Health care reforms: A guide

Some of the first major changes under the health reform law take effect on its six-month anniversary today.

Well, sort of.

The changes affect new plans now, but won’t apply to existing plans until they’re renewed. For many people with health insurance, that will be Jan. 1.

Some of the changes apply to everyone with health insurance, while some apply only to group plans and new plans sold on the individual market. Many existing plans will be “grandfathered” and exempt from certain regulations. But those plans could lose their exempt status if the benefits they offer or costs consumers face change significantly.


You’re not alone. Doctors, industry experts and consumers have professed varying levels of bafflement at the changes and what will apply to whose plans when. Meanwhile, the effect the changes will have on insurance rates has become a subject of fierce debate.

Here’s a guide to help decode it.

What are the changes that apply to all plans?

Young adults up to age 26 will be allowed to remain on their parents’ health insurance plans, although they might be ineligible if they are offered insurance through their own jobs. The change, which some insurers adopted earlier this year, is projected to affect about 9,050 people in Connecticut. State law already allows people to stay on their parents plans through age 26, but the federal law includes groups not covered by the state law, including young adults who are married or live out of state but don’t attend school. The federal requirement also applies to self-insured insurance plans, which are not subject to state regulation.

Health insurance plans will no longer be allowed to have lifetime dollar limits on “essential benefits,” such as doctor visits, hospitalizations and prescription drugs. Nearly 102 million people have policies with lifetime limits, and between 18,650 and 20,400 people are believed to exceed their limits each year.

In addition, insurers will be prohibited from denying payments because of an error or technical mistake made on a customer’s insurance application – an uncommon but widely criticized practice known as rescission.

The changes apply to new plans beginning today and to existing plans in their next “plan year” – that is, when the plan is renewed.

What changes only apply to some plans?

Some changes apply only to new plans and to existing plans that are not grandfathered. (Most group health plans are likely to be grandfathered at least through 2011. More on the term “grandfathered” later.)

Plans affected by these changes will be required to cover preventive services with no co-payment, deductible or coinsurance for the consumer.

The plans will also be required to allow customers to select their own doctors from within the insurers’ networks and will be prohibited from charging more for visits to emergency rooms that are outside the plans’ networks.

People covered by those plans will also get a new way to appeal insurers’ decisions to an independent party.

Many people with employer-sponsored coverage will not see these changes yet if their existing plans do not change substantially when they are renewed.

In addition, two changes will apply to all group plans and new individual-market plans, but not to existing plans sold on the individual market if they are grandfathered.

Annual dollar limits on “essential” health benefits, which some health plans impose, can be no lower than $750,000 for plans issued or renewed through Sept. 23, 2011. The minimum limits will rise each year after that until 2014, when the limits will be prohibited.

And children under 19 cannot be excluded from insurance coverage because they have a pre-existing condition.

What does it mean for a plan to be grandfathered?

Health insurance plans that were in effect on or before March 23 – the day the health reform bill became law – can be exempt from certain provisions of the law, a status referred to as being “grandfathered.” The plans will lose grandfathered status if they make significant changes to reduce benefits or increase costs to customers.

Grandfathered plans are exempt from the requirements to cover preventive care at no cost to the customer, allow patients to select their doctors, charge equally for emergency rooms visits that are in and out of network, and be subject to an independent-party appeals process.

Grandfathered individual-market plans are also exempt from the restrictions on annual benefit limits and from the requirement to cover people under 19 with pre-existing conditions.

Plans that are grandfathered are to send statements to participants saying so.

How does a plan lose grandfathered status?

Plans will lose their grandfathered status if they significantly reduce benefits; significantly raise co-payments or deductibles; raise coinsurance; significantly lower employer contributions or tighten limits on what employers pay; or change insurers.

The definitions of “significant” are different for each category, but are related to either the rate of medical inflation or set at a fixed percent change.

How many plans will remain grandfathered?

It’s impossible to tell, but the federal government expects it to vary based on the type of plan.

For plans sponsored by employers with 100 or more employees, which cover some 133 million Americans, the federal government has predicted that more than 75 percent will be grandfathered in 2011. A smaller portion will likely remain grandfathered by 2014.

