Fewer Health Plans Retain Grandfathered Status

By Stephen Miller, CEBS Apr 10, 2013

In 2012, 58 percent of U.S. employers that offered health care coverage had at least one plan that was grandfathered (or exempt from specific health care reform requirements such as fully covered preventative care). In contrast, an examination of 2013 plans reveals that, on average, less than 20 percent were grandfathered.

This finding may be due to employers' need to provide competitive health plans, according to findings from the fourth annual Medical Plan Trends Report from benefits-management firm HighRoads and CEB, a member-based advisory company.

The Patient Protection and Affordable Care Act requires nongrandfathered plans to provide coverage without a co-payment for services such as Pap smears, routine mammograms and colorectal cancer screenings under generally accepted medical guidelines (for instance, a colorectal cancer screening once every five years for men over age 50).

While grandfathered plans can charge enrollees a co-pay for “well woman” visits to an OB/GYN, only 16 percent of all surveyed plans actually did so. Similarly, just 10 percent of all plans required co-pays for adult immunizations, Pap smears, mammograms or colorectal cancer screenings.

These findings suggest that many grandfathered plans are moving toward providing coverage levels required of nongrandfathered plans, and that "fewer plans than expected will retain their grandfathered status," according to the report.

'Cadillac Tax' Risks

The so-called Cadillac tax on high-value plans is scheduled to take effect in 2018. This 40 percent nondeductible excise tax will be levied against employers that pay more than $10,200 for individual coverage and $27,500 for family coverage.

Nearly one in five plans still have no deductibles, and 55 percent of plans charge a co-pay of $20 or less for a primary care physician visit, the study found, which suggests they are likely to trigger the Cadillac tax.

"Organizations must take a careful look at their plans and redesign them to mitigate the tax while protecting the employment value proposition," the report advised. "Changes such as increasing prescription drug costs," which has a relatively limited effect on employee perceived value, "could help avoid the tax entirely while protecting the employment value proposition."

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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