Monday, June 14, 2010

If You Like Your Current Plan, Watch Out…

The New York Times has an article this morning reporting that the interim final rules for grandfathered health plans will be released today.  The article notes that “in some respects, the rules appear to fall short of the sweeping commitments President Obama made while trying to reassure the public in the fight over health legislation.”  The Administration, in attempting to sell the rules, now claims that allowing people to keep their current coverage “was just one goal of the legislation,” and acknowledged “that some people, especially those who work at smaller businesses, might face significant changes in the terms of their coverage.”  The White House is now attempting to “spin” this broken promise by saying that plans losing grandfathered status will gain additional “protections” thanks to the myriad new mandates in the law – in other words, “You may like your current plan, but government knows better than you what you’ll really like.”

(A word of caution about the details in the Robert Pear piece: While he cites statistics regarding the rule’s impact – for instance, 51 percent of employees would be in plans losing grandfathered status by 2013 – it’s unclear whether these data come from the draft regulation leaked last week or the official document.  While the OMB website shows that the grandfathered reg finished its clearance at the agency last Friday, the interim final regulation has yet to be posted at

On a related note, the Associated Press has a story this morning about a new PricewaterhouseCoopers study (registration required) predicting medical inflation trends for next year.  The report predicts a 9% rise in medical cost inflation, and notes as one of the prime drivers of rising costs for private insurance coverage the growth in cost-shifting from public to private payers as a result of Medicare payment cuts to hospitals included in the health care law.  As the study notes, “The patient population that is expected to increase the most [under the law] – Medicaid – pays the least.”  The report also highlights the rising costs associated with some of the federal mandates being imposed both now and in 2014, and opines that “prices may also be increased in anticipation of higher demand in 2014 and beyond when more people have insurance coverage.”

To summarize: Candidate Obama promised BOTH that individuals who like their current plan can keep it AND that his reforms would reduce premiums by $2,500 per family per year.  The Administration is on the cusp of releasing regulations that by their own admission would break the first promise – and, by imposing costly new federal mandates on insurance coverage, violate the second as well.  Coupled with the cost-shifting and other inflationary pressures already growing on employers, as outlined in the PWC report, these regulations will only RAISE costs for employers, thereby encouraging them to stop offering coverage entirely.  Any way you slice it, this is NOT “reform.”