By: Carol Taylor
Employee Benefit Advisor
D&S Agency, a UBA Partner Firm
Another delay for non-compliant plans was released recently, to renew the plan into 2017. However, the process to remain on these plans relies on several items. First, the State Insurance Commissioner must allow or approve non-compliant plans to renew. Second, the insurance carrier decides to file the non-compliant plan rates, get approval from the respective State Insurance Commissioner in a timely manner, and send out all the required notices to the affected policyholders. Many in the industry are now calling these ‘grandmothered’ plans.
Not every state government allowed the first delay, and is, therefore, very unlikely to allow the second delay. The first delay was granted in November 2013. A list of states that granted the first delay can be found at: http://www.commonwealthfund.org/Blog/2013/Nov/State-Decisions-on-Policy-Cancellations-Fix.aspx. Given the level of confusion, cost of rate filings, and other factors, states allowing the non-compliant plan renewals are likely to shrink.
One thing that seems to be escaping the thought process in all of the delay announcements -- are the delays really even necessary? In a nutshell, no. The bill passed by Congress and signed into law by the President, on March 23, 2010, merely states that a plan in place as of that date is considered a ‘grandfathered’ plan. The regulatory agencies, in this case the Department of Health & Human Services (HHS), issued regulations that made it extremely difficult to maintain grandfathered status. If a copay was raised by more than $5, if the coinsurance percentage was lowered at all (i.e., from 90% to 80%, even if the out-of-pocket maximum remained the same), if the deductible was raised by more than 15%, or if an employer lowered their contribution percentage by more than 5% -- since March 23, 2010 -- the plan lost grandfathered status and must move to a compliant plan as of the plan renewal in 2014.
Was it necessary for those regulations to be so restrictive? Absolutely not. Grandfathered policies still must comply with several protections enacted by the Patient Protection & Affordable Care Act (PPACA). A few of these items being no lifetime maximum benefit, covering children to age 26, and starting at the plan renewal in 2014 the plans cannot have more than a 90-day waiting period.
Very few plans can still claim grandfathered status, with most small groups and individual policy holders having no choice to remain in that status. Could the confusion of some states allowing, while others not allowing, been avoided? Absolutely. Had HHS issued regulations that allowed for changes in the plans according to budgetary needs of individuals and companies, we would not be dealing with the state-by-state basis we are seeing today. Likewise, the individual mandate penalty waivers for the non-compliant plan cancellations would not be needed, as those plans would not have been cancelled in the first place.
For more information about compliance with health care reform, download "The Employer's Guide to 'Play or Pay'" which covers PPACA penalties, and how to make "Play or Pay" decisions taking into account factors such as location, compensation, subsidies, Medicaid, family size and income.