New Rules on Changes to Benefits
The White House on Monday will issue new rules that strongly discourage employers from cutting health insurance benefits or increasing the costs of coverage to employees, administration officials say.
The rules limit the changes that employers can make if they want to be exempt from certain provisions of the health care law passed by Congress in March. Many employers want the exemption because it allows them to keep their existing health plans intact with a minimum of changes. More than 170 million Americans have employer-sponsored insurance.
The administration said the rules would allow a smooth transition to a new, more competitive insurance market that works better for consumers. But in some respects, the rules appear to fall short of the sweeping commitments President Obama made while trying to reassure the public in the fight over health legislation.
In issuing the rules, the administration said this was just one goal of the legislation, allowing people to “keep their current coverage if they like it.” It acknowledged that some people, especially those who work at smaller businesses, might face significant changes in the terms of their coverage, and it said they should be able to “reap the benefits of additional consumer protections.”
The law provides a partial exemption for certain health plans in existence on March 23, when Mr. Obama signed the legislation. Under this provision, known as a grandfather clause, plans can lose the exemption if they make significant changes in deductibles, co-payments or benefits.
About half of employer-sponsored health plans will see such changes by the end of 2013, the administration says in an economic analysis of the rules.
The rules allow employers and insurers to increase benefits. But, in a summary of the rules, the administration said, “Plans will lose their grandfather status if they choose to make significant changes that reduce benefits or increase costs to consumers.”
Some provisions of the new law apply to all health plans. In general, they cannot cancel coverage when a person becomes ill, and they cannot impose lifetime limits on benefits.
But “grandfathered health plans” are exempt from other requirements. In general, they do not have to provide “essential health benefits” specified by the federal government and they do not have to provide free preventive care.
Under the rules, a health insurance plan can lose its exemption if it eliminates all benefits for a particular condition or if it increases deductibles or co-payments by more than the rate of medical inflation plus 15 percentage points.
Likewise, a health plan loses its exemption if an employer reduces its contribution so that its share of the total cost of coverage declines by more than 5 percentage points. If, for example, an employer is paying 60 percent of the cost of family coverage, it would run afoul of the rules if it cut its share to 50 percent.
An employer would also lose its exempt status if it increased co-payments for doctor’s visits to $45, from $30 — a 50 percent increase — while medical inflation was 8 percent.
Some health plans require consumers to pay a percentage of the bill, rather than a fixed dollar amount. An insurer loses its special protection if it makes any increase in this percentage — if, for example, it requires patients to pay 25 percent of the bill for surgery, rather than the 20 percent charged in the past.
A health plan would also run afoul of the rules if it eliminated coverage for services needed to diagnose or treat a particular condition. As an example, the rules describe a health plan that covers a combination of counseling and prescription drugs for treatment of a particular mental illness. The plan would lose its exemption if it eliminated benefits for counseling.
Some insurers cap the amount they will pay for covered services each year. If they want to retain their grandfathered status, they cannot reduce any annual dollar limit that was in place on March 23.
About 133 million Americans are in group health plans from employers with 100 or more employees, the administration said, and most “will not see major changes to their coverage as a result of this regulation.”