Grandfathered vs. non-grandfathered plans
Under the Affordable Care Act, individuals, employees, and employers have the right to continue the coverage they had as of March 23, 2010, the date healthcare reform took effect. These are considered "grandfathered plans," and they are exempt from many reforms. Collectively bargained plans are grandfathered until the existing collectively bargained agreements come to an end.
It's important to understand when a plan is grandfathered, so you know when the law applies.
Certain requirements apply to all plans, grandfathered or not. There must be no lifetime benefit maximum limits. They must include dependent coverage for adult children up to age 26. There are no annual limits on certain types of benefits. And no exclusions for pre-existing conditions for children under age 19.
If certain changes in coverage are made after March, 2010, the plan will likely no longer be a grandfathered plan. This means a plan must include 100% coverage for preventive care in- network. It must not require prior authorization for emergency services, it must not have different or additional restrictions for a non-network provider for emergency services, or higher cost-sharing for emergency services from a non-network provider. Plus, it must include coverage of routine patient costs for Phase I-IV clinical trials for treatment of cancer or any other life-threatening diseases, starting in 2014. In addition for 2014:
- Small employer groups are defined as 1-100 employees, however states have the option to modify that definition until 1/1/16.
- For small groups, all essential health benefits must be covered.
- Carriers may not apply pre-existing conditions for any age. This applies to all size groups.
- For small groups, the maximum deductible requirement is $2,000 per person , though proposed rules allow deductibles to be higher if needed to reach bronze status
- The maximum out-of-pocket limit is the same out-of-pocket limits applicable to HSA-compatible HDHP plans. This requirement applies to all size groups and includes all member cost-share, i.e. copayments, deductible and prescription drugs.
- For small groups, habilitative services must be covered.
- For small groups, behavioral health must be at parity. This includes mental health and chemical dependency.
There is some flexibility to modify a plan without losing grandfathered status. This includes:
- Changes to comply with federal or state laws
- Routine premium changes of a policy or plan to keep pace with medical inflation
- Adding new benefits and making modest adjustments to existing benefits
- Changes to voluntarily comply with healthcare reform law
- Changes in third-party administrators
- Changes in premiums
- The addition of a family member
- The addition of an new employee
A plan can also lose grandfathered status. The following changes to a plan will result in a loss of grandfathered status:
The healthcare challenge
- Eliminating all (or substantially all) benefits to diagnose or treat a particular condition
- Increasing coinsurance by any amount above the level that was set on March 23, 2010
- Increasing fixed amount cost sharing (other than copays) beyond inflation plus 15 percentage points from the level of March 23, 2010
- Increasing copays by an amount that exceeds the greater of either a total percentage more than medical inflation plus 15 percentage points, or $5 multiplied by medical inflation plus $5
- Reducing employer or employee contributions based on the cost of coverage or a formula by more than 5 percentage points below the contribution rate in March 2010
- Reducing an overall annual dollar limit or adding a new overall annual dollar limit compared to that in effect on March 23, 2010
- Ensuring that consumers switch to a grandfathered plan that has fewer benefits or higher cost-sharing compared with the current plan
- Buying and/or merging another plan to avoid complying with the new law
The federal healthcare reform law contains a number of positive steps that Humana supports. The law widens access to coverage, putting health insurance in reach of millions of Americans who were not covered. It also removes pre-existing conditions as a barrier to coverage. It rightly ensures premiums are no longer based on health status or gender. And it provides financial assistance to those in need.
There are areas where the law falls short. It does not address the underlying cause of our healthcare crisis: rising costs. Americans need secure, affordable coverage choices. Cost control is critical to achieving that goal. We are concerned that the healthcare reform law does not address some of the root causes of medical cost inflation. This means the cost curve is likely to continue bending in the wrong direction. The law also includes a premium tax, scheduled to take effect in 2014, which the Congressional Budget Office has said “would be largely passed through to consumers in the form of higher premiums for private coverage.”
Improving the system
To truly make coverage more affordable, all parts of our healthcare system must do more to create value, eliminate waste, encourage effective care, and promote health. To do this we must align incentives to reward value. Instead of paying providers based on the volume of services delivered, we must pay for performance.We should create incentives to achieve high-quality outcomes at a low cost.
