Pre-Reform Health Plans Might Lose Reform Law Exemption

Draft regulations by the Obama administration indicate that more than half of employer-sponsored health care plans might lose their “grandfathered status” in 2013 and be forced to change in order to comply with regulations in the new health reform law, the Wall Street Journal reports.

The regulations — currently being written by HHS, as well as the Labor and Treasury Departments — appear to contradict Obama’s promise throughout the reform debate that people who like their insurance plans will be able to keep them (Johnson, Wall Street Journal, 6/12).

Qualifying for Grandfathered Status

Plans that were implemented before the new reform law was signed in March can qualify for grandfathered status, which exempts them from many, but not all, of the law’s consumer protections (AP/Washington Post, 6/12).

For example, grandfathered plans are exempt from limits on cost-sharing (Wall Street Journal, 6/12). The plans also are not required to comply with mandates that plans offer preventive care without co-payments or requirements that they institute an appeals process for disputed claims following guidelines stipulated in the overhaul (AP/Washington Post, 6/12).

Losing Grandfathered Status

The draft regulations suggest that the plans could lose their statuses if they make significant changes in deductibles, co-payments or benefits (Pear, New York Times, 6/13). A plan could lose its grandfathered status if it were to increase an employee’s share of medical costs from 20% to 30% or if it increased a deductible beyond the set limit of medical inflation plus 15% (Wall Street Journal, 6/12).

Health plans often change due because of increasing costs, making it likely that many grandfathered plans will change enough to lose their status (Alonso-Zaldivar, AP/San Diego Union-Tribune, 6/11).

The most extreme scenario under the draft is that 80% of small-business plans will lose their grandfathered status by 2013, according to the Journal (Wall Street Journal, 6/12).

Employer Groups, GOP Respond to Regulations

Some employer groups said the stricter guidelines associated with losing grandfathered status could be a positive development for workers.

Alex Vachon, an independent health policy consultant, said, “On the face of it, having consumer protections apply to all insurance plans could be a good thing for employees,” adding, “Technically, it’s actually improved coverage.”

However, Republicans criticized the draft regulations, saying that Obama broke his promise that workers can choose to keep their current coverage (AP/San Diego Union-Tribune, 6/11). Senate Minority Leader Mitch McConnell (R-Ky.) called Obama’s pledge a “myth.” He said, “Since its passage, Republican arguments against the bill have been repeatedly vindicated, even as the administration’s many promises about the bill have been called into question again and again” (AP/Washington Post, 6/12).

Representatives from the U.S. Chamber of Commerce added that the regulations serve as evidence that the reform law will raise costs (AP/San Diego Union-Tribune, 6/11). James Gelfand, health policy director at the Chamber of Commerce, said, “These rules are extremely strict,” adding, “Almost no plan is going to be able to maintain grandfathered status.”

An Obama administration spokesperson said the final rules are still being written, adding that the administration’s goal is to ensure that the regulations do not affect most grandfathered plans (Wall Street Journal, 6/12).

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