New rules from the Obama administration that regulate health care plans that existed before the reform bill was passed highlight the difficulty the administration faces in both reforming the system and allowing people to keep the plans they like.
Under new regulations issued Monday, anywhere from 39 percent to 66 percent of employer plans will lose their “grandfathered status” by 2013, according to estimates included with the rules.
For plans that do not fall under the grandfathered status, employers would have to find a plan that complies with the health care bill passed March 23. Whether or not costs for the new plans will be less than grandfathered plans has yet to be seen.
Small businesses would be harder hit than large employers, losing grandfathered status for as few as 49 percent and as many as 80 percent of plans. Employers may keep their plan if it does not raise its prices beyond “reasonable changes” and if it does not cut substantially cut benefits for a particular condition.
Health and Human Services Secretary Kathleen Sebelius reiterated a saying that President Obama said many times during the health care debate: “If you like the plan you have, you can keep it,” Sebelius said at a press conference Tuesday.
But experts say the new regulations reflect the limits to which that promise can be kept.
“Given the direction that President Obama wanted to go with health care, his promise that people could keep their existing plans was always a dicey one,” said Tevi Troy, former HHS deputy secretary under President Bush and visiting senior fellow at the Hudson Institute.
The administration said that it would “take into account reasonable changes” that insurers routinely make in response to changes in cost and availability but would not outline details about what “reasonable changes” might be.
The regulations stipulate that insurers may make changes to their plans, but only to increase benefits or adapt to consumer protections outlined in the health care bill.
“They give all Americans with health insurance some important protections this year and create a path to the consumer-friendly health insurance marketplace of the future,” Sebelius said.
The new rules mandate that new individuals may not be added to grandfathered health plans after a business merger or restructuring so that grandfather status is not traded as a commodity. Thus companies will likely have employees with two different types of health care coverage, if the companies stay with their current plan.
Troy anticipates that insurance companies will try to freeze their plans to retain their grandfathered status for as long as possible.
“Freezing is not sustainable,” Troy told the Daily Caller. “The majority of plans will lose their grandfathered status in relatively short order, which I suspect was the unstated intent of both the legislators and the regulators.”