.n RECEIVED ". 

Ju126,2010 08:02:35 WS"20 

OSNUM: 072620101005 Aetna· 

OFFICE OF THE SECRETARY 

CORRESPONDENCE 151 FanningtOn Avenue 

CONTROL CENTER Hartford, CT 06156 

Staven B. Kelmar 

Senior Vice President 

Govemment and Public Policy 

Law &Regulatory Affairs. RE6A July 21,2010 (860) 273-2706 

Fax: (860)273HB340 

The Honorable Kathleen Sebelius 


Department ofHealth and Human Services 


Hubert H. Humphrey Building, 


Room 445-G 


200 Independence Avenue, SW 


Washington, DC 20201 


Re: 	 HHS Waiver Process fur Restricted Annual Limits and Limited 


Health Benefit Plans 


Dear Secretary Sebelius: 

The Department ofHealth and Human Services ("HHS"), Department ofTreasury and 

Department ofLabor (the "Agencies") recently issued an interim final regu~ion implementing 

. various patient protection provisions ofthe Patient Protection and Affordable Care Act 

("PPACAtI

). 75 Fed. Reg. 37188 (June 28,2010) (the "IFRfI). The IFR establishes rules 

permitting restricted annual limits on essential health benefits fur plan years beginning prior to 

January 1, 2014. In connection with the IFR, the Agencies did not provide any specific relief that 

would allow limited benefit plans (also sometimes known as "mini-med plans") to maintain lower 

annual dollar limits prior to January I, 2014. However, the preamble to the IFR indicates that 

HHS will establish a program under which the requirements relating to restricted annual limits 

may be waived fur limited benefit plans and that HHS expects to issue guidance on the scope and !, 

process fur applying for a waiver in the near future. 75 Fed. Reg. at 37191. ,I 

Aetna is one ofthe nation's leading diversified health care benefits companies, providing 

members with information and resources to help them make better informed decisions about their ,i 

health care ..Our programs and services strive to improve the quality ofhealth care while II 

controlling rising health benefit costs. Aetna offers a broad range oftrBditionaland consumer-. 'I. 

directed health insurance products and related services, inclUding medical. pharmacy, dental. 

behavioral health, group life. long.term care and disability plans and medical management 

capabilities. Aetna's affiliate, SRC, is a 1eading provider of limited benefit policies. The SRC 

. policies are exclusively group health insurance policies (rather than individ'9a1 health) and they 

have been issued to more than 1350 employers covering over 430,000 emp19Yees and dependents 

in a given year. 

As a key stakeholder affected by PPACA and by the IFR, Aetna is committed to working with 

HHS and the other Agencies in developing reasonable administrative standards in its . 

implementation. Aetna has a substantial interest in the waiver process that HHS is adopting and 

is therefure providing comments on the scope and process that HHS might employ in developing 
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the waiver program. It is particularly important that the waiver program be established promptly 

so that applications can be made and decisions rendered in the near term. 

·BaekgrouDd 

Approximately 1.4 million workers nationwide have group healthcare coverage under limited 

health benefit plans that cover accident- and sickness- related medical expenses. These plans 

typically have an annual dollar cap on overall benefits and/or an annual dollar cap on specific 

services. The individuals covered by such plans typically work for-employers on a part-time, 

seasonal, or temporary basis and are ineligible fur coverage ~er the employer's regular group 

health plan, or are in an eligibility waiting period for an employer's regular health plan. SRC's 

experience is that over 40% ofemployers make contributions to fund the limited benefit plans. 

Generally, employee premiums are paid pre-tax via a payroll reduction. 

Public Health Service Act ("PHSA") § 2711 provides that effective for plan:years beginning on or 

after September 23, 2010, a group health plan and a health insurance issuer offering group or 

individual coverage may not impose annual limits on the dollar value ofessential benefits, except 

as permitted by the Secretary ofHHS for plan years beginning prior to January I, 2014. In 

defining the term "restrieted annual limit. " PPACA specifies that the Secretary of "shall ensure 

that access to needed services is made available with a minimum impact on premiums." /d. 

Annual donar limits are prohibited -altogether beginning in 2014. The restriction on annual limits 

applies to both new plans and grandfathered group health plans. See PPACA § 1251(a)(4)(8)(i). 

