Even With The ‘Grandfather Clause’ Protection, Change Is Coming To Most Health Plans

Jun 21, 2010

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This column is a collaboration between KHN and The New Republic.

Now that Karl Rove doesn't have a Republican president to advise anymore, he's been picking up some new hobbies. One of them is health care policy. In a recent column for the Wall Street Journal editorial page, Rove made the latest in a series of attacks on the new reform law. Rove offered a number of familiar conservative allegations: Reform would bankrupt employers, stick people with lousy coverage, etc. But my personal favorite was his reaction to new regulations the Obama administration had issued just a few days before.

Health care reform includes a "grandfather clause." Basically, an insurance plan that existed before reform became law won't be subject to many of the law's new regulations on benefit design and company behavior. But under the new regulations the administration just unveiled, plans lose this exemption if their coverage changes substantially for the worse. For example, if an employer offering insurance to employees decides to hike deductibles or stop covering a major disease, the grandfather clause would no longer apply. The plan would become subject to the full array of reform's requirements, which include everything from full coverage of preventative care to the right of appeal for treatment denials.

This horrified Rove. Among other things, he noted, a plan could lose grandfather status if employers decided to switch carriers--"a common practice when employers shop for lower prices." Well, yes. So what? The grandfather clause is there to let you keep your current insurance, assuming you like it and that it remains available to you. But if your employer is switching carriers, then it's not really the same plan anymore, is it? You've already lost your insurance. Obama didn't take it away from you. Your employer did.

And that's really the broader point to keep in mind--not just in the debate over this particular regulation, but in the debate over health care reform that's going to continue over the coming months and beyond. Rove and other Republican leaders have been making a lot of noise about the fact that, within a few years, the vast majority of Americans with private health insurance will have different health insurance arrangements than they do today. The new motto for health care reform, according to House Minority Leader John Boehner, R-Ohio, "should be 'If you like your health care plan, too bad.' "

To hear these Republicans talk, you'd think insurance arrangements never change--that people are walking around with the same generous policies they had 20 or 30 years ago. Of course, nothing could be further from the truth, as anybody who pays attention to their coverage can tell you.

Insurance changes all the time. And it's not usually for the better. In recent decades, as the cost of health care has skyrocketed, millions have become uninsured while additional millions have become under-insured. The point of health care reform is stop and, eventually, reverse this trend--to make sure everybody has access to an insurance policy, to make sure insurance policies actually provide adequate protection, and then to make sure coverage is affordable both for individuals and the country as a whole.

The most logical way to do this, arguably, would have been to blow up the existing insurance system and just start over--perhaps by giving everybody a basic, government-provided benefits package through something that looks like Medicare, and then introducing system-wide reforms to make health care less expensive overall. But that would have meant changing everybody's coverage right off the bat. And that's too big a jolt for the political system to handle. Just ask veterans of the Clinton Administration, whose tried their own, similarly ambitious scheme--only to have it fail, in part because too many insured Americans feared it would instantly take away what they already had.

Instead, Obama and the Democrats have opted for a more gradual transition. As long as existing policies are still available--as long as employers and insurers continue to offer something as good as what they offer today--people can continue to buy them. That's the reason for the grandfather clause. But if an employer or insurer diminishes some existing coverage, then the protections of health care reform kick in--the guarantees that all policies will include basic benefits, the limits on out-of-pocket spending, and so on.

Even with this slower approach, will most people's health insurance still change? Absolutely. But change was coming no matter what. With reform, it's likely to be change for the better. If Rove and his Republican friends had their way, it'd likely be for the worse.