As companies approach their open enrollment period, many are facing questions about the new rules under the health care reform act.
One of the biggest decisions they will initially need to make is whether they want their current plan to be grandfathered under the former rules, exempting them from some of the new mandates but locking them into the terms of their current plan, says Toni Pilzner, a member at McDonald Hopkins PLC.
“Employers should evaluate their plans and determine whether they want them to remain grandfathered,” says Pilzner. “It is a balancing act between the constraints of being grandfathered versus the cost of losing that status.”
Smart Business spoke with Pilzner about the benefits and pitfalls of retaining grandfathered status, and about how to determine which option is right for your company.
What does a company need to consider when determining whether it wants its group health plan to remain grandfathered?
If your plan remains grandfathered, you essentially must keep your coverage and your plan exactly as they were on March 23, 2010. You cannot change your insurance company or increase any of your co-insurance percentages. You are limited on how much you can increase co-pays and deductibles and in how much you can decrease the employer contribution and increase the employee contribution. Keeping a plan grandfathered may not make sense from a flexibility and financial management stance.
If your plan is not grandfathered, the plan will have to provide first-dollar coverage for preventive benefits and your plan has to pay emergency care both in and out of network at the same level, and cannot require pre-authorization for emergency care. But, you have the freedom to change your insurance company, your coinsurance percentages and your co-pays and deductibles. Thus, it may pay to give up your plan’s grandfathered status for the financial flexibility.
What are the consequences of losing grandfathered status?
If you have a fully insured plan, the plan becomes subject to nondiscrimination rules. If your plan loses its grandfathered status, you must offer coverage to a broader range of employees, not just to your highly compensated employees. Your plan also becomes subject to more of the new mandates, such as having to provide first-dollar coverage for preventive benefits.
Realistically, I do not see any plans remaining grandfathered after 2014. And companies may end up providing the additional mandated benefits in their plans, whether they want to or not, because insurance companies have already indicated that they are putting all of the mandated benefits in all policies.