Pursuant to the authority granted to the Secretary ofHHS, the IFR implements PHSA § 2711 and 

permits group health plans, group health insurance coverage and individual· insurance to maintain! 

annual limits on essential health benefits as follows: 

• 	 $750,000 for plan and policy years beginning on or after September 23,2010 but before 

September 23, 2011; 

• 	 $1.25 million fur plan and policy years beginning on or after September 23,2011 but 

before September 23.2012; 

• 	 $2 million fur plan and policy years beginning on or after September, 23,2012 but before 

January I. 2014. ' 

45 C.F.R. § 147 .126( d). These limits are substantially higher than the typical annual limits 

established under Aetna's SRC limited benefit plans. Unless HHS issues timely waivers allowing· 

limited health benefit plans to establish lower annual dollar limits, these plans, as currently ,I 

designed, could be prohibited fur plan years beginning on or after September 23,2010, resulting :1 

in the loss ofcoverage for 1.4 million workers. . 	 , 

Aetna modeled how much more part-time, hourly and seasonal workers would have to pay iftheir • 

current plan limits had to be raised to comply with the new limits. The study included all net 

claims incurred in 2009 eligible for payment on a net basis (i.e., charges minus the applicable 

provider contractual discounts). The results indicate that claims costs would increase by at least 

514% and that premium costs increase by at least 383%. Such increases will be imaffordable fur 

I 
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many ofthe typical lower wage workers that enroJl in these policies. The typical enrollee in a 

limited benefit plan has an annual before.tax income of between $10,000 and $30,000. Ifforced 

to comply with the new annual limit requirements, we project that the premiums would increase 

from an average of 10% ofannual after-tax net income to an average ofalmost 50% of annual 

after-tax net income, which is an effective five-fold increase in healthcare premium cost. 

Importantly, these workers will not be eligible for guaranteed issue coverage in the individual 

market, or federal subsidies available through Exchanges, until 20 14~ 

ReeommendatioDs OR Scope and Process for Waiver Program 

The preamble to the IFR indicates that the waiver process is being established "so that individuals 

with certain coverage, including coverage under a limited benefit plan or so-caUed 'mini-med' 

plans, would not be denied access to needed services or experience more than a minimal impact 

on premiums ...•It 75 Fed. Reg. at 37191. The preamble indicates that the restricted annual 

limits rule may be waived "ifcompliance with these interim final regulations would result in a 

signi ficant decrease. in access to benefits or a significant increase in premiums. " Id. (Emphasis· 

added). 

Aetna strongly supports the creation ofa waiver program by HHS fur limited benefit plans and 

commends the Agency fordoing so. It is critical that the waiver program be structured in an 

effective and efficient manner in order to allow workers who have elected limited benefit plan 

coverage to keep the coverage they have, at least Wlti12014. In addition, consistent with the 

preamble to the IFR, clear standards should be set for detennining whether compliance with the 

IFR will result in either (I) a significant decrease in access to benefits, or (2) a significant 

increase in premiums. Aetna makes the following recommendations with respect to the scope and I 

process for the waiver program: . 

1 

1. 	 Insurers as applicants: Insurers that issue limited benefit policies with respect to group 

health plans or as non-grand fathered individual policies should be permitted to appJy fur 

the HHS waiver. The insurer should be able to seek waivers on a product by product 

basis. As such, waivers could be granted for an entire book ofsimilar policies or 

certificates issued by the insurer. Employers and individuals that have elected limited 

benefit plans would not have to apply for waiver, unless the employer sponsors a selffunded limited benefit plan, in which caSe the employer could apply for the waiver 

directly. Under this structure, the insurer would do the work for its employer and 

individual policyholders. HHS would have far fewer waivers to process and it will be 

more likely that timely waivers will be issued. 

2. 	 New products and material modifications: Insurers would be required to seek new waivers; 

for new limited benefit plan products developed prior to 2014, or for material changes to 

existing products that are subject to a waiver. A material modification would be defined 

as any modification that would require a summary ofmaterial modifications under DOL 

regulations. See 29 CFR § 2510.104. 

3. 	 Coverage until 2014: Waivers should extend until the later ofthe last date ofthe plan year III' 

beginning prior to January 1, 2014, or the date when an Exchange is operational in a given! 

state, unless a material change to the product subject to waiver occurs. Insurers should not' . 	 . I 

i 

II 
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CORRESPONDENCE It CONTROL CENTER II Page 4 

July 21, 2010 II 

:1 

!! I I: 

be required to apply for waivers annually. An annual program will burden both the i,;r 

waiver applicant and HHS, and will create uncertainty for emploYer$ and individuals that r 

11 purchase such policies. 	 Ii 

i' 

4. 	 New policies: Waivers should Cover new policies and certificates issued by the insurer, !I 

provided that the new policies and certificates are issued pursuant to: a product that is II'I 

II subject to a valid HHS waiver. Limited benefit plans play an important place in the pre2014 marketplace and such affordable coverage should be available to fill the gaps of II 

employer coverage until 2014. ' . 

