Many Employer Health Plans Will Forfeit Grandfathered Status, Survey Indicates

checklist2.JPGA survey of more than 1,000 employers has found that slightly more than half (53%) believe that they will be able to maintain their health care plan’s grandfathered status in 2011. This percentage is lower than the projected 67-85% of employer plans that recent regulations claimed would be able to qualify as “grandfathered” and therefore be exempt from a number of cost-sharing and coverage mandates contained in the Patient Protection and Affordable Care Act (PPACA or “Affordable Care Act”). According to the survey conducted by the consulting firm Mercer, many employers believe that the advantages of altering their health care plans to lower costs outweighed the benefits of the grandfathered status.

Generally, employers estimated that making the necessary changes to their plans to comply with PPACA – such as extending dependent eligibility to age 26 and removing annual and lifetime benefit maximums – would add an additional 2.3% to their average 2011 costs, resulting in an average rise of 10.1% if they made no further plan changes. Making changes that would cause employer plans to forfeit their grandfathered status – such as switching plan vendors, raising deductibles and other cost-sharing provisions, or offering a different type of plan – would lower the projected rise in health care costs to about 6%.

According to a statement issued by Beth Umland, Mercer’s research director for health and benefits, “six percent seems to be employers’ collective comfort level,” adding “For the past five years the actual cost per employee has risen by about 6% annually, even as the underlying trend has been running at about 9%. Employers have been working hard to keep it at that level, and they’ll have to work a bit harder in 2011 to achieve the same result.”

With respect to the types of changes employers will make that will cause them to lose the grandfathered status, 35% of those surveyed indicated that they would increase deductibles or out-of-pocket maximums by more than the allowed amount; 31% intended to increase employee coinsurance levels; 23% planned to raise copays by more than the allowable amount; and 21% in general (and 34% of those surveyed with fewer than 500 employees) plan to consider using a new health plan insurer.

Additionally, the majority (57%) of those surveyed plan to shift a greater share of the coverage costs to employees. In order to further reduce costs, a number of employers responded that they will introduce health management and wellness programs or services to the workplace. Of those employers that already offer such plans or programs, 38% intend to add incentives for employees to actually use them. As noted in the survey, more employers plan to add wellness programs/services to reduce health costs than impose higher deductibles or other cost-sharing methods.

Of the 1,091 employers surveyed, 299 had fewer than 500 employees; 482 had between 500 and 4,999 employees; and 304 had more than 5,000 employees.

This entry was written by Ilyse Schuman.

Photo credit:  style-photographs

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.