Insurers seek more flexibility to avoid health reform mandates

The Congressional Research Service has said individual and group health insurance plans in existence before the law was signed on March 23 "are exempt from the vast majority of the new insurance reforms," including cost-sharing restrictions, minimum benefits and federal claims denial standards.

The Obama administration issued guidance in June on how health plans could preserve their grandfathered status. The guidance prohibits "significant" cost hikes or benefit cuts, but regulators say more than half of all employers — and two-thirds of small employers — would relinquish their grandfathered health plans by the end of 2013 under the current rules.

Pending regulations would strip plans' grandfathered status if:

- Coverage for a particular condition or illness is eliminated;

- An annual dollar limit on benefits is imposed or an existing limit is reduced;

- Coinsurance amounts are increased above a certain threshold;

- Deductibles or out-of-pocket maximums are increased above a certain threshold;

- Or employers change eligibility requirements in certain ways or increase employees' contributions to premiums by more than 5 percent plus medical inflation.

The memo says AHIP members should ask regulators to consider:

- Allowing greater permissible cost-sharing changes. The memo says the regulatory threshold of 15 percentage points plus medical inflation doesn't keep up with rising medical costs;

- Allowing routine changes to prescription drug formularies and provider networks;

- And issuing additional guidance. This includes requiring prospective but not retroactive changes to the plans if their grandfathered status is successfully challenged; allowing consumers who bought coverage with a premium affordability feature on or before March 23 to exercise that right; and specifying that only changes proscribed by the regulations would cause a loss of grandfathered status.

AHIP says more flexibility is needed to ensure Americans can keep their health plans.

But in outlining the new grandfathering rules in June, Secretary of Health and Human Services Kathleen Sebelius said it was important that plans "don't use this additional flexibility to take advantage of their customers."