Consumers In Grandfathered Plans Can Face Higher Costs For Preventive Benefits

Judy Naillon called her insurer several months ago to find out why she was being charged $35 every month for birth control pills. Her friends said they were getting their pills for free under the federal health law. Why wasn’t she getting the same deal?

The insurance rep explained that was because the plan Naillon and her husband had through his job was “grandfathered” under the health law. That meant the plan didn’t have to cover preventive services, including contraceptives, with no charge to consumers as Obamacare requires of other plans.

Naillon, 33, would have to continue to pay a share of the cost of her pills, and the plan wouldn’t pay if she wanted to switch to an intrauterine device either. There also was no coverage for an annual physical.

“I’m just really frustrated,” says the Wichita, Kan., piano and violin teacher. When her husband took a new marketing job last fall, “I thought that surely all these insurers must now be covering these benefits.”

About a quarter of insured workers remain covered by grandfathered plans, according to the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.) These plans were in existence when the health law was enacted in March 2010 and haven’t changed their benefits or consumer costs significantly since then.

In addition to not being required to cover preventive benefits without charge, grandfathered plans are exempt from some other health law requirements. They don’t have to guarantee members’ rights to appeal a decision by their health plan, for example, and may charge consumers higher copays or coinsurance for out-of-network emergency services. They also don’t have to comply with the law’s limits on annual out-of-pocket spending (currently $6,600 for someone in an individual plan and $13,200 for families), so consumers in these plans may be on the hook financially for more of their medical care.

When the health law passed, President Barack Obama sought to reassure anxious consumers by promising that “if you like your health care plan, you can keep it.”  Since then, the number of grandfathered plans has steadily declined. In 2011, 72 percent of companies that offered health insurance had at least one grandfathered plan; by 2014 that number had declined to 37 percent, according to KFF’S annual employer health benefits survey.

The decline isn’t surprising, say benefits experts.

“Large employers make changes every year to improve care and reduce costs,” says Steve Wojcik, vice president of public policy at the National Business Group on Health, an advocacy group representing large employers’ interests.

Some big self-funded companies may keep generous grandfathered plans as a recruiting and retention tool, says Joe Kra, a partner and actuary at human resources consultant Mercer.

Smaller employers are more likely than large ones to be grandfathered at this point, Wojcik says. Small firms typically buy a plan from an insurer that pays their claims, unlike larger companies that often design their own plans and pay their employees’ claims directly.

Individual plans can also be grandfathered.

Some health policy experts have two words for the demise of grandfathered plans: Good riddance. Lacking many consumer protections and generally subject to weaker regulation, they aren’t necessarily good options for people who have health problems.

But they can be a good deal for younger and healthier people. “Grandfathered plans are more likely to hang onto people who are low risk,” says Sarah Lueck, a senior policy analyst at the Center on Budget and Policy Priorities. However, on the individual market, if healthy people stay in grandfathered plans, that tends to leave sicker people in the comprehensive plans that comply with the health law.

From an employee’s perspective, what grandfathered plans may lack in consumer protections they may make up for in reduced cost sharing, Kra says.

In order to retain their grandfathered status, for example, plans are limited in how much they can increase copayments and deductibles, among other things. That means if someone had a $20 copayment in 2010, the copayment today could be no more than $26 next year, Kra says. Likewise, a $500 deductible could be no more than $652.

“If an employee is in a grandfathered plan, they’re one of the fortunate minorities,” Kra says.

Naillon probably wouldn’t agree with that statement.

“Even though my doctor would like to do a physical and run labs, I can’t afford to have those services,” she says.

Please contact Kaiser Health News to send comments or ideas for future topics for the Insuring Your Health column.

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