'Grandfathering' clause raises more questions on impact of overhaul
NORTH BAY — Throughout the health care reform debate, employers and employees alike were told they’d be able to keep their current health plans, if so desired. With the unveiling of details on the so-called “grandfathering” clause by the Department of Health and Human Services, however, brokers said such a prospect seems slim, and employers will face a series of tough choices regarding what type of plan they choose to offer employees as they attempt to grapple with still-rising costs.
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“Very few of the groups will be grandfathered by 2014,” said Victor McKnight, a broker with Sitzmann Morris & Lavis in Santa Rosa and past president of the North Coast Association of Health Underwriters.
Mr. McKnight’s point was echoed by numerous insurance professionals who said seemingly minor changes to health plans on such short notice mean that few employers will be able to keep existing plans in place.
“My biggest problem is the limited amount of warning to clients,” said David Hodges, who heads Hodges Insurance Services in Santa Rosa.
Requirements for plans in place on or before March 23 of this year to meet grandfathered status were issued by the federal government recently and quickly created a buzz among brokers – most of whom in the North Bay expressed doubt that the promise to keep plans as is would not be met for the majority of both group plans and individual plans.
Changes that would alter the status of plans include the elimination of any specific benefit, an increase in employee co-insurance, an increase in deductible or the out-of-pocket maximum, any increase in employee co-payment, a decrease in employer contribution of more than five percent, changes to annual policy limits and change of carrier for a new policy.
“If you raise the co-pay by more than five dollars, you lose status. Or if you ask your employees to pay a little more, say from 80 percent to 90 percent, you lose status. If you go from Blue Cross to Blue Shield or Health Net, you lose status,” Mr. McKnight said.
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Brenda Gilchrist, who advises many employers on polices as the principal and co-founder of the HR Matrix, said many employers may not be aware of some of the implications that certain plan design changes will have under the rules.
“Some employers may be making changes this year, such as increasing cost-sharing, changing co-pays or making other plan changes to decrease costs. In the end, some of their plan design changes made after March 23 may increase their costs,” she said.
Another possibility is that some employers may find it more cost-effective to drop employee coverage all together, since it may be cheaper to pay government fines rather than footing the cost of benefits, Mr. Hodges said.
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He called the new rules "a blind side to small businesses" because they will likely be impacted more so than companies with 50 or more employees. Based on conservative estimates from the Congressional Budget Office, he said the average cost for a single employee’s health plan will be around $7,000 a year when all elements of the health overhaul bill take effect. The average fine per employee on an annual basis will be around $2,000 a year.