What are the seven ways to lose grandfathered status?
The first way to lose status is to eliminate all benefits related to a specific condition, such as diabetes. Second, you can’t increase co-insurance. So if the plan covers services at a percentage level — such as the plan pays 90 percent and the participant pays 10 percent — you can’t increase that. If you increase that coinsurance level by as little as 1 percent, the plan loses its grandfathered status and all the benefits of that status.
Third, increasing the out-of-pocket maximum or deductible above the federal maximum allowed amount causes loss of status. The maximum allowed amount is a combination of medical inflation plus 15 percentage points. Medical inflation last year was about 9 percent, so 24 percent is the maximum change for your deductible if you wish to maintain grandfathered status.
Fourth, many employers try to deal with premium increases delivered to them each year by adjusting co-pays. But if the plan increases any co-pay for any service by more than the maximum allowed amount, it loses grandfathered status. The maximum amount is different for flat dollar co-pays than for deductibles and out-of-pocket expenses. It is the greater of $5, or medical inflation plus 15 percentage points. So if a co-pay is $10 and you want to raise it to $15, you’d be OK. But if you wanted to increase a co-pay from $50 to $100, you’d lose your status. It’s more than $5 and more than medical inflation plus 15 percent, because you’d be raising it 100 percent.
Fifth, if the employer decreases the contribution made for the plan premium for any tier of coverage by more than 5 percent, the plan would lose grandfathered status. For example, if the employer splits the contribution to premium costs with employees 60/40 and chooses to decrease that contribution to 50/50 the plan would lose grandfathered status. Sixth, if you change carriers or enter into a new insurance policy or certificate, you lose your status — even if you keep your plan the same. However, if your plan is self-insured, the employer takes on the full cost of the claims and doesn’t buy an insured product from a carrier, moving from one third-party administrator to another.
Finally, if the plan adds an annual limit on the dollar value of all benefits that will be paid out, the plan can lose its status. If you put in an annual limit and you didn’t have a lifetime limit in the past, you lose grandfathered status. Also, if the annual limit is added in place of a former lifetime limit and the new annual limit is lower than the former lifetime limit, the plan will lose grandfathered status.
Is it worth it to employers to do everything that will be required to maintain grandfathered status?
It’s different for every employer. Every employer should do the math, but don’t fear losing your grandfathered status. The Department of Health and Human Services is predicting that 70 percent of employers will keep their grandfathered status in the first year. From what we’re hearing on the street from agents, that number is really high.
We don’t think that many employers will be able to keep their status because they’re just too handcuffed. They need to be able to adjust their co-pays, deductibles and employee contributions in order to afford to offer benefits.
Marti Lolli is director of health care reform for Priority Health. Reach her at [email protected].
