New health care rules for employers draw mixed reaction

Kaiser Health NewsJune 15, 2010 

WASHINGTON — Business groups gave mixed reviews this week to new Obama administration rules limiting how much employers and insurers can change their health insurance plans while remaining exempt from potentially costly new consumer protections.

Consumer groups praised the regulations, saying the rules would ensure that millions of Americans receive the full benefits of the new health care law.

Under the new law, existing or "grandfathered" health plans could be exempt from some provisions designed to protect consumers. Those provisions include, for example, a requirement that takes effect Sept. 23 barring plans from charging for immunizations, cancer screening and certain other preventive health services.

The rules, released Monday, spell out when plans would lose their grandfathered status, including if they make major increases in premiums, modest increases in co-payments or significantly cut benefits. The administration estimates that half of all employers, including two-thirds of small employers, could lose their grandfathered status by 2013.

Many employers pressed the administration for maximum flexibility, saying they didn't want to have to comply with potentially expensive new requirements if they made modest changes in their health plans. Meanwhile, consumer groups argued for tough rules so that millions of Americans wouldn't be deprived of the protections.

Business groups that opposed the enactment of the health overhaul law denounced the regulation. "Under the regulation, a plan could lose grandfathered status by changing a co-pay more than $5," said Randel K. Johnson, a senior vice president at the U.S. Chamber of Commerce, in a statement. "Once grandfathered status is lost, employers will be forced to follow a number of expensive new insurance rules — which will increase costs for employers and employees, threatening the coverage Americans currently have."

Stephanie Cathcart, a spokeswoman for the National Federation of Independent Business, said the regulations would make it more difficult for small businesses to continue to offer coverage. "There are restrictions on co-pays; there are restrictions on adjustments on cost sharing; there's restrictions on deductibles," she said. "You're kind of leaving small business with pretty few choices at the end of the day."

Other small business groups supported the rules, however.

John Arensmeyer, the chief executive of the Small Business Majority, a California-based health care research and advocacy group that supported passage of the health care law, called the regulation a "fair balance."

Consumer groups praised the regulation.

"This seems reasonable, balancing the need for consumer protections with the need to maintain stability in the health insurance marketplace during this transition period leading up to 2014," said DeAnn Friedholm, the director of health reform for the Consumers Union.

The American Cancer Society Cancer Action Network said in a statement: "This is a strong rule that encourages plans to strengthen benefits for patients and strips them of their 'grandfather' status if they choose to reduce benefits or substantially shift costs to patients."

Administration officials said the rules help strike the balance between giving most Americans the benefits of the new law while meeting their promise to allow people to "keep their current coverage if they like it."

Under the rules, health plans and employers would lose their "grandfathered" status if they:

  • Significantly cut or reduced benefits such as eliminating coverage for people with diabetes or AIDS.
  • Significantly raised co-payments or deductibles. Co-pays could not be increased by $5 or a medical inflation rate plus 15 percentage points, whichever is greater. Deductibles could not be raised by a percent equal to medical inflation plus 15 percentage points. Medical inflation has averaged 4 percent to 5 percent in recent years. Thus, a family with a $1,000 annual deductible could still see its deductible hiked to $1,200 and the plan keep its grandfathered status.
  • Significantly lowered the portion of health coverage premium paid for by the employer. Grandfathered plans would not be allowed to decrease the amount by more than 5 percentage points.
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(Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization that isn't affiliated with Kaiser Permanente.)

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