On September 21, 2010, Senator Enzi introduced a resolution (S.J.Res39) that would disapprove and nullify an interim final rule submitted by the Departments of the Treasury, Labor, and Health and Human Services relating to status as a grandfathered health plan under the Patient Protection and Affordable Care Act (P.L. 111-148, 111-152, Affordable Care Act). The rule that Senate Republicans seek to nullify is consistent with statute, preserves stability in insurance markets, provides insurers and businesses the flexibility to grow and innovate, and provides enhanced consumer protections in health insurance markets.
Health reform is built on the requirement that Americans who like their current health plan can keep it. On June 17, 2010, the Departments of Treasury, Labor, and Health and Human Services issued interim final regulations to implement this requirement and clarify the meaning of “grandfathered” health plans in the Affordable Care Act. Many provisions of the Affordable Care Act apply to all health plans, both those in existence on the date of enactment (“grandfathered plans”) and new health plans (“non-grandfathered plans”). For example, all grandfathered and non-grandfathered plans must comply with:
- A ban on lifetime coverage limits;
- A ban on rescissions of coverage when people get sick and have previously made an unintentional mistake on their application;
- Extension of parents’ coverage to young adults until their 26th birthday; and
- Limits on administrative costs and profits (also called a medical loss ratio).
For the vast majority of Americans who receive health coverage through their employers, additional benefits will be offered under both grandfathered and non-grandfathered plans, including:
- A ban on coverage exclusions for children with pre-existing conditions; and
- A ban on “restricted” annual limits.
However, some provisions apply only to new health plans, exempting existing, or grandfathered, plans from making certain changes right away, including:
- Coverage of preventive services without cost-sharing;
- Right to internal and external appears of insurer decisions; and
- Patient protections, such as direct access to OB/GYNs without a referral, a ban on higher cost-sharing for out-of-network emergency services, and a ban on prior authorization for emergency care.
The interim final rule outlines the changes a health plan that existed on the date of enactment (March 23, 2010) may make over time and maintain its grandfathered status. Insurance plans that reduce benefits or reduce costs to consumers no longer have the same characteristics as they did at the time of enactment and will lose their grandfathered status, becoming subject to additional consumer protections listed above (i.e. coverage of preventive services without cost-sharing, etc.). The following changes will cause a plan to lose its grandfathered status:
- Significant reduction in benefits, such as no longer covering care for a certain condition;
- Increase in co-insurance charges, for example, increasing the fixed percentage consumers are required to pay for a hospital stay;
- Significant increase in co-payment charges of more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points;
- Significant increase in deductibles of more than a percentage equal to medical inflation plus 15 percentage points;
- Significant reduction of employer contribution to employees’ health care of more than five percentage points; and
- Addition or tightening of annual limits on coverage.
The interim final rule strikes an appropriate balance, preserving the ability of Americans to keep their current health plan if they wish, while providing new benefits, minimizing insurance market disruption, and paving the way toward competitive, patient-centered private insurance markets of the future. Most of the 133 million Americans with employer-sponsored health coverage through large firms will maintain the coverage they have now, as these firms already offer most of the benefits and protections that the Affordable Care Act extends to all Americans. Americans with employer-sponsored coverage through smaller firms and those who purchase coverage in the individual market tend to experience more frequent change of coverage due to annual fluctuations in premiums and will likely experience the benefits and protections offered by the Affordable Care Act sooner rather than later. This group of individuals will also benefit from competitive Health Insurance Exchanges, established in 2014, which will offer greater plan choices at affordable rates – the same choice of plans offered to Members of Congress.
The grandfather regulation provides flexibility to allow insurers and businesses to continue to innovate and grow and still maintain their grandfather status, while providing the market stability required before 2014 when insurance market reforms and Health Insurance Exchanges provide enhanced protections and more affordable options. Passage of S.J.Res39 would reverse course by creating uncertainty and instability in the marketplace, high potential for litigation, and harm to small businesses as their insurers neither give them the option of keeping the same plan nor offer them the benefits of the new consumer protections. The resolution dismantles the health insurance reform law and rolls back the important consumer protections that ended the worst insurance industry abuses.
S.J.Res39 is a resolution of disapproval of an interim final rule submitted by the Departments of Treasury, Labor, and Health and Human Services relating to status as a grandfathered health plan under the Patient Protection and Affordable Care Act (P.L. 111-148, 111-152, Affordable Care Act).
