Questions and Answers Related to Annual Limit Waivers

Q:  A health insurance issuer has received from HHS a waiver of the annual dollar limit requirements pursuant to section 2711 of the PHS Act for a group health insurance product. Can this issuer sell that product to a self-insured grandfathered group health plan that has itself been granted a waiver and wishes to switch from being a self-insured plan to a fully insured plan?

A:  Yes, if the group health plan and the health insurance coverage satisfy the criteria below.  In the December 9, 2010, CCIIO Supplemental Guidance: “Sale of New Business by Issuers Receiving Waivers,” HHS stated that it is permissible for a group health plan that is fully insured with a waiver of the annual limit requirement to purchase a new policy from a different issuer that has also obtained a waiver of the annual limit requirement. The December 9, 2010 guidance was published in light of an amendment to the interim final rule concerning grandfathered health plans.  The amendment permits a group health plan to maintain its grandfathered status despite entering into a new insurance contract, 26 CFR 54.9815-1251T(a)(1)(ii), 29 CFR 2590.715-1251(a)(1)(ii), 45 CFR 147.140(a)(1)(ii).  The amendment permits a self-insured group health plan to become a fully insured plan while maintaining its grandfathered status, so long as the group health plan is not altered in a way that would violate paragraph (g)(1) of the grandfathering rule.

While the December 9, 2010, guidance only addressed the scenario of switching from one fully-insured insurance policy to another, the same policy rationale for permitting the change of insured policies applies to a self-insured group health plan that received a waiver of the annual limits requirement pursuant to section 2711 of the PHS Act and wishes to purchase a new policy from a health insurance issuer that has obtained a waiver of the annual limit requirement for that policy.  

Accordingly, a self-insured group health plan that has obtained a waiver can purchase a group health policy with a waiver from a health insurance issuer under the following conditions, which are similar to those established in the December 9, 2010, guidance:

1. In all cases, the plan sponsor must have been offering group health coverage to its employees before September 23, 2010, for which it obtained from HHS a waiver of the annual limits requirement;
2. The issuer from which the group health plan is now obtaining the insured policy must have obtained a waiver from HHS for the newly purchased policy;
3. The annual limits of the new policy may not be lower than the annual limits of the previous policy, except in the situation outlined in #4;
4. The plan sponsor may obtain a replacement policy with a lower annual limit only if other comparable coverage is not available.  If a plan purchases a lower annual limit policy due to lack of comparable coverage, this change    would cause a loss of status under 45 CFR 147.140(g)(1)(vi)(C), relating to status as a grandfathered health plan.
5. The health insurance issuer must obtain from the plan sponsor an attestation that the criteria outlined above are satisfied, and the attestation must be accompanied by documentation outlining the terms of the prior coverage. Issuers shall retain this information in accordance with the data retention requirements of the September 3, 2010 and November 5, 2010 annual limits guidance documents.
6. To the extent not superseded here, all prior HHS guidance regarding annual limits waivers continues to apply to the plan and policies described here.