Cleveland partners John McGowan and Jennifer Mills were quoted in the June 21, 2010, Health Plan Week article, "Grandfather Regs, Rate Hikes Put Insurers, Employers Between Rock and Hard Place."
According to the article, as long as employers don't alter their benefit design or shift more costs on to workers in 2011, they will be able to offer the same coverage they offered this year, according to interim final rules released June 14 by HHS and the departments of Labor and Treasury. But a new study on likely rate hikes for 2011 could make it difficult for many employers to comply with the regulations, which are more stringent than expected, according to the article.
McGowan and Mills said the new rules are very specific "to the point of attempting to micromanage where the regulatory line gets drawn." They contend that the rules should have been grounded in principals such as the covered employees' overall expectations or whether the coverage continues to have substantial economic value. McGowan and Mills said there is "a movement" to invalidate grandfather protections even if changes occur which either are beyond the plan sponsor's control (e.g., a change in an insurer's provider network) or are not perceptible to covered employees (such as a change from fully insured to self-insured coverage, or vice versa). While the interim final rules are effective immediately, there is a 60-day public comment period. The final regulation could contain some changes.
McGowan and Mills said that the new rules essentially "handcuff" employers to existing plan designs. But encouraging employers to comply with the reform law sooner rather than later might be what federal regulators have in mind, they said. Another possible unintended consequence is that the new regs could encourage employers to place all new hires into non-grandfathered plans that comply with provisions of the reform law but have substantially higher contribution rates, copays and deductibles and substantially lower benefits levels, McGowan and Mills warned.
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