Millions of Americans in coming months will receive notices from their insurance companies saying that their policies must be cancelled due to changes brought about by President Obama's health care law.
At issue is that the law imposes a raft of new requirements on insurance policies, mandating that they offer a certain package of benefits deemed “essential,” regardless of whether consumers actually want to pay for those benefits.
As the legislation was making its way through Congress, Democrats added a provision allowing plans that wouldn’t otherwise meet Obamacare’s requirements to be “grandfathered” — meaning that they could still operate as long as they didn’t make certain changes.
With cancellation notices piling up and Obama under fire for violating his most memorable health care promise — that Americans could keep their current health plans if they liked them — the issue of what qualifies as a “grandfathered” plan is becoming a flashpoint.
Already, the Obama administration is trying to put the blame on insurance companies. Senior Obama adviser Valerie Jarrett wrote on Twitter on Monday, “FACT: Nothing in #Obamacare forces people out of their health plans. No change is required unless insurance companies change existing plans.”
In reality, the Department of Health and Human Services has issued regulations limiting the changes that insurers could make after March 23, 2010 (the date Obamacare was signed into law) for plans to survive. Here are six types of changes that would strip a plan of its grandfathered status:
1. If a plan eliminates all or most benefits for diagnosing or treating a particular condition. For instance, to use an example mentioned by HHS, if a plan offered mental health coverage and treatment consisted of counseling and prescription drugs, eliminating counseling coverage would cause a plan to lose its grandfathered status. This is true even if only a small number of subscribers to the plan have the given condition.
2. If a plan alters the percentage that enrollees must pay toward their own medical expenses. For instance, if before March 23, 2010, a plan made its subscribers pay 10 percent of the cost of doctors’ visits, raising that amount to 11 percent would mean loss of grandfathered status.
3. If a plan alters the dollar amount its subscribers must pay toward their own medical expenses by either $5 (adjusted for medical inflation) or medical inflation plus 15 percent, whichever is greater. As an example, based on my calculations, if a plan charged consumers $10 for doctors' visits and upped the charge to $16 over the last three and a half years, it would no longer be grandfathered. (Medical inflation in the past few years has averaged about 3-4 percent.)
4. If the annual deductible or out-of-pocket limit were increased by more than medical inflation plus 15 percent. In other words, if somebody had a $400 deductible in March 2010, and it got raised above $500, that could trigger a loss in grandfathered status.
5. If the plan didn’t have lifetime or annual limits on medical claims as of March 2010, adding them would cause the plan to lose grandfathered status — so would adding an annual limit that exceeds the lifetime limit or decreasing the dollar value of the annual limit.
6. For employment-based health insurance, in addition to all of the above, a plan would lose its grandfathered status if the employer reduced its contribution by more than 5 percent. In other words, if in March 2010, an employer paid for 85 percent of its employees’ premiums, reducing that amount to less than 80 percent would trigger a loss in grandfathered status.
Once a plan loses grandfathered status, it is subject to all of the other regulations within Obamacare, which is why so many Americans are losing their current coverage.