We must root out waste, fraud, and abuse in the system. Unnecessary procedures, prescription drug abuse, and fraud drive up healthcare costs by billions of dollars each year.
We must eliminate needless and costly variation in the delivery of care. Ensuring widespread adoption of medical best practices, we will get more out of our healthcare dollar. We must also apply technology to improve care, connect the system, reduce errors, and eliminate redundancy.
By attacking costly underlying public health problems like obesity, inactivity, and smoking, we can decrease the epidemic of preventable chronic conditions.
The most significant healthcare reforms are set to take effect in 2014. This includes guaranteed coverage, rating restrictions, and health insurance exchanges (online marketplaces). These dramatic changes will alter our healthcare system considerably. Our goal must be a smooth and stable transition that does nothing to disrupt the coverage that Americans count on today.
We must find ways to ease the transition to new rating requirements, which state experience shows us will abruptly raise costs for the young unless we build in a gradual transition period. We must also preserve a wide range of options, so people can choose a plan that's right for them.
Medicare is another critical piece of the healthcare system. Humana agrees with the President and leaders of both parties that the Medicare program needs to improve to cope with upcoming challenges. The cost of Medicare, for example, is forecast to nearly double in 10 years, to more than $1 trillion.
People with Medicare must have the affordable, quality coverage they need. Not just today, but into the future. Reform proposals vary, but many share important similarities, such as choice and an emphasis on care coordination. The dialogue helps get us closer to solutions.
Medicare can be improved by combining the best of the public and private sectors. The public sector provides an important safety net. The private sector, through Medicare Advantage, has helped improve quality, create value-based networks and systems that coordinate care, and control cost. Medicare Advantage and its coordinated approach to care encompass clinical, wellness, and prevention programs. It’s a model that can help stabilize the Medicare system.
Leading the way
Humana is committed to helping build a sustainable future for American healthcare. And we're not waiting. We're advancing ideas, collaborating with doctors, hospitals, and other healthcare providers to increase quality and enhance health outcomes. We’re promoting prevention and wellness, helping patients and physicians fight chronic conditions and reduce unnecessary costs and services. In short, Humana is delivering innovative approaches that are both good for people and good for our healthcare system:
- Individualized care services, such as care coordination programs and transition planning. These keep people healthier and reduce the need for costly urgent care. Special programs such as post-discharge telephone outreach and meal delivery to those in need have reduced 30-day re-hospitalizations by more than 2% and 8%, respectively.
- Patient safety initiatives, like programs that can prevent harmful drug interactions, which greatly reduce dangerous and costly mistakes. In 2011, Humana's efforts to improve medication safety successfully prevented more than 500,000 potentially harmful drug interactions.
- Programs like HumanaVitalityreg that motivate people to live healthier as they pursue lifelong well-being. The health benefits you choose not only should cover you when you are sick, they should keep you well. According to a study published in the American Journal of Health Promotion, people engaged in the Vitality incentive-based wellness program had lower medical costs, shorter hospital stays, and fewer hospital admissions in general. (Source: Am J Health Promot 2010;24:199-204)
- Ways to identify and stop waste, fraud, and abuse. We're working with doctors, hospitals, and law enforcement agencies to prevent fraud and abuse before they happen. This helps hold down the cost of healthcare. It keeps healthcare safe and keeps resources focused on helping people stay healthy and get the care they need.
- New technologies allow us to send real-time health alerts to providers and members. Anvita Health and the Anvita Health information network make health information more accessible to providers. This reduces medical errors, and improves communication between doctors, hospitals, and pharmacies.
- New models of care, such as medical homes and Accountable Care Organizations (ACOs). A high-profile ACO project with Norton Healthcare in Louisville, sponsored by The Brookings Institution and The Dartmouth Institute for Health Policy and Clinical Practice, has decreased unnecessary emergency room visits by close to 50%. This has lowered expenses by more than 12%. (Source: Norton Healthcare: A Strong Payer-Provider Partnership for the Journey to Accountable Care, The Commonwealth Fund, Case Study Series, January 2012.)
Despite divisions, our nation needs to find ways to move healthcare solutions forward in a constructive way. Humana will continue to work with policymakers on both sides of the aisle. The goals are to promote healthcare affordability, provide security, and preserve choices for all Americans.