The federal government has estimated that 70 percent of small business health insurance plans will be grandfathered in 2011, but that could fall faster after that because small plans are more likely to make substantial changes than large plans.

Fewer individual plans are likely to be grandfathered because individuals who purchase insurance change plans more frequently, sometimes within one year.

Fully-insured plans that are subject to collective bargaining will be grandfathered until the agreements terminate.

What effect will these changes have on health insurance rates?

This is one of the big points of contention in the health care debate, and there’s no easy answer.

The effects on individual plans will largely depend on what the plan already offers. Those that have annual and lifetime benefit limits, for example, are likely to see larger cost increases than plans that do not have them. For plans subject to the provision prohibiting charging customers for preventive care, the impact on premiums – and the extent the plan will need to change – will depend on what co-payments and other cost-sharing a particular plan had.

The insurer Anthem offered a glimpse at the potential effects of various provisions in its request to the Connecticut Insurance Department for rate changes on new individual policies and those sold since March 24. The largest change was an increase of up to 22.9 percent – depending on the plan – for removing annual benefit maximums, with a particularly large effect from removing limits on pharmacy coverage.

Covering children with pre-existing conditions could add 4.8 percent to premiums and fully covering preventive services could range from no effect to an 8.5 percent increase, according to the insurer. Covering dependents up to age 26 could increase premiums by 0.2 percent.

Removing lifetime benefit maximums and banning rescissions were projected to create no change in premiums.

The plans that see an increase in cost because of the health reform law will include more benefits than they did before, Anthem spokeswoman Sarah Yeager said.

“There’s a range, and it’s important to note that everybody’s not going to get that big rate increase. It depends on the product that they had,” she said. “If you purchase a product that had limited benefits, you’re now getting expanded benefits.”

The effect of the new requirements on insurance rates has become the subject of dispute in recent weeks.

Connecticut Attorney General Richard Blumenthal has called for more public scrutiny of the rate increases and has asked the Connecticut Insurance Department, which approved Anthem’s rate requests, to reopen the filing so policyholders can review and comment on it. The state’s five U.S. Representatives have also asked the department to “remain vigilant of excessive rate increase requests by insurance providers that surpass expected costs of these changes.”

HHS Secretary Kathleen Sebelius blasted insurers sending what she called “misinformation” to enrollees, linking the health reform law to higher premiums.

“The Administration, in partnership with states, will not tolerate unjustified rate hikes in the name of consumer protections,” she wrote in a letter to Karen Ignagni, president and CEO of America’s Health Insurance Plans.

In the letter, Sebelius cited studies that suggest the health reform changes would produce “minimal” effects on premiums, ranging from 1 percent to 2 percent. She also wrote that consumers would see out-of-pocket savings from the effects of the law.

Keith Stover, a lobbyist for the Connecticut Association of Health Plans, said premiums reflect medical costs. Of the projections that suggested only minor impacts on costs, Stover said it is important to know whose projections they were and to understand the debate in its political context.

“I think that it was important rhetorically as this bill was making its way through the process in Washington DC to say, ‘oh no, no, this is such a revolutionary change that it’s not going to cost anybody anything to have all these new benefits,'” Stover said. “But at the end of the day, an actuary takes out her calculator and computes the cost trend and applies whatever the medical costs are to the particular range of benefits and comes up with a number.”

“Frankly, it’s not that complicated, and a lot of the political invective is, in all honesty, fundamentally irresponsible because you’re continuing to, for political purposes, try to send out this message that everything’s free and then there’s the stunning moment of clarity when it’s clear that it ain’t,” Stover said.

Marianne Udow-Phillips, director of the Center for Healthcare Research and Transformation, which is affiliated with the University of Michigan Health System and Blue Cross Blue Shield of Michigan, said projections of health care spending by the federal Centers for Medicare and Medicaid Services could offer an indication of the likely effects of the health reform provisions.

A forecast released by CMS this month projected that national health expenditures will increase by an average of 6.3 percent a year between 2009 and 2019, or 0.2 percentage points faster than estimates made before health reform predicted.

Health care spending is expected to rise by 5.1 percent in 2010 and 4.2 percent in 2011, according to the forecast. In 2014, when many of the major health reform provisions take effect, health care spending is projected to rise 9.2 percent, which is 2.6 percentage points higher than what was projected before health reform.