Does Grandfathered Health Plans Rule Need Flexibility?
As discussed in an earlier post, the interim rule for grandfathered health plans left some feeling cranky.
The Society for Human Resource Management (SHRM) thinks “grand-pops” needs more flexibility.
What Are Your Intentions?
Throughout the health reform debate, the promise repeated over and over was that Americans could keep health plans they loved.
The Patient Protection and Affordable Care Act (PPACA) “grandfathered” certain health plans that were in place as of March 23, 2010. That grandfathered status exempts the health plans from certain provisions of the PPACA.
SHRM questions if the interim rule supports the intent of the health reform provision.
Keeping Grandfathered Plan Breathing
Keeping current health plans is not only important to individuals, but also the employers that sponsor them. Since its introduction, the trick to grandfathered health plans appears to be maintaining the grandfathered status.
According to the interim rule, significant changes in plan provisions, like copayments, deductibles and other changes, cause a loss of grandfathered status. What that means is the health plan is then subject to the more restrictive rules established by the PPACA,
It is that lack of flexibility that SHRM objects to. The organization sees the interim rule as making it difficult for grandfathered health plans to maintain their status for very long.
SHRM’s Wish List
With employer-sponsored plans, responsibility for complying with health plan regulations usually falls to human resources. As the world’s largest association of human resource management, SHRM has a vested interest in health reform.
A survey conducted by SHRM revealed that 9 out of 10 large companies expected to lose grandfathered status for their health plans. SHRM took action by submitting comments on the interim rule to the U.S. Department of Labor.
The following is a brief summary of what SHRM requested. A more complete explanation can be found here.
Employer contributions – The interim rule states that if grandfathered plans decrease the percent of premiums the employer pays by more than 5 percentage points, they lose their grandfathered status.
SHRM suggested the use of actuarial value, which would be provided by the employer, instead of the flat statistic of 5 percentage points.
The actuarial value measures medical expenses, benefits and cost-sharing. So if the health plan changes some benefits, the actuarial value determines what effect that has on cost-sharing (what the employer pays versus the employee).
High Cost Plan – Some employers offer multiple health plan options for their employees that have higher and lower costs. SHRM requested a clarification in the interim rule that states the grandfathered status would not be lost if the health plan eliminated and replaced its high-cost plan option with similar benefits.
Coverage Tiers – Coverage tiers are handled differently by health plans. For example, one health plan has coverage for the employee + family, which covers the employee and any number of eligible family members. Another health plan may classify it as employee + 3 dependents, which covers the employee and three eligible dependents. If the employee had four dependents, it would put the family into the next coverage tier.
SHRM recommended that health plans be allowed to change coverage tiers without losing grandfathered status.
Changing Insurers – The number of insurance carriers offering health plans shrunk dramatically in the past several years. SHRM requested that health plans not lose grandfathered status if there is a change in carriers, especially if the change is involuntary.
Prescription Drugs – A formulary is a list of prescription drugs, covered by a health plan. Insurers and pharmacy benefit management companies change formularies regularly. SHRM recommended that a change in formulary not result in loss of grandfathered status.
Provider network – SHRM also requested that changes in a provider network not cause the loss of grandfathered status.
SHRM had other items on its wish list concerning recordkeeping and access to health plan documents.
One thing is certain, the rules, interpretations and health plans have many changes in store.
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Notice of Disclaimer –Cathy Miller is not an attorney and cannot provide legal advice. The information provided is for your general background only, and is not intended to constitute legal advice as to your specific circumstances. We recommend you review legislation with legal counsel.
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