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Waivers Address Talk of Dropping Health Coverage

As Obama administration officials put into place the first major wave of changes under the health care legislation, they have tried to defuse stiffening resistance — from companies like McDonald’s and some insurers — by granting dozens of waivers to maintain even minimal coverage far below the new law’s standards.

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The waivers have been issued in the last several weeks as part of a broader strategic effort to stave off threats by some health insurers to abandon markets, drop out of the business altogether or refuse to sell certain policies.

Among those that administration officials hoped to mollify with waivers were some big insurers, some smaller employers and McDonald’s, which went so far as to warn that the regulations could force it to strip workers of existing coverage.

At a time when the midterm elections are looming and Republicans have been vocal in campaigning against the law, reaction to the rollout has been closely watched.

To date, the administration has given about 30 insurers, employers and union plans, responsible for covering about one million people, one-year waivers on the new rules that phase out annual limits on coverage for limited-benefit plans, also known as “mini-meds.” Applicants said their premiums would increase significantly, in some cases doubling or more.

These early exemptions offer the first signs of how the administration may tackle an even more difficult hurdle: the resistance from insurers and others against proposed regulations that will determine how much insurers spend on consumers’ health care versus administrative overhead, a major cornerstone of the law.

Several leading insurers, including WellPoint , Aetna and Cigna , have also objected to new rules requiring them to cover even those children who are seriously ill, warning that they will stop selling new policies in some states because the rules do not protect them from having to cover too many sick children.

"It is a balancing act.  The president wants to have a smooth glide path to 2014." -Office of Health Reform, director, Nancy-Ann DeParle

“The hardest part of health reform is always going to be the transition,” said Peter T. Harbage, a former state health official who is a policy consultant in Sacramento. He predicts more insurers and employers will lean on the government to delay or weaken the new regulations. “I think this pressure just increases until we get to 2014,” he said, referring to the year that the law will fully go into effect.

How much the administration can, or should, compromise in ways that could dilute the effect of the new law in the next few years is a subject of much debate, depending on the politics from state to state or the economic dynamics in a particular market.

Policy experts say much of the authority to enforce the new law rests with the states, and they say the federal government may have little ultimate control over whether insurers will keep offering coverage in specific markets.

Nancy-Ann DeParle, the director of the Office of Health Reform at the White House, acknowledged that the concessions given to companies and insurers reflected attempts to avoid having people lose their current coverage before the full law goes into effect while meeting the aim of improving that coverage.

“It is a balancing act,” Ms. DeParle said. “The president wants to have a smooth glide path to 2014.”

The waivers issued so far include the policies offered by McDonald’s to its fast-food workers, typically capped at just a few thousand dollars, sold by a profit-making company owned by Blue Cross and Blue Shield plans. As a result of the administration’s efforts, McDonald’s says it is “confident that we’ll continue to provide health care coverage for our 30,000 hourly restaurant employees.”

Aetna and Cigna have also received waivers to continue selling limited-benefit policies, according to the list released by the Department of Health and Human Services, as have small employers like Sanderson Plumbing Products and Guy C. Lee Manufacturing. HealthMarkets, which offers policies through MEGA Life and Health and other insurers, says it also plans to apply for a waiver for some of its plans.

Some states, like Iowa and Maine, have already said they might seek additional authority from federal officials to exempt some insurers, at least for a time, because of the potential disruption if carriers leave the market over the new standards on medical spending.

“We have some very small carriers in the state,” said Susan E. Voss, the Iowa insurance commissioner, who said she favored letting state regulators decide whether some carriers should be given more leeway. The state has already lost some carriers, including the Principal Financial Group , which announced its decision last week.

The new standards may prove a challenge to the administration in its attempt to protect the limited-benefit plans. Under the legislation, insurers are required to spend at least 85 cents of every dollar in premiums on the welfare of their customers, and many of these plans spend far less.

The administration says it has the authority to change the way medical spending is calculated. But the National Association of Insurance Commissioners, which has been charged with drafting the regulations that will go to the Health Department for approval, has so far rejected the notion that these plans deserve special treatment.

A committee looking at the issue concluded that there was no reason to calculate spending differently for these plans, saying state regulators could always request exemptions later if they foresaw too much market turmoil.

Some consumer advocates argue that Congress did not intend for these mini-plans to be unaffected by the new standards. “If they wanted to exclude mini-meds, they would have excluded mini-meds,” said Timothy S. Jost, a law professor at Washington & Lee University who has been working with state regulators on these issues.

And even some state regulators, like Ms. Voss, whose state has formally requested a federal waiver to allow Iowa to decide case by case what considerations to give individual carriers, acknowledges that some plans should be allowed to leave the market. “I don’t think my job as a commissioner is to make sure every company is viable forever,” Ms. Voss said.

The struggle to stop insurers from dropping child-only coverage illustrates the limited power that the administration, and some states, may have to pressure companies to participate. While federal officials have tried to address the concerns by insurers that the rules allow parents to wait until their children are sick to sign up, some insurers have remained reluctant to commit to the market.

While states like California can force their hands by passing legislation requiring any insurer who plans to sell policies in the new exchanges to also sell child-only policies, other states have little recourse other than to try to persuade insurers to stay.

In Washington State, for example, Regence BlueShield, a major insurer, has announced it plans to no longer sell child-only policies, and Mike Kreidler, the insurance commissioner, is trying to persuade the other major insurers to stay. He cannot force them, he said, under current state law. “I couldn’t do anything other than use the bully pulpit,” said Mr. Kreidler, who was optimistic that he had succeeded.

And politics surrounding the health care law may intrude. In Minnesota, Gov. Tim Pawlenty, a Republican and a potential 2012 presidential candidate who has long opposed the law, has become the target of accusations that he is stonewalling discussions over certain types of coverage. (He has already refused federal money for rate reviews and to set up the 2014 exchanges.)

“We are seriously disappointed that we appear to have hit a wall,” said Julie Brunner, executive director of the Minnesota Council of Health Plans, which represents the state’s insurers. The insurers had been meeting with regulators to hash out the child-only coverage policies.

Mr. Pawlenty’s office, however, said it had no knowledge that negotiations over children’s insurance had been halted, and a spokesman, Bruce Gordon, denied that the governor had played any role in ending the talks. He said, however, the request by the insurers for a standardized period in which parents can buy coverage was unwarranted: “The insurance companies’ request for an exemption is yet another example of the failings of Obamacare.”

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