On September 21, 2010, under the authority granted to Congress by the Congressional Review Act, Senator Enzi introduced S.J.Res39, which was read twice and referred to the Committee on Health, Education, Labor and Pensions.
On September 28, 2010, the Senate entered into an agreement to consider S.J.Res.39. Under the terms of that agreement, on September 29, 2010, the Senate will debate the motion to proceed to S.J.Res.39, with two hours for debate equally divided and controlled by the Leaders or their designees. Upon the use or yielding back of time, the Senate will proceed to a vote on the motion to proceed.
If the motion to proceed is agreed to (which requires a simple majority vote), there will be one hour for debate prior to a vote on final passage. If the motion to proceed is not agreed to, no further motions to proceed to the joint resolution will be in order.
Under the expedited procedures established by the Congressional Review Act for consideration of a resolution of disapproval, amendments or motions to recommit are not in order.
On September 29, 2010, the White House released its Statement of Administrative Policy on S.J.Res39:
The Administration strongly opposes Senate passage of S.J.Res.39, which would undermine important protections offered to Americans and businesses under the Affordable Care Act. This resolution is an attempt to put insurance companies back in charge of Americans’ health care by allowing them to dramatically reduce benefits and increase costs while evading the new protections that the Affordable Care Act provides to consumers.
By dismantling the Interim Final Rule that set out the conditions under which health plans can qualify for "grandfather" status, the resolution would limit individuals’ and businesses’ choice to keep the plan they had in place when the Affordable Care Act was enacted. Adoption of the joint resolution would result in significant uncertainty as to what kind of changes may be made to coverage without a loss of grandfather status. If S.J.Res.39 were approved, it could be argued that any change in coverage could be made while retaining grandfather status, creating confusion about which plans are actually grandfathered and stripping consumers of additional benefits and protections.
The Interim Final Rule provides guidance that is essential for businesses, individuals, and issuers to determine when health coverage has changed to the point that it can no longer be regarded as the grandfathered plan in effect on the date of enactment. In specifying what changes can be made without the loss of grandfather status, the Interim Final Rule strikes a careful balance between the goals of the Affordable Care Act of providing new patient protections while minimizing disruption in existing markets. It achieves these goals by allowing businesses and health insurance issuers flexibility to make the kinds of normal adjustments they have historically made to contain costs and innovate. The Interim Final Rule ensures that if individuals or businesses choose to change their health coverage so significantly that it is no longer the coverage in place on March 23, the plan will need to provide additional consumer protections required by the Affordable Care Act, such as preventive health benefits without out-of-pocket costs and the right to independent appeals of health plan coverage determinations and claims. Moreover, the regulators are considering potential specific improvements to and clarifications of the Interim Final Rule in order to be responsive to stakeholders’ comments on particular aspects of the rule while continuing to meet issuers’, employers’ and families’ needs for clear guidance.
S.J.Res.39 would replace the clarity of a reasoned set of rules for maintaining grandfather status with confusion and uncertainty that will be disruptive for both employers and their workers and families and result in unnecessary litigation. The Administration estimates that 145 million Americans with employer-sponsored health insurance–who make up the vast majority of those with private health insurance today–will be in grandfathered health plans. Further, the Administration estimates that 70 percent of small business health plans will be grandfathered in 2011. To help sustain and promote small business coverage, the Affordable Care Act includes a tax credit for small businesses of up to 35 percent of their premium contributions for employees starting in 2010.
The Affordable Care Act supports Americans’ ability to maintain their current health plan if they like it and if an employer continues to offer it without significant changes. Under the legislation, individuals are guaranteed new benefits and protections if their plan is significantly changed or if they lose their plan or select a new plan. S.J.Res.39 would dismantle this balance and would undermine key provisions of the Affordable Care Act that preserve market stability and flexibility and enhance consumer protections for businesses, health plans and individuals. If the President is presented with a Resolution of Disapproval, his senior advisors would recommend that he veto the Resolution.
Departments of the Treasury, Labor, and Health and Human Services, “Group Health Plans and Health Insurance Coverage Relating to Status as a Grandfathered Health Plan Under the Patient Protection and Affordable Care Act,” June 17, 2010, available by clicking here.
Department of Health and Human Services, “Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans,” undated, available by clicking here.
Department of Health and Human Services, “Affordable Care Act Implementation FAQs,” undated, available by clicking here.
Department of Health and Human Services, “Questions and Answers: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans,” undated, available by clicking here.
Congressional Research Service, “Disapproval of Regulations by Congress: Procedure Under the Congressional Review Act,” October 10, 2001, available by clickinghere.