, 	 :1 

5. 	 New enrollees: Waivers should pennit new enrollees into existing coverage. An employer l 

that sponsors a limited benefit plan should be able to treat all part-time, seasonal, r 

temporary or other similarly situated employees the same with respect to eligibility fur the ,t 

plan. . ; !f > 	 ijl 

II 

6. 	 Demonstrating significant decrease in access to.benefits or significant increase in 1[1 

premiums: Consistent with the text ofPHS A § 2711 and the preamble to the IFR, an i! 

applicant should be able to obtain a waiver ifit demonstrates either ~ significant decrease Ii 

in access to benefits or a significant increase in premiums (i.e., these are independent it 

ways for an applicant to demonstrate that a waiver should be grant~). Objective II 

standards should be established for this determination to expedite the waiver process and If 

ensure fairness among applicants. i II " 

a. 	 Demonstrating a significant decrease in access to benefits: The applicant should be It 

able to meet this requirement by showing that in order to co.nply with the ·Il 

$750,000 restricted annual limit for plan years beginning on br after September 23, ! 

I 201 0 and before September 23, 20II, and assuming no other' policy changes are II 

made with respect to the scope ofbenefits, the resulting premiums will cost more III 

than 9.5% ofthe average enrollee's weekly wage. It is exp~ed that this standard I 

would likely be demonstrated in the event an employer applies for a waiver since Ii 

the employer would have access to such information. Employers could provide Ii 

other information to demonstrate the likelihood that the application ofthe annual !i 

limits rule will impact their ability to offer benefits. The applicant should be It 

required to attest to any cost estimates or data supplied in support ofthe ;1 

application. ',~ 

; . 	il 

~I 

b. 	 Demon~tratin~ a significant in,:"ease in. premiums: The 8pp!~cant should be able to Ii 

meet this requtrement by showmg that an order to comply With the $750,000 II 

restricted annual limit for plan years beginning on or after St:J)tember 23, 2010 and ii 

before September 23,2011, and assuming no other policy changes are made with ~I 

respect to the scope ofbenefits, premiums will increase by greater than medical I! 

inflation plus I S% above the current premium rate. Alternatively, a premium I! 

increase of 50% or more shall be deemed to result in a "significant increase in ., 

premiums." The applicant should be required to provide an actuarial certification 

for this cost estimate.! 
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The waiver process should specify that the Secretary has discretion to consider other 

indicia ofa significant decrease in access to benefits., andlor a signifiCant increase in 

premiums. 

7. 	 Notice: In the event a waiver is granted, the applicant (e.g., insurer) should be required to 

provide notice to its policyholders that their limited benefit plan is subject to a waiver 

(similar to the requirement under the grandfathered health plan IFR): Waiverapplicants 

could be required to notify HHS when they are no longer relying ona waiver (e.g .• they 

withdraw a policy from the market prior to 2014). II. 

8. 	 Applicant information: Relevant information ofthe applicant should be required. Such 

information should include the name ofthe company, individual contact, address, EIN, 

affiliates. description ofthe insurer's lines ofbusiness, scope ofproducts subject to the ' 

waiver. representative samples ofproduct documentation (e.g., approved policy forms) for II 

which the waiver is sought. and the number ofpolicyholders and individuals covered by I, 

the plans that are subject to the waiver application. 	 . 

9. 	 Certification: Applicants for waivers should be required to certify the accuracy ofthe 

waiver application. 

10. Timing: HHS should process applications within 30 days ofa complete submission. In 

the event the application raises issues that require a supplemental filing.. HHS should be 

required to ask for supplemental information within the 30 day period. 

11. Delayed application date: The filingofa timely application should delay the application ofl 

the September 23. 2010 compliance deadline such that applicants are not deemed out of il 

compliance with PPACA in the event that HHS does not act on the waiver application in I 

sufficient time for the applicant to comply with PPACA in the event the waiver i 

application is denied. . 

12. Right to a conference: HHS should notifY applicants in advance if it has tentatively il 

detennined to deny a waiver. Applicants should have a right to a conference with HHS in! 

connection with an application that HHS intends to deny, so that the applicant can clarifY 

issues and modify its application as appropriate. Applicants must request a conference 

within 15 days ofnotice by HHS. 

13. Publication: HHS should publish its waiver decisions. 

* • • 

Aetna believes that the forgoing recommendations will result in an effective and administrable 

waiver program that will allow workers who have elected limited benefit ph,n coverage to keep· 

the coverage they have untit 2014. It establishes clear standards for determining that there is a , 

signiftcanl: decrease in access to benefits, or significant increase in premiums. And it ensures that it 

HHS has access to sufficient information on which to grant a waiver, while protecting the rights ,! 

ofapplicants. We would be pleased to respond to any further questions you may have. 
'"RECEIVED''' 

Jul 26.201008:02:35 WS# 20 

OSNUM: 07262010111115 

OFFICE OF THE SECRETARY Page 6 CORRESPONDENCE 

July 21, 2010 	 CONTROL CENTER 

Sincerely, 

[t!- bIZ 

Steven B. K.elmar 

cc: 	 Jay Aogoff 

Steve Larsen