It’s not going to be easy to hang on to your “grandfathered” health plan under the new healthcare reform rules.
Bottom line: The regs will severely limit your ability to share future cost increases with your employees – and that means company costs are sure to rise.
Under the healthcare bill, employers with current coverage can get it grandfathered – in other words, keep the coverage they have without being subject to new, expensive mandates.
What you can’t do
Sounds OK so far. But here’s the rub: The new regs dictate that if a company wants to stay grandfathered, it can’t:
- Significantly cut or reduce benefits. For example, firms can’t eliminate coverage for people with chronic conditions like diabetes.
- Significantly raise co-pays. Grandfathered plans can’t increase staff co-pays by more than $5 (adjusted annually for inflation) or a percentage equal to medical inflation plus 15 percentage points. For instance, a plan would lose grandfathered status if co-pays rose from $30 to $50 over two years.
- Significantly raise deductibles. Plans can increase deductibles only by a percentage equal to medical inflation plus 15%.
- Significantly lower employer contributions. Grandfathered plans can’t decrease the percentage of premiums that employers pay by more than five percentage points.
Firms can make some changes without risking grandfathered status, but there’s not a lot of wiggle room. Those changes include:
- making modest adjustments to existing benefits
- voluntarily adopting new consumer protections under the new law, and
- making changes to comply with state or other federal laws.
Not a pretty picture
Seems clear: Many companies could be in real danger of losing their grandfathered status.
Health insurance rates for small businesses could certainly increase by more than the “15% plus medical inflation” that the new regs allow for.
Even the feds admit that grandfathered plans are likely to vanish.
According to Department of Health and Human Services estimates, 34% to 64% of large businesses’ plans will no longer be grandfathered in 2013. That number skyrockets to between 49% and 80% among small businesses.
And when that happens, employers will be forced to shoulder more expensive mandates – which will increase costs for companies and staff – or eliminate all coverage, resulting in costly taxes or penalties.
For a full look at the new regs, go here.