Health Insurance Renewal Decisions - Plan “grandfathering” Complicates Things
Can a PEO Help?

Health Insurance Renewal Decisions - Plan “grandfathering” complicates things. Accept a large increase in health insurance costs or shop for a new plan? Traditionally in a free and open market for health insurance business owners and managers review other health insurance options when they receive a large health rate increase. Now, they may be thinking twice.

With the new health care rules, companies that keep their existing health plans will be exempt from some of the legal requirements, such as providing yearly physical exams and other benefits that may add up to higher costs starting in 2014. Companies forfeit "grandfathered" status if they change their health plans.

According to an article in the Wall Street Journal:
“Many small businesses would like to keep their grandfathered status but can't afford the premium increases. Benefits consulting firm Mercer LLC says increases are averaging about 10% in 2010, and a Deloitte LLP estimate puts the range between 11% and 15%.
In California, Blue Shield California's small-business quotes rose an average of 18%. In New York, WellPoint Inc.'s Empire BlueCross BlueShield unit says it has raised prices for some small companies 17%. Mark Wagar, chief executive at Empire BlueCross BlueShield, attributed the higher premiums to increasing hospital prices and taxes.

The insurers argue that they have to increase prices because of mushrooming costs for hospital care, drugs and doctors. They say that the health overhaul did little to address the rising costs and that the health overhaul law's new coverage requirements could push prices up further.

Tom Epstein, the vice president for public affairs for Blue Shield of California, says that up to 75% of the increases stem from higher-than-anticipated patient use of plans with few limits on cost sharing.

Mike Sumner, who runs Case Automotive in Woodburn, Ore., found out recently that he would have to pay a 24% premium increase to renew his policy with Regence, a Blue Cross Blue Shield plan in the Northwest.

"Being grandfathered would be great, and I do like my plan," he says, "But 2014 is too far out. We've got health-care problems now." Instead of paying the new rate, he plans to shop for a new plan for himself and his six employees.

Nicholas Papas, a spokesman for the White House Office of Health Reform, says that the health-care law gives companies the flexibility to respond to rising costs. The new rules allow changes to deductibles, for instance, that adjust for medical inflation plus 15%.

Tax credits of up to 35% should help small businesses with 25 or fewer workers offset rising costs, and eventually health-insurance exchanges—the new marketplaces where consumers can shop for coverage— will help push prices down.

The law will also allow a grace period during which plans can undo changes that may have unwittingly triggered the forfeiture of grandfathering, Mr. Papas says. And, he adds, it will even acknowledge good-faith efforts to comply that nonetheless resulted in changes that are "modestly" over the new limits.”

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According to NAPEO

Federal agencies have issued and interim final rule on how the grandfathering provisions of the federal Patient Protection and Affordable Care Act (PPACA) are to be applied. The Department of Labor has also issued chart of which provisions of PPACA apply to grandfathered plans.

Additional information on the rule and the regulation itself is available on the EBSA Web site, including a model notice for use by those asserting grandfathered status.  The regulation provides that adding a new employee or eligible dependent to a plan does not destroy grandfathering.  However, the anti-abuse provisions of the regulation disallow any merger, acquisition, or "similar business restructuring" if the "principal purpose" is to cover new individuals under a grandfathered plan. Moreover, most increases of cost burdens upon employees or the diminishing of benefits to employees will cause a plan to lose its grandfathered status.

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Business owners who elect to join a PEO that has a current master group policy may be eligble for grandfathering under the PEO's master health isurance policy since those worksite employees may be considered new hires and/ or new dependents of the PEO. Contact StaffMarket or your current PEO for more information.

Most provisions are effective immediately with a few deferred to July 12, of this year. Visit the DOL Affordable Care Act site for more information.

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