The Obama administration has released its rules governing “grandfathered” insurance plans. Those that qualify will remain legal under the new health care law. Those that don’t will have to comply with costly new mandates.
Throughout his campaign for health reform, the president vowed that he wouldn’t disrupt Americans’ existing policies. These rules are meant to fulfill that promise. They’re so onerous, though, that most employers will find it impossible to follow them.
Grandfathered plans are prohibited from increasing deductibles, out-of-pocket spending limits or co-payments beyond a certain amount. Plans are also barred from eliminating benefits — even if those benefits aren’t popular and consumers want the savings.
The new regulations also prohibit employers from reducing the amount they contribute to employee coverage. And they forbid employers from switching insurers to secure a better deal for the same plan. If an insurer raises its rate, the employer has to swallow the increase — if he wants to keep grandfather status.
Here’s why that’s an issue: Employer health costs were already projected to increase 9 percent next year. With the grandfather rules, those costs could now go up 12 percent.
These higher costs will cause many folks to lose their existing plans.
Employers are stuck in a double bind. Either they follow the grandfather rules to keep their existing plans and watch insurance costs eat up more of their revenues, or they relinquish their existing policies and potentially pay more for a new plan.
Fortunately, there’s a third way for employers to keep their plans and simultaneously reduce costs. Health care performance management (HPM) is a business strategy that enables managers to identify health risk problems in their work force and take proactive steps to generate savings — without violating the grandfather rules.
Businesses use HPM to analyze employee-agnostic health data, which has traditionally been the exclusive property of insurers. This information shows what risks are most prominent in a company’s work force. Employers can then install customized, low-cost outreach programs to address those risks. A manager using HPM data could discover his employees are at a higher-than-average risk of developing high blood pressure or stress-related illnesses, and then subsidize gym or wellness programs to improve their health.
Medicine isn’t ever one size fits all. HPM allows managers to personalize plans to fit the people using them. It gives control over health care expenses back to the employers who are responsible for them.
Insurers don’t have an incentive to explain to businesses how they could lower their costs. HPM gives managers the data they need to lower health costs — which often represent a company’s second- or third-largest business expense. Since most Americans are covered through their employers, more widespread use of HPM could lower costs on a national scale.
HPM’s benefits aren’t purely theoretical. Employers nationwide have used the technology to cut health care costs. For instance, a long-term-care provider in South Carolina recently employed HPM to reduce its costs by 18 percent.
The Obama administration’s grandfather rules ignore the fact that many employers’ existing health plans serve their employees extremely well. Health care performance management can enable companies to achieve meaningful cost savings — without forfeiting their existing plans or compromising employee health.
George J. Pantos is executive director of the Healthcare Performance Management Institute.