Employers May Win U.S. Health Law Exemption to Switch Insurers
Employers may be allowed to switch their health insurers and still be shielded from costly coverage changes mandated in President Barack Obama’s health-care overhaul, a White House official said.
Under the law passed in March, once companies change plans they must provide added services, including preventive care. The U.S. is weighing whether to allow employers to avoid the requirements, even with a new insurer, as long as benefit levels stay the same, said a White House official who asked not to be identified because the talks are private.
The overhaul has been a campaign target for Republicans who opposed it. As the mid-term election nears, the administration has modified provisions in the law in at least two instances to give businesses more flexibility. In this case, the change would allow employers to shop for cheaper plans without a penalty, a goal that fits with the law’s intent to lower costs, said John Green, of the National Association of Health Underwriters.
“They are listening, they are interested in hearing what’s going on out there, what the troubles are,” said Green, a lobbyist whose Washington-based group represents insurance brokers, in a telephone interview.
Green and James Klein, president of the American Benefits Council, a Washington-based group that represents employers that sponsor health plans, are both in discussions about the so- called grandfather rules with the Office of Consumer Information and Insurance Oversight, which is part of the U.S. Department of Health and Human Services. The Labor and Treasury departments also are involved.
‘Really Do Care’
“I think they really do care what businesses are saying,” Klein said in an interview.
In late September, the Obama administration exempted groups and companies from a requirement that would raise minimum annual benefits for low-cost health plans used to cover about 1 million part-time or low-wage workers. That concession came after restaurant companies, including McDonald’s Corp., complained about the potential for added costs. Another change delayed tax reporting rules by a year.
The grandfather rules were intended to make good on Obama’s promise that people who liked their health-care coverage could keep it. Grandfather status was offered to plans that existed in March, when the health law was signed. Fifty-one percent of companies would lose grandfather status by 2013, according to one administration estimate.
Along with adding coverage for preventative services, employers that change insurers would have to offer an appeals process for health coverage that may require the hiring of third party contractors, and gain new responsibilities for reporting on their benefit packages to the U.S. government.
This may mean fewer workers would fall under the full consumer protections in the law. It might also save jobs, said Grace Schmitt, vice president of human resources, for Glimcher Realty Trust, a Columbus, Ohio-based manager of shopping malls.
An inability to look for less expensive coverage may almost double Glimcher’s spending on benefits by 2014, she said. “The only way for us to keep costs down for 2011 is to be able to maneuver things with our plan, or switch carriers,” Schmitt said in a telephone interview.
Adjusting the requirement to allow changes in insurer plans would keep Glimcher Realty Trust from having to fire as many as a third of its workers, Schmitt said.
The company would sacrifice its grandfather status to shop for less expensive coverage, said Schmitt, the human resources official. “It doesn’t make sense for us to try and maintain grandfather status” under the current rules, she said.
Higher premiums and the cost of providing benefits mandated by the health law will increase the company’s annual medical spending to $6 million in 2014 from $3.3 million this year, Schmitt said.
Midsize and small companies with fewer than 750 employees have the most at stake. They may not be able to self-insure, or set aside money to cover potential claims.
As a result, the companies have to buy coverage from a health insurance company. Larger employers with more resources tend to self-insure and pay the health plans to administer their benefits.
Employers with fewer than 750 workers tend to buy complete coverage, said Tom Billet, a senior consultant with the benefits firm Towers Watson. The New York-based firm consults with large employers on their benefits.
Without changes to the grandfather regulations, Glimcher will probably fire or subcontract some of its 1,000-plus workers, Schmitt said.
The company provides health benefits to about 300 full-time managers, maintenance workers and security staff who run Glimcher’s mall properties.
More exemptions could be on the way. “We’re working with everyone from the business community to insurers to state insurance commissioners to consumers to ensure a smooth transition,” said Jay Angoff, director of the HHS insurance oversight office.
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