Under the health care reform law, employer health plans or
those on the individual market in existence on March 23 (when the legislation
was signed by President Obama) have been exempted from some, but not all, of
the insurance reforms in the bill. This “grandfather” provision is a critical
component of health care reform because it ensures that families can keep the
coverage they have now.
New interim rules recently released by the Administration maintain this safeguard while also making
certain that employers cannot create additional burdens for individuals by
cutting benefits or increasing costs.
If they do, it triggers the additional protections in the bill, like
ensuring that children receive critical medical and developmental screenings at
no cost or ensuring family members who are sick cannot be denied coverage. (For
a list of insurance provisions that apply to grandfather status, see the chart
developed by HHS.)
Under the rules, health plans and employers will lose their
“grandfathered” status if they:
o Eliminate or substantially reduce benefits related to a
particular health condition.
o Increase copayments by more than $5 or the cost of
medical inflation plus 15 percentage points, whichever is greater. Deductibles
could also not be raised by the same medical inflation calculation. (Note that
medical inflation has averaged 4 to 5 percent in recent years.)
o Decrease the employer contribution by more than 5
o Increase co-insurance charges (a fixed percentage of
the medical charge paid by the patient).
o Apply new annual limit restrictions or tighten limits
already in place.
o Switch insurance companies. (Only that particular plan
would lose the grandfather status, other plans offered by an employer through
an existing insurance company would retain their grandfather status.)
Federal authorities estimate that by 2013 about half of
employer-sponsored plans will lose grandfather status because of significant
changes made to the scope and cost of coverage. With the new rules in place,
however, these millions of children and families will be assured that they
receive the same protections under health reform as others newly signing up for
coverage. Now that’s something to tell our grandchildren about!
For more information see the Administration’s fact sheet on
the new interim rules.