June 21, 2010
The announcement of interim final rules by the U.S. Department of Health and Human Services is a significant regulatory action. These rules outline the parameters under which our customers’ plans will be considered "grandfathered"—thus exempt from certain provisions of healthcare reform.
If plans make changes beyond those allowed by the interim final rules, they will have to comply with additional provisions of healthcare reform. For example, plans lacking grandfathering will be required to cover designated preventive services in full, without cost-sharing.
- Loss of grandfathering may ultimately require customers to purchase coverage more expensive than that which some customers are choosing to purchase today, which remains a point of concern for LifeWise.
- We continue to counsel our customers to consider carefully the impacts of changing their healthcare benefits at this time.
- "Grandfathering" has advantages and disadvantages, which will vary by the unique needs of each customer.
- Some customers may wish to retain "grandfathered" status based on their needs. Others may find retaining such status to be less preferable.
- Our desire is to provide our customers with more choices rather than less.
- The interim final rules issued by the federal government on June 14 provide clarity, but will constrain future choices for some customers.
- Many employers have managed premium costs in recent years by adjusting various elements of their benefit plans, including deductibles, coinsurance, and copays.
- Employers wishing to maintain grandfathering will see that flexibility limited by these rules. In order to maintain grandfathering, plans cannot make the following changes based on the provisions in their plan as of March 23, 2010:
- Increase employee cost-sharing via increased coinsurance
- Raise deductibles or co-pays above a specified amount
- Decrease employer contributions more than a specified amount
- Significantly cut or reduce benefits for the diagnosis or treatment of a particular condition.
- Changes to premiums will not affect grandfathering under the rules.
- Insured employers who change carriers, even if they were to keep the exact same plan design, will lose grandfathering.
- These rules do provide some flexibility, including for good faith compliance and transitionary provisions.
- Overall, application of the rules is expected to result in a loss of grandfathering for many customers not wishing to adhere to the rules limitations. HHS's analysis of the rules expects:
- 34 percent to 64 percent of large employers will lose grandfathering by 2013.
- 49 percent to 80 percent of small employers will lose grandfathering by 2013.
- We will be sharing additional information as it becomes available on this important topic.
