One would like to think that this will be interpreted in favor of the policyholders, but you never know, do you? WASHINGTON — Millions of Americans
May 11, 2010

One would like to think that this will be interpreted in favor of the policyholders, but you never know, do you?

WASHINGTON — Millions of Americans could lose some important benefits of the new health overhaul law depending on how the Obama administration chooses to interpret one term: "grandfathered."

Under the law, existing, or "grandfathered" health plans are exempt from several consumer protections, including a requirement that beginning as early as September prohibits health plans from charging co-payments and other cost-sharing for certain preventive health services such as immunizations and cancer screenings.

The issue has touched off a debate over how grandfathering is defined, with some consumer and employer groups squaring off. Consumer groups say that if the definition is too lenient, many Americans won't get the full benefit of the law. Meanwhile, some business groups say that if their plans have to forfeit their grandfather status, they'll be subject to all the new rules that raise costs and premiums.

Congress included the grandfather provisions in the bill to give employers and insurers time to transition to the new law. The law is mostly vague, though, on exactly what constitutes a grandfathered plan. For example, does a plan lose its grandfather status if it increases employees' deductibles or changes prescription drug coverage? Plans that give up their grandfather status must abide by all the consumer protections in the new law.

Some state regulators are confused. "What's not clear to me is actually how we are going to define a grandfathered plan," said Beth Sammis, the acting insurance commissioner for Maryland.

The grandfathered plans are subject to some consumer protections in the bill, including a requirement that plans provide dependent coverage for children until age 26; a ban on pre-existing condition exclusions for children this year and everyone in 2014, and a prohibition on lifetime insurance limits. In addition, grandfathered health plans will be blocked from retroactively canceling coverage after a policyholder gets sick.

Grandfathered plans also will be exempt from some consumer protections, however, including one requirement that health plans cover certain treatments associated with clinical trials, and another that limits annual out-of-pocket costs. In addition, grandfathered plans won't have to meet new rules limiting how much premiums can vary based on age and tobacco use.

The Obama administration, which is writing the regulations that implement the new law, is expected to issue its guidance soon on how it interprets the grandfathering clause.

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