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HHS Urged to Ease Requirements for Maintaining 'Grandfathered' Status

By John Reichard, CQ HealthBeat Editor

August 17, 2010 -- A coalition representing retail stores, various types of franchises, insurance brokers, and many small businesses is calling on the Obama administration to revise its regulation on what plans are "grandfathered" and therefore exempt from some of the requirements of the health care overhaul law.

Plans offered on March 23, 2010, the day the overhaul law was signed, have grandfathered status if they do not make major changes, such as increasing their cost-sharing requirements beyond certain levels.

But many employers say the requirements for maintaining grandfathered status set out in an interim final rule are much too hard to meet. As proof, they cite estimates in the rule itself that by 2013, as many as 69 percent of all employer plans and 80 percent of small businesses will relinquish their grandfathered status.

The Coalition for Affordable Coverage said in its comment on the interim final rule that it strongly supports the ability to maintain grandfathered status, because "grandfathered plans will likely be less expensive and thus more affordable." The coalition consists of the International Franchise Association, the National Association of Health Underwriters, the National Retail Federation, and the U.S. Chamber of Commerce.

The group urged that employers be able to switch insurance carriers without losing grandfathered status. Small businesses "are struggling to keep their businesses open, create jobs and provide health coverage," said the coalition's comment letter to Health and Human Services Secretary Kathleen Sebelius. "They do this partially by shopping for a better deal, and yet the HHS rule would require them to relinquish grandfather status if they seek to obtain a lower cost plan, even if the plan provides the same level of benefits."

The group also said that allowable yearly increases in cost sharing are too low and that bigger increases should be permitted without a loss of grandfathered status. The alternative is that small businesses will have to buy more costly plans that do not have grandfathered status, it said. As a result, "employers, especially small businesses, may choose to forgo offering coverage altogether," the coalition warned.

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