Bowing to pressure from the business community, the feds have eased the rules on “grandfathering” employer health plans.
As you recall, the White House touted the health reform law as one that would lower costs and let companies keep their health plans if they liked their coverage.
But under the original regulations, once a group health plan entered into a new policy, certificate or contract of insurance, the plan lost its grandfathered status.
Companies balked at that rule, saying it prohibited them from switching to less costly plans that would allow them keep their existing coverage — thus tying their hands and forcing them to cut costs using other means (like layoffs, wage freezes, etc.).
So the Departments of Labor, Treasury and Health and Human Services just amended the laws’ grandfathering regulations.
Under the amendment, group health plans can now enter into new insurance contracts without affecting their grandfathered status — as long as the plan’s benefits levels do not decrease (e.g., benefits for a condition are eliminated or employees’ cost-sharing requirements are increased).
Now companies can shop for cheaper plans that keep employee benefits levels the same, even if it means switching providers.
Not effective retroactively
Unfortunately, this amendment comes a little late for those plans that have already entered into new contracts.
The amendment is not effective retroactively, so new insurance contracts that became effective between March 23 (the day the reform bill be came law) and Nov. 14, 2010 (the day before the amendment took effect) are not grandfathered — no matter what level of benefits the plans offer.
In addition, for new insurance contracts with effective dates on or after Nov. 15, 2010 to keep their grandfathered status, they must provide the new insurance carrier with documentation of their prior policies’ plan terms. This is to help the new carrier determine whether there are any coverage changes that would cause a loss of grandfathered status.
The amendment also does not apply to individual insurance policies. All recently-issued individual health insurance policies will not be grandfathered.
Under the reform law, once a plan loses its grandfathered status, it must provide added services — like preventive care.
