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Regulation and Compliance > Federal Regulation

Agencies Set Rules To Exempt Plans From PPACA

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Rules unveiled last week that will govern the grandfathering of existing plans under health care reform legislation did not generate the outrage that opponents of reform hope create.

Under the interim rule with a request for comments unveiled Monday by the Departments of Health and Human Services and Labor, the administration projected that more than half the healthcare plans now in existence won’t be in compliance with the new rules by 2013.

Republicans used that projection to argue against reform, if most small or large business health care plans lose their grandfathered status by 2013, they asked, “can it really be said that the president has kept his promise to the American people that they can keep their coverage?”

Alec Valchon, a former Republican Senate staffer and now a healthcare consultant, argued that the President’s pledge was more “aspirational” than substantive.

He also argued that in general, “there is tremendous turnover in healthcare plans.”

Market reaction to leaks about what would be contained in the regulation as well as a release of the new rules signaled that the new rules “won’t change the insurance business in a material way,” he added.

He said compliance with the new rule would likely raise costs that employers and, probably, employees would have to pay, but the government didn’t act to reduce the number of covered lives that healthcare plans must provide for.

Officials of the National Association of Health Underwriters said they will ask for greater flexibility in the allowable copay band and a longer compliance transition in final regulations.

But Jessica Waldman, NAHU senior vice president of policy and public affairs, did not appear to believe the rules were Draconian and that agents’ groups could not live with them.

And Tom Currey, president of the National Association of Insurance and Financial Advisors, pointed to some encouraging aspects of reform.

Imposition of the grandfathering rules and all the new regulations that are expected as the law is put into practice will require agents to play “an even greater role assisting employers to evaluate whether it makes sense to make changes to their current health plans that could subject them to losing their grandfathered status,” Currey said. “Employers will need help determining the costs associated with putting a new plan in place or whether maintaining a ‘grandfathered’ plan would be a better decision for companies and their employees.”

Once that question is settled, the agent would then provide guidance on how to maintain the existing plan without losing the grandfathered status or assist the employer with the selecting of a new plan, Currey said.

Under the new rules, employers will lose the right to retain their current healthcare plans if they raised deductibles or copays by more than the rates of medical inflation plus 15%.

Another no-no will be decreasing cost- sharing by employees by more than 5%.

The rule stipulates that if a plan loses its grandfathered status, it will be required to provide the full extent of consumer protections offered under the law, including preventive care without cost sharing or guaranteed access to OB-GYNs and pediatricians.

But industry officials noted that even with grandfathering, most of the consumer protections mandated by the new law will apply to all insurance plans, including a ban on lifetime limits for coverage, coverage rescission and extended coverage to children under 26 years old.

In commenting on the regulation, NAHU will argue that the regulation provides for an unrealistic transition period, from June 17 to July 1, Waldman said.

She said most of the contracts that go into effect July 1 and Aug. 1 were negotiated over several months because they must go through various review processes. As a result, “plans must be given more time to comply” with the new rule, she said.

Moreover, the tight transition schedule in the rule does not comply with the spirit of the president’s pledge that, “If you like your plan, you can keep it,” she said.

“This is a very great burden,” she added. She suggested a “good-faith compliance standard of up to a year or at least six months.”

She also said that the provisions proposed on copays are too rigid, because plans change their copays on hospital stays, X-rays, and lab fees frequently.

She said that NAHU will also ask that issues that have not been raised, such as limits on formulary changes, out-of-network policies and specific hospitals, be kept out of future regulations to provide plans with greater flexibility.

NAHU will ask HHS, “Please don’t add more components that would further complicate grandfathering of plans,” Waldman says.

Last week, the Office of the Federal Register posted a draft of the interim final regulations on its website and was preparing to publish the final version of the interim rules June 17.

Comments on the interim rules will be due 60 days after they are published in the Federal Register.


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