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U.S. halts new applications for waivers on health coverage rule

Beginning in September, employers that offer health coverage will no longer be able to seek a waiver from rules mandating that their plans provide at least $1.25 million worth of coverage annually.

June 18, 2011|By Noam N. Levey, Los Angeles Times

Reporting from Washington — The Obama administration is ending a controversial program that allowed employers to avoid a key requirement of the new federal healthcare law.

Beginning in September, employers that offer health coverage to their workers will no longer be able to seek a waiver from rules mandating that their plans provide at least $1.25 million worth of coverage annually.

The law was designed to eliminate plans with low annual limits, often called mini-med plans, that critics said offered little protection to customers. The plans typically capped how much medical care they covered in a year at as little as a few thousand dollars.

This year, employers were banned from offering plans with annual limits below $750,000. That limit rises to $1.25 million in September and will rise again a year later. In 2014, plans will be prohibited from placing any annual limits on coverage of essential benefits.

Many employers complained after the healthcare law was passed last year that raising annual limits would force them to raise premiums, making their health plans unaffordable for employees.

Fearing that many workers would lose even subpar coverage, the administration responded by allowing companies to apply for waivers from the rule if they could show that the annual limit requirement would substantially increase premiums.

As of this week, the administration had granted waivers to 1,433 plans covering more than 3 million workers, according to the Department of Health and Human Services.

That represents about 2% of Americans covered by private health plans.

The effect of halting new waiver requests, however, could be limited.

Steve Larsen, who oversees the federal waiver process, said Friday that the administration decided to stop taking new waiver applications after concluding that most plans that would need waivers already had applied for them.

"We think this is the best glide path going forward to allow folks who are in these policies to continue that coverage. We want them to be able to continue it," Larsen said. "But we really don't expect significant premium increases for the remaining plans."

Employers that already have waivers would be able to apply for renewal this September, he said.

Ending the waiver process also eliminates a political headache for the administration as President Obama ramps up a reelection campaign in which he will have to defend the new healthcare law.

Republicans had seized on the waivers as evidence that the law was unworkable. And hinting at political favoritism, they charged that the administration was concealing which employers were denied waivers.

An independent report by the nonpartisan Government Accountability Office this week found no evidence to support the GOP charge, concluding instead that employers that were denied waivers did not show that the annual limit requirement would substantially increase premiums.

Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, and Sen. Orrin G. Hatch (R-Utah) nonetheless kept up their criticism.

"The Democrats instituted the waiver program to cover up the fact that their failed law would increase costs and force people out of the plan they have and like," Camp and Hatch said in a joint statement.

"Now they are shutting it down because it's become clear that the only way to keep what you have and like is to be exempted from the very law they said would lower costs," they said.

Larsen said political considerations did not play a role in the administration's decision.

"We looked at the data and concluded this was the appropriate course of action without any reference to … whatever criticisms or comments are being made about the program," he said.

Officials at the National Federation of Independent Business and the Retail Industry Leaders Assn. declined to comment about the administration's decision.

noam.levey@latimes.com

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