Can you “Keep your insurance” under the proposed health care reform bill (H R 3200)?

Within the health care “debate” there is an ongoing battle of language and spin. The word “keep” has always been a reassuring word to the Public – in a world of “change,” you might be able to “keep” some things stable and comfortable and safe, and also “keep” them for yourself.  But beyond the “spin” game, does H R 3200 really allow people to “keep” their current insurance coverage?  We need to look at the bill – pages 16 and 17 under “SEC. 102. PROTECTING THE CHOICE TO KEEP CURRENT COVERAGE.”  This section creates two tiers of “keeping” – one for “individual health insurance coverage” that you have purchased for yourself – another for “employment-based health plans” that are group plans provided by employers to their employees.  First let’s look at the “individual insurance coverage”

“(a) GRANDFATHERED HEALTH INSURANCE COVERAGE DEFINED.—Subject to the succeeding provisions of this section, for purposes of establishing acceptable coverage under this division, the term ‘‘grandfathered health insurance coverage’’ means individual health insurance coverage that is offered and in force and effect before the first day of Y1 if the following conditions are met:

“(1) LIMITATION ON NEW ENROLLMENT.—
(A) IN GENERAL.—Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1.”

So your individual health insurance coverage is  “grandfathered” for an indefinite period of time on the condition that your insurer does not add any new members to your plan (except new dependents of policy holders) after the effective date of the Act.  Now let’s move on to the second condition for “grandfathered” coverage

“(2) LIMITATION ON CHANGES IN TERMS OR CONDITIONS.—
Subject to paragraph (3) and except as required by law, the issuer does not change any of its terms or conditions, including benefits and cost-sharing, from those in effect as of the day before the first day of Y1.”

So your insurer cannot make any change to the “terms or conditions” of your coverage including”benefits” or “cost-sharing,” that is, your out of pocket expenses, such as copays. Insurers will probably try to not make such changes initially, but it may be difficult for them to maintain the status quo as time goes by.  This is made more difficult by Condition #1.  Because of the prohibition against adding any new members to the plan, the pool will start shrinking due to attrition.  This attrition will be exacerbated by the fact that the competing (non-grandfathered”)  “exchange participating”  plans, including the “public option,” will not be limited in terms of enrollment;  some will develop very large pools and they will be able to make economies of scale and undercut the pricing of the “grandfathered” plans, so your fellow pool-mates will start to jump ship to cheaper plans, thus draining the pool quicker.   The traditional pools for individual health insurance are not that large to begin with, so the “grandfathered” plans may start to feel the “squeeze” within a relativeley short time .  When these plans become unprofitable for the insurers, they could change the coverage or the rates and effectively offload you to an “exchange participating” plan. 

Now let’s look at your current “employment-based” insurance coverage.  For these plans, the bill proposes a five year “grace period” before they become “qualified plans.”

“(1) GRACE PERIOD.—
(A) IN GENERAL.—The Commissioner shall establish a grace period whereby, for plan years beginning after the end of the 5-year period beginning with Y1, an employment-based health plan in operation as of the day before the first day of Y1 must meet the same requirements as apply to a qualified health benefits plan under section 101, including the essential benefit package requirement under section 121.”

So your employment-based coverage is not “grandfathered,” but rather is temporarily exempted from the requirements for the qualified health benefits plans.  However, almost immediately your employment-based plan will come into competition with the other options in H.R. 3200.  These include the other qualified plans that will be offered.  Your employer, realizing that they will need to make a change within 5 years, and wanting to establish predictability and continuity of costs, may wish to get a head start and convert to a “qualified plan” sooner than that.  Also, H R 3200 allows your employer to pay a penalty of up to 8% of your salary, to off-load you to the “Public Option.”  This is actually quite an attractive option for many employers who may pay 10% to 15% of salary for your current coverage.    H R 3200 recognizes that the “qualified plans” and the “public option” will be financially attractive to employers, and so, in Section 202, the bill attempts to slow down the hemorrhaging by phasing in the eligibility – only smallest employers will be eligible to participate in the first year, with large employers not becoming eligible until the third year.  At that point, however, the changeover should proceed swiftly. In fact, it appears very likely that the majority of individuals currently enrolled in traditional employment-based plans will be forced into new “qualified” plans (Private and Public) before we reach the 5-year mark. 

But, if your employer stays the course and you do manage to stay in your current plan, at the end of 5 years, your  “employment based” plan must meet the same requirements that apply to a qualified health benefits plan. This means that, at a minimum, it will need to jump two difficult hurdles – maximum “cost sharing” limits – limits on so called “out of pocket” expenses – and no “annual or lifetime limit on the coverage of covered health care items and services.” In addition, there will be other requirements “mandated” for your insurance, and, most likely, in terms of cost, it will become less attractive than it seems now, and, basically, it will become just like all the other “qualified plans ” on the exchange.

So what exactly does this mean?  The answer is that we don’t totally understand the ramifications of your current coverage morphing into a “qualified plan.”  Not all the requirements have been written yet, and some will require regulations that, as yet, have not even been outlined to the Public.   However, it is very likely that there will be changes relating to the structure of the delivery and payment system.  What is not clear is whether these changes will be mandatory, or will just be a byproduct of the “competition” that the Administration is always talking about.  Essentially, look for the Public Option to be run as a very large scale HMO with very low costs.  In order to compete with the pricing of the “Public Option,” many private plans may also choose the HMO format.  However,  the Government could also “require” competing private plans to become HMO’s  through the leverage they hold by providing “affordability credits” to insurers to subsidize premiums for lower income participants.   Once a business accepts Government funding, they may be asked to make all kinds of changes, as the banks and car companies have discovered. 

Changing the private insurance health service delivery scheme to an HMO model would certainly be in keeping with the long-term goals of the Government to emphasize primary care and reduce access to specialists.  This approach is partly dictated by the Government’s pragmatic desire to control access to health care resources, but these folks may also harbor an ideological bias favoring the primary care or “people’s” doctor who is trained to be “socially conscious” as described by Dr. Ezekiel Emanuel, over the self-absorbed, greedy(amputating feet for big bucks), absurdly personal (slavishly following the Hippocratic Oath), and socially ignorant (advocating expensive treatment for individual patients ) specialist.  But … that is the subject of another post …

So, to wrap up, lets ask our question again –  Can you “keep your insurance” under the proposed health care reform bill (H R 3200)?

For “individual plans” the answer is “yes,” but … since they will not be allowed any new members, it is hard to imagine that they will last longer than 5 to 10 years.

For employment-based plans the answer has to be “no” – employers will desert the current plans in droves within 5 years and you will have no say in the matter.

With all the “spin” that is being put out on this subject by the proponents of  H R 3200, you need to

Stay Skeptical!

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