New health-care rules could add costs, and benefits, to some insurance plans

By David S. Hilzenrath and N.C. Aizenman
Washington Post Staff Writer
Tuesday, June 15, 2010; A05

If you like your health plan, you can keep it. That's what President Obama promised during the long months of debate over health-care reform.

On Monday, the administration issued new rules to fulfill that promise. But your plan might not be quite the same -- it could offer more benefits, and it could cost more.

The administration estimates that many plans will end up changing, prompting Republicans to accuse the president of breaking his word.

The tempest involves an issue known as "grandfathering." Consistent with Obama's promise, the legislation said health plans in existence when the law was enacted are exempt from some of its requirements. But the law left it to the administration to decide how much a health plan can change without forfeiting that exemption.

The rules issued Monday begin to answer the question.

For instance, health plans would lose their protected status if they significantly raise deductibles or other out-of-pocket charges patients pay when they seek medical care.

Some plans require members to pay a percentage -- 20 percent, for example -- of the hospital or doctor bill. If plans want to remain grandfathered, they can't raise the percentages.

For increases in deductibles, the trigger is medical inflation plus 15 percentage points.

Employers would lose grandfathered status if they switch insurance companies -- unless the plan is covered by a union contract or the employer pays claims out of its own funds and uses the insurer only to administer the plan.

It isn't clear how much the restrictions on co-payments and deductibles will save consumers, because health plans can still raise premiums. The rules issued Monday say plans would relinquish grandfathered status if they reduce the percentage of the premium they pay by more than five percentage points. The broader health-care law includes checks on unreasonable increases, which have not been defined.

The administration estimated that by 2013, health plans covering as few as 39 percent and as many as 69 percent of employees could lose protected status. For small employers, the total could be as high as 80 percent; for large ones, it could reach 64 percent.

Those plans would then have to offer benefits required of new plans, such as fully covering certain preventive services and guaranteeing access to OB-GYNs. Beginning in 2014, non-grandfathered plans covering individuals and small groups would also have to offer at least a minimum benefits package as defined by the government.

To the extent that plans losing grandfathered status do not already offer those benefits, their costs could increase.

"This is not only bad news for the vast majority of Americans who like the plans they have. It also flatly contradicts the president's repeated promises," Senate Minority Leader Mitch McConnell (R-Ky.) said on the Senate floor.

Health and Human Services Secretary Kathleen Sebelius said in an interview that Obama "wanted to make sure as much as possible that if people had plans that they liked they got to keep them and balance that with, you know, some overall protection for consumers."

Obama's frequently repeated promise about keeping your coverage if you like it was problematic. Health plans routinely make changes. If the overhaul works as intended, many small businesses would send workers to new marketplaces called exchanges, where they could find more and better options. Over time, the exchanges could be opened to large employers, too.

The promise helped reassure a public nervous about change, but it also gave Obama's critics political ammunition.

Losing grandfathered status could be a bigger deal for small businesses than for large businesses because small employers' health plans could have more ground to make up to come into compliance.

Industry representatives said it was too soon to tell how much.

"The reality is, we're going to have to take a closer look at these rules," said Kathryn Wilber, senior counsel for health policy at the American Benefits Council, whose member companies sponsor or administer health plans. "They're a little more complicated than we would have liked, and it's really a plan-by-plan specific decision."

Judging the stakes is also complicated by the fact that rules implementing other aspects of the health-care overhaul have yet to be hammered out by regulators.

"For example, the law gives very little insight on what types of internal and external claims procedures a [non-grandfathered] plan would have to have in place," said Kelly Traw, a lawyer with Mercer, a human resources consulting firm. "It also does not spell out which preventive services a plan might offer."

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