Keep or Lose?

Throughout
the debate on health care reform earlier this year, Americans were promised,
if you like the coverage you have, you can keep it. With this in mind, the
new laws exempt, or grandfather, existing health plans from some (but not
all) reform mandates. New regulations released in June have answered the
question of what causes a plan to lose grandfathered status, but also raised a
new one: How essential is it really for a business to keep grandfathered
status?

Employers
who want to keep their grandfathered status wont have many chances to make
changes to their health plans in the future. Only limited changes in employer
contributions to health premiums, co-payments, deductibles and other plan
parameters will be allowed. You will not be able to move to a new
insurance company. In addition, there are several reform mandates which even
grandfathered plans must adopt (such as extending coverage for children to age
26).

For
many companies, adhering to the tough rules will not be worth it. For others, losing
grandfathered status could be significant. Two requirements in particular could
have great potential impact on a health plan if it loses grandfathered status.

1. Full
   coverage for preventive care services: Non-grandfathered plans will be required
   to cover preventive care services (such as mammograms, certain immunizations
   and screenings) with no cost sharing. If your health plan already covers preventive
   care at that level, this may not be a significant change. Plans which currently
   require co-payments for preventive care may see an increase in their rates.
   However, evidence suggests that improving access to preventive care may help
   lower medical costs in the long term.
2. Nondiscrimination
   rules: Non-grandfathered insured health plans will now be subject to
   nondiscrimination rules. Employers will not be able to favor highly compensated
   employees both in eligibility and benefits provided. Companies who currently
   offer the same health plan to all employees, at the same cost and access, will
   not be impacted by this change. Also, employers who pay for medical claims
   rather than buying a policy (known as self-funding) already need to adhere to
   such nondiscrimination rules, so for them this will not be a change either.

Given
the complexity of keeping grandfathered status and the potentially low risks
associated with losing it, employers should carefully weigh their options when
formulating their benefit strategy for the coming year.