Yesterday, the Department of Health and Human services updated its so-called grandfather rules that exempt health insurance plans in existence before March 23, 2010 — the day the Affordable Care Act became law — from many of the new regulations, benefits standards and consumer protections that new plans now have to abide by. The goal is to allow consumers to keep their existing plan, while also denying insurers and employers the ability to avoid the rules by dramatically cutting benefits, raising co-pays, or lowering employer contributions.
Under the original regulation only self-funded plans could “change third-party administrators without necessarily losing their grandfathered plan status.” Yesterday’s update, “allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, so long as the structure of the coverage doesn’t violate one of the other rules for maintaining grandfathered plan status”:
The Departments received many comments on the provision in the original grandfather rule stating that a group health plan would relinquish grandfather status if it changed issuers or policies. This change was made in response to those comments for the following reasons:
1. There are circumstances where a group health plan may need to make administrative changes that don’t affect the benefits or costs of a plan.
2. Comments expressed concern that the original provision could have the inadvertent effect of interfering with health care cost containment.
The new, looser rules will help a relatively small number of employers hang on to their grandfather protections longer, even if it won’t please Republicans (who tried to repeal these regulations back in September). But of course, eventually, most plans will lose their so-called ‘grandfather protections.’ And that’s a good thing. The whole point of grandfather rules is to serve as a bridge to gradually moving everyone into plans that have the kind of consumer protections and benefit standards that Americans say they want. By 2014 almost all plans will be in full compliance and we’ll hopefully have a health care system in which all plans are required to meet a basic floor of standards.