Report: Administration weighing changes to 'grandfathering' rule for health plans

The Obama administration is weighing whether to allow companies to switch health plans without losing their coveted "grandfathered" status, reports Bloomberg.

The provision under consideration exempts health plans from some of the coverage requirements established by the healthcare law. Plans that are grandfathered in do not have to comply with all of the new rules.

In June, the Department of Health and Human Services issued regulations spelling out what would cause companies to lose their grandfathered status. Among the listed actions was changing insurance providers. 

"If an employer decides to buy insurance for its workers from a different insurance company, this new insurer will not be considered a grandfathered plan,'" the regulations state.

Now, Bloomberg reports, the American Benefits Council, which represents employers that sponsor health plans, is in discussions about the grandfathering rules with the Health and Human Services Department's (HHS) Office of Consumer Information and Insurance Oversight. The report cites an unnamed White House official as saying that the administration is "weighing whether to allow employers to avoid the requirements, even with a new insurer, as long as benefit levels stay the same."

The Chamber of Commerce has made replacing the provision with less stringent requirements a priority. On Sept. 29, senators rejected 59-40 a resolution of disapproval by Sen. Mike Enzi (R-Wyo.) that would have required HHS to withdraw and re-issue the rule.

According to HHS estimates:

• 40 percent to 67 percent of individual policies will lose grandfathered status by 2011;

• 34 percent to 64 percent of large employer group plans (100 or more employees) will lose their grandfathered status by 2013; and

• 49 percent to 80 percent of small-employer group plans (three to 99 employees) will lose their grandfathered status by 2013.

That doesn't mean those plans would no longer be offered — only that they would have to comply with new mandates of the healthcare reform law. 

The debate comes as HHS is struggling to put in place the law's costly new consumer protections without causing employers to drop coverage ahead of the midterm elections. Earlier this month, HHS granted waivers to 30 companies from the requirement that the annual limit on their coverage be at least $750,000 next year, sparking criticism from both liberals and conservatives.

The latest news is also fueling speculation that the administration could show flexibility in applying the reform law's medical-loss ratio, which requires health plans to spend a certain percentage of premiums on medical care.