From the September 2010 issue of Treasury & Risk magazine

Heading Into Open Enrollment, Companies Adjust Health Plans


Many companies are making changes to their health plans for the coming year to contain costs, even though doing so may mean the plans lose grandfathered status under the new law, the Patient Protection and Affordable Care Act.

Healthcare costs are expected to increase 8.9% in 2011, according to a survey of big corporates by the National Business Group on Health (NBGH), outpacing the increases of 6% to 7% seen in recent years. Helen Darling, the group's president, estimates that one percentage point of that increase will reflect changes mandated under healthcare reform.

In response, the survey shows 63% of the employers are increasing the percentage of the premium paid by workers, 46% are boosting employees' out-of-pocket maximums and 44% are increasing in-network deductibles. And 61% will offer a consumer-directed health plan.

And according to the survey, 53% of companies are making changes despite the uncertainty about regulations on grandfathered status. "From their point of view, [grandfathered status] is less important than their business requirements," Darling says.

Healthcare reform awards grandfathered status to plans that undergo little alteration, and that status limits the new requirements plans must comply with immediately. But many companies seem to be giving up on being grandfathered.

"About 60% of our larger employer clients are planning on forgoing grandfathered status, which means they can do whatever they might chose to do in terms of plan design changes," says Randall Abbott, a senior consultant at Towers Watson.

"Grandfathered status is very limiting," Abbott adds. "You can make very few changes in your plan design or employee contribution strategy." He argues that losing grandfathered status would not be that costly for most plans.

The main requirements facing non-grandfathered plans are to provide preventive health benefits at 100% coverage, cover out of-network emergency room visits at the same level as in-network emergency room visits, and adopt an external appeals process, he says.

Some organizations representing employers have submitted comment letters requesting changes in the interim regulations regarding grandfathered status. But companies have to prepare for the fall enrollment season now, Abbott says. "While there's still some discussion going on, employers just have to act."

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