Health Care Reform: More on Keeping Your Existing Plan

Some individuals and employers want to keep their plans as they were on March 23, 2010, when the new health care reform laws took effect.

The new laws generally allow for this in “grandfathered plans,” with the exceptions outlined in my earlier blog.

"Grandfathered plans" are those health insurance plans in existence on March 23, 2010, which can be kept mostly "as is" under the new law. In a release on June 14, he Federal government provided guidance on what changes can and cannot be made after March 23.

Generally, changes cannot be made in grandfathered plans that significantly reduce benefits or increase costs to those covered, but here are some specific guidelines as to changes that can be made without losing grandfather status:

• Can make limited increases in fixed dollar amount co-payments up to the greater of $5.00 (adjusted by medical inflation, which has been around 4%) or a percentage equal to medical inflation plus 15 percentage points.
• Can raise deductibles by a percentage equal to medical inflation plus 15 percentage points.
• Can lower employer contributions to employee health insurance premiums, if amount lowered is within 5 percent.
• Can make changes to improve coverage and reduce insureds’ costs, and changes required of all plans under the health care law (including elimination of lifetime limits, elimination of arbitrary rescission of coverage, and offering coverage to children until age 26, if the plan includes coverage of children).

Some changes that cannot happen without jeopardizing grandfather status include:

• Cutting or reducing benefits.
• Raising the insured’s co-insurance charges (a percentage of charges the insured may be required to pay).
• Adding a new, or tightening an existing annual dollar limit on what the insurer pays.
• Changing insurance companies (though self-insured plans can change plan administrators).

These guidelines do allow employers, insurers and insureds some ability to make appropriate adjustments in existing plan arrangements without being required to adopt all the features required by the new legislation.

But as competition develops, particularly with the new state exchanges (by 2014), it may become attractive to leave grandfathered plans for updated plans with new features and attractive cost structures.

Alan Wenger can be reached at awenger@hhmlaw.com or at (330) 744-1111.

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