The Nitty Gritty: 6 Types of Obamacare Waivers

You cannot listen to news about Obamacare without hearing about waivers. Obamacare waivers not only evidence a poorly conceived law, but the very need for a waiver transfers power to a bureaucracy where the individual, organization, or firm with the best lobbyists wins. What you may not know is that there are actually several types of waivers:

  1. MLR waiver for mini-med health insurance plans
  2. Annual limit waiver
  3. MLR waiver for States
  4. State innovation waiver
  5. ACO anti-trust waivers
  6. Individual mandate waivers

MLR waiver for mini-med health insurance plans
In September 2010, the Wall Street Journal reported that McDonald’s was requesting a waiver from the Medical Loss Ratio (MLR) requirements of Obamacare for nearly 30,000 of its employees who have “mini-med” insurance plans. McDonald’s, and others, said that high turnover rates for lower wage employees make mini-med plans more expensive to operate than other types of health insurance. It warned the Department of Health and Human Services (HHS) that the high costs associated with such plans would mean that they wouldn’t be able to meet the requirement that 85% of premiums be spent on health benefits.

The MLR regulation, published on December 1, 2010, exempts mini-med plans for 2011 by requiring them to meet only half the MLR as other plans. The regulation requires that these plans submit certain figures to HHS which HHS will use to determine whether or not to extend the waiver into 2012 or 2013.

Annual limit waivers
On October 7, 2010, USA Today reported that 29 companies, including McDonald’s, had received a waiver. While these waivers were issued to protect individuals covered by mini-med plans, they constituted an entirely different waiver from that which was reported on in the Wall Street Journal in September 2010.

This waiver involves Obamacare’s minimum annual limit requirements. After January 1, 2014 the insurance companies will be barred from placing annual or lifetime limits on any health insurance plan.1 Between now and then HHS has instituted the following, phased-in minimum limits based on a plan’s start date:

  • Sept. 23, 2010 through Sept. 22, 2011, $750,000;
  • Sept. 23, 2011 through Sept. 22, 2012, $1.25 million; and
  • Sept. 23, 2012 through Dec. 1, 2013, $2 million.2

As of December 3, 2010, HHS reported that it had granted this waiver to 222 plans—up from the original 29.3 A document HHS submitted to the White House Office of Management and Budget suggests that HHS estimates that they will receive 1,500 requests per year for the annual limit waiver.4

MLR waiver for entire states
Even with the waiver from the MLR for mini-med plans, many state insurance commissioners are concerned with the effect it will have on their states. In a letter to Secretary Kathleen Sebelius, state insurance commissioners warned,

[W]e continue to have concerns about the potential for unintended consequences arising from the medical loss ratio. As we noted in our letter of October 13th, consumers will not benefit from higher medical loss ratios if the outcome is destabilized insurance markets where consumer choice is limited and the solvency of insurers is undermined.5

The MLR regulation allows for states to apply for a waiver, or as HHS calls it an “adjustment,” from the MLR. HHS expects 20 states to apply for this waiver.6 As of December 13, 2010, ten states had said that they will, or are leaning towards, applying for this waiver.7 However, only Maine has submitted an application.8

State innovation waiver
South Carolina Governor-elect Nikki Haley commented on her discussion with President Obama at a recent meeting he had with newly elected governors:

“I respectfully asked him to consider repealing the bill,” she said, to which he clearly stated he would not. “I pushed him further and said if that's the case, because of states’ rights, would you at least consider South Carolina opting out of the program?”

Obama told her he would consider letting South Carolina opt out, she said, if the state could find its own solution that included a state exchange, preventing companies from bumping people for preexisting conditions and allowing insurance pooling.

“I think it’s something we go back to South Carolina and start crunching," she said. "This is not about expecting what's given. This is about saying we're going to fight this every step of the way and use every option possible.”9

Was Obama offering to exempt South Carolina by virtue of his own judgment and magnanimity? Hardly. Obama was offering no more than what Obamacare already offers. Namely, a “Waiver for State innovation” from section 1332 of Obamacare.

But this waiver is not as helpful as Governor-elect Haley might hope. What President Obama did not tell her is that South Carolina would also be required to:

  • “provide coverage at least as comprehensive” as Obamacare;
  • “provide coverage and cost sharing protections against excessive out-of-pocket spending that are at least as affordable” as Obamacare; and
  • “provide coverage to at least a comparable number of its residents as” Obamacare.10

Benjamin Domenech, in his December 1, 2010 op-ed says, “If this seems like a silly Catch-22 for states, it is. The only policies that could meet this waiver requirement are single-payer constructs — which many other nations are moving away from, having tried them and seen them fail.”11

ACO anti-trust waiver
To be clear, this is a potential waiver. It doesn’t exist yet. But those considering the formation of Accountable Care Organizations (ACO) are requesting it.

If you don’t know what an ACO is, you’re not alone. Even the healthcare industry is trying to figure it out. ACOs are health care provider organizations (like HMOs) that have the capability of serving at least 5,000 Medicare recipients. ACOs will receive Medicare payments as other providers do—based on services performed. What will makes ACOs different are the bonus payments they will receive for reducing costs while maintaining a certain level of quality.

In theory, ACOs are supposed to provide better care for less money. Many experts believe that only hospitals have the capacity to form an ACO partially due to its 5,000 patient minimum requirement. Others believe that it will be difficult, if not impossible to form an ACO in a rural area. The most immediate concern of those considering the formation of an ACO, is the potential these organizations have of attaining so much market power that they run the risk of violating anti-trust law.
The U.S. Justice Department is now determining whether it is possible to grant anti-trust waivers for these organizations.

Individual mandate waivers
Finally, Obamacare provides for several specific waivers from the mandate that individuals purchase insurance.12 The individual mandate will not apply to you, or you can get a waiver, if you:

  • Are a religious objector;
  • Are a member of a “Health care sharing ministry;”
  • Are an illegal alien;
  • Are in jail;
  • Are poor;
  • Are a member of an Indian tribe; or
  • Are suffering a “hardship.”13

1 Patient Protection and Affordable Care Act (hereinafter “PPACA”) § 10101(a).
2 75 Fed. Reg. 37,188, 91, (June 28, 2010).
3 U.S. Dep’t of Health and Human Services, Approved Applications for Waiver of the Annual Limits Requirements of the PHS Act Section 2711 as of December 3, 2010 (Dec. 3, 2010),
4 Process for Obtaining Waivers of the Annual Limits Requirements of PHS Act Section 2711, ICR Reference No: 201010-0938-002 (Oct. 7, 2010), available at
5 Letter from State Insurance Commissioners (NAIC) to Kathleen Sebelius, Secretary of Health and Human Services (October 27, 2010), available at
6 75 Fed. Reg. 74,864, 92, (Dec. 1, 2010).
7 Sarah Kliff and Jennifer Haberkorn, Health reform heads to court in Virginia ... GOP to Dems: No 1099 repeal piggyback on tax cuts ... Dutko's Gary Andres joins E&C as staff director ... MLR waiver waiting game starts, POLITICO PULSE, Dec. 13, 2010,
9 Seann Adcox, Haley: Obama might let S.C. opt out of health care, THE POST AND COURIER,
10 PPACA § 1332.
11 Benjamin Domenech, Health Policy Innovation Is About More Than Just Timing,,, (Dec. 1, 2010).
12 PPACA § 1501(b) and 26 U.S.C. § 5000A(d)-(e) (2010).
13 26 U.S.C. § 5000A(d)-(e) (2010).