an exemption from the pending medical loss ratio standard requiring it to spend 85% of premiums on health benefits. HHS officials objected because the MLR policy wasn't even final yet.

However, Jay Angoff, director of the HHS Office of Consumer Information and Insurance Oversight, tried to assuage employer concerns by emphasizing that HHS will exercise its discretion to "address the special circumstances of mini-med plans in the medical loss ratio calculations."

As of last month, HHS had provided waivers to more than 30 companies, insurers and union plans. The waivers only apply for one year.

Requests for waivers have increased as employers seek to refine health benefits for 2011. While employers, insurers and many workers applauded HHS's quick action in granting the waivers, some health reform advocates criticized the administration for permitting inadequate plans to continue.

UNINTENDED CONSEQUENCES

At the same time, major insurers threaten to discontinue child-only policies because of the new law's ban on waiting periods for pre-existing conditions. After accusing insurers of reneging on promises to end such exclusions, Angoff advised them to address adverse selection by establishing open enrollment periods for all children; imposing surcharges on parents who drop a child-only policy and then reapply; and adjusting rates for health status.

Another unintended consequence of reform is that small insurers may exit the business, as Principal Financial Group announced in September. UnitedHealthcare will take over its enrollees.

In Medicare Advantage (MA), most are maintaining their programs, despite earlier predictions. HHS Secretary Kathleen Sebelius also announced that most seniors will pay 1% lower premiums for 2011.

Enrollment in MA plans will increase by 5% in 2011 to cover some 12 million beneficiaries, according to CMS Administrator Donald Berwick. He credited the lower MA premium costs to tough CMS negotiating with health plans. CMS rejected bids from 300 plans that proposed increases in premiums and out-of-pocket expenses for members while also predicting higher margins.

Actuarial staff succeeded in reaching better deals with almost all of them. However, seven plans offered by three sponsors did not present new bids. One of those dropouts was Harvard Pilgrim, which announced in late September that it would end its private fee-for-service plan.