Millions of Americans could lose some important benefits of the new health overhaul law depending on how the Obama administration chooses to interpret one term: 鈥済randfathered.鈥
Under the law, existing, or 鈥済randfathered鈥 health plans are exempt from several consumer protections, including a requirement that beginning as early as September prohibits health plans from charging co-payments and other cost-sharing for certain preventive health services such as immunizations and cancer screenings.
The issue has touched off a debate over how grandfathering is defined, with some consumer and employer groups squaring off. Consumer groups say that if the definition is too lenient many Americans won鈥檛 get the full benefit of the law. Meanwhile, some business groups say that if their plans have to forfeit their grandfather status, they鈥檒l be subject to all the new rules that raise costs and premiums.
Congress included the grandfather provisions in the bill to give employers and insurers time to transition to the new law. But the law is mostly vague on exactly what constitutes a grandfathered plan. For example, does a plan lose its grandfather status if it increases employees鈥 deductibles or changes prescription drug coverage? Plans that give up their grandfather status must abide by all the consumer protections in the new law.
The administration, which is writing the regulations that implement the new law, is expected to issue its guidance soon on how it interprets the grandfathering clause.
Asked about the issue, Jessica Santillo, a spokeswoman for the Department of Health and Human Services, didn鈥檛 comment directly. Alluding to President Barack Obama鈥檚 oft-repeated pledge, she said, 鈥淯nder health reform, Americans who like their health care can keep it and we鈥檒l change the balance of power to put consumers in control of their health care, not big insurance companies. Our work to implement this law and draft regulations is ongoing, but we鈥檝e already made tremendous progress.鈥
鈥楶lans Can Evolve鈥
Many employer organizations, including the U.S. Chamber of Commerce and the National Federation of Independent Business, are pushing for a loose interpretation of 鈥済randfathering鈥 that allows employers to maintain flexibility in designing coverage. They want employers to be able to make changes in their health plans while retaining their grandfathered status. They fear that many of the law鈥檚 requirements will increase costs and premiums.
鈥淭he no-brainer solution is to have an understanding that plans can evolve and change and that should not trigger loss of grandfathering,鈥 said James Gelfand, a lobbyist for the U.S. Chamber.
America鈥檚 Health Insurance Plans, the major health insurance lobby, also backs a broad definition that would allow plans to make 鈥渞outine鈥 changes and still maintain their grandfather status. 鈥淥ur focus is on minimizing disruption for the more than 200 million people we serve as we look at these implementation issues,鈥 said spokesman Robert Zirkelbach.
But consumer groups and organizations such as the American Cancer Society Cancer Action Network worry the 鈥済randfathering鈥 clauses will be a huge loophole that allows employers and insurers to avoid complying with the law鈥檚 increased consumer protections and benefits. 鈥淭his is one of the most critical issues going forward in the regulation writing,鈥 said Erin Reidy, senior policy analyst at the cancer group. 鈥淲e are very concerned.鈥
Reidy said that grandfathered plans could go on into perpetuity because the law does not give a date when that status expires. She said the group is recommending that the administration 鈥渁dopt a real narrow definition of grandfathering and any change to coverage should constitute a loss of grandfathering status.鈥
Consumer Protections聽
The grandfathered plans are subject to some consumer protections in the bill, including a requirement that plans provide dependent coverage for children until age 26; a ban on pre-existing condition exclusions for children this year and everyone in 2014, and a prohibition on lifetime insurance limits. In addition, grandfathered health plans will be blocked from retroactively canceling coverage after a policyholder gets sick.
But grandfathered plans also will be exempt from some consumer protections, including one requirement that health plans cover certain treatments associated with clinical trials, and another that limits annual out-of-pocket costs. In addition, grandfathered plans won鈥檛 have to meet new rules limiting how much premiums can vary based on age and tobacco use.
Some state regulators are confused. 鈥淲hat鈥檚 not clear to me is actually how we are going to define a grandfathered plan,鈥 said Beth Sammis, acting insurance commissioner for Maryland.
Some employers are concerned that changes they typically make every year to their employee health coverage 鈥 such as changing a policy鈥檚 co-pays or deductibles 聳 could alter a plan鈥檚 grandfathered status. 鈥(Employers鈥) ability to manage future costs will be constrained to some degree,鈥 said Neil Trautwein, vice president and employee benefits policy counsel for the National Retail Federation. 鈥淭here are cases where (medical) practice may change, where they might want to encourage behavior 聳 further incentives on wellness, for example 聳 and we鈥檙e leery about how big a tripwire there will be for changes.鈥
Employers are anxious to see the new regulations from the Obama administration because they need the information this summer as they develop their health benefits for 2011, said Sally Doubet King, a partner with the McGuireWoods law firm in Chicago. 鈥淚 know of several employers who want to be sure not do anything that would take them out of grandfather status,鈥 she said.