Medicare Compliance & Reimbursement

Depending on how the Obama administration interprets the term "grandfathered," millions of Americans could lose some important benefits of the new health overhaul law. So say Phil Galewitz and Mary Agnes Carey in their post on www.kaiserhealthnews.org.

"Grandfathered" health plans is the legal term for existing health plans which would be exempt from several consumer protections. One of these exemptions requires that beginning as early as September, health plans are prohibited from charging co-payments and other cost-sharing for certain preventive health services such as immunizations and cancer screenings, the post indicates.

The issue, say Galewitz and Carey, has sparked a debate on the very definition of "grandfather" with some consumer and employer groups already at loggerheads. According to consumer groups, if the definition is too lenient, many Americans will be deprived of the full benefit of the law. But business groups are saying the plans that are made to forfeit their grandfather status will be subject to new rules that will raise costs and premiums.

Provisions were included in the bill to give employers and insurers some buffer to transition to the new law, the post says. And the problem is that the law is very vague on what constitutes a grandfathered plan. For example, does a plan forfeit its grandfather status if it increases employees' deductibles or changes prescription drug coverage? Plans that give up their grandfather status must abide by all the consumer protections in the new law, it says in the post. The administration is expected to issue its guidance soon on how it interprets the grandfathering clause, say Galewitz and Carey in their post.

When asked for her views on this issue, Jessica Santillo, a spokeswoman for the Department of Health and Human Services, said, "Under health reform, Americans who like their healthcare can keep it and we'll change the balance of power to put consumers in control of their health care, not big insurance companies. Our work to implement this law and draft regulations is ongoing, but we've already made tremendous progress," the post reports.

Grandfathered plans are subject to some consumer protections in the bill, states the post. A requirement, for instance, says plans provide dependent coverage for children until age 26. Other protections include a ban on preexisting condition exclusions for children this year and everyone in 2014, and a prohibition on lifetime insurance limits. Plus, grandfathered health plans will be blocked from retroactively canceling coverage after a policyholder gets sick.

On the other hand, grandfathered plans also will be exempt from some consumer protections, including a requirement that health plans cover certain treatments associated with clinical trials, and another that limits annual out-of-pocket costs. Apart from this, grandfathered plans won't have to meet new rules limiting how much premiums can vary based on age and tobacco use.

This has confused some state regulators. Galewitz and Carey quote Beth Sammis, acting insurance commissioner for Maryland, who says "what's not clear to me is actually how we are going to define a grandfathered plan."

Employers Call for Swift Action Sally Doubet King, a partner with the McGuireWoods law firm in Chicago, opines in the post that employers are anxious to see the new regulations from the Obama administration because they need the information this summer as they develop their health benefits for 2011. "I know of several employers who want to be sure not do anything that would take them out of grandfather status," she said.

(Editor's note: Read the complete post on www.kaiserhealthnews.org at: www.kaiserhealthnews.org/Stories/2010/May/07/health-reform-law-grandfather-clause.aspx.)