During the consideration of health reform, we were assured repeatedly by President Obama and proponents of the behemoth euphemistically called the Patient Protection and Affordable Care Act (PPACA) that if we liked our health insurance we could keep it. Many opponents of the bill, including the National Association of Manufacturers, never bought that talking point and now we know for a fact the promise will not be kept.
Ostensibly, the intent of health reform was to insure the uninsured and protect the coverage of those who get health insurance from their employer. Instead, what we got is a looming crisis for as many as 170 million Americans who could lose their coverage because their employer can’t afford to provide it anymore or inadvertently runs afoul of the government. Now that’s reform.
The “grandfather rule” issued by the Department of Health and Humans Services (HHS) in June essentially read like a cynical attempt to make good on a promise never intended to be kept. (HHS news release, fact sheet, rule.) In a technical sense, if your plan doesn’t change at all from what it looked like on March 23, 2010, you can keep it – but how realistic is that? Not very, and they know it.
In fact, the HHS itself acknowledges that up to 70 percent of all employers will either lose their health plan by violating the new federal regulations or forgo grandfather status on their own within the first three years.
Under the rules for so-called “grandfathered plans,” small businesses that purchase health insurance for their employees have been stripped of the single most important tool they have to keep their rates in line – the ability to shop around and negotiate with multiple health insurance companies to get the best coverage they can afford. If an employer switches insurance companies now, they lose their grandfather status.
If employers decide to stick it out with their current plan, other tools to keep costs in check have been taken away as well. Increase co-payments beyond limits set in the regulation? Lose your grandfathering. Increase employee cost-sharing for premiums beyond what the government tells you? Lose your grandfathering. And the HHS isn’t done yet.
HHS has asked for comments on whether a plan should lose its grandfather status if it changes their prescription drug coverage or the network of physicians and hospitals beneficiaries can see. These are common alterations insurers and employers look to for cost control so their employees can afford the coverage. The NAM will be submitting comments to the HHS today on these and other issues raised by the rule. [UPDATE: Here are the NAM's comments.]
Unless significant changes are made, it seems clear what the end goal is with the so-called “grandfather rule” – design it to effectively ensure that within three years all current employer-based plans will go the way of the Dodo.
Joe Trauger is the NAM’s Vice President for Human Resources Policy.