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Nine Out Of 10 U.S. Companies Anticipate Losing Grandfather Status Under Health Care Reform, According To New Hewitt Survey

While many U.S. companies initially hoped they could preserve much of their existing group health plans under the new grandfather provision, a new survey by Hewitt Associates, a global human resources consulting and outsourcing company, shows that almost all now believe they will not. Ninety percent of companies said they anticipate losing grandfathered status by 2014, with the majority expecting to do so in the next two years.

Under the “grandfather” provision of the U.S. Patient Protection and Affordable Care Act, companies can maintain many of their current health care coverage provisions and are required to make fewer changes to plan documents and administrative procedures in order to comply with the new law. Companies can lose their grandfather status if they take certain steps such as reducing benefits, significantly raising co-payment charges, significantly raising deductibles or changing insurance carriers.

According to Hewitt’s survey of 466 companies—representing 6.9 million employees—most companies expect to lose grandfather status because of health plan design changes (72 percent) and/or changes to company subsidy levels (39 percent). Employers also cited consolidation of health plans (16 percent), changes to insurance carriers (16 percent) and union negotiations (15 percent) as additional reasons. More than three-quarters of companies (77 percent) said that recently released guidance on preventive care did not impact their decision to maintain grandfathered status.

Hewitt’s survey found that of those companies with self-insured plans, most (51 percent) expect to first lose grandfather status in 2011 and another 21 percent plan to lose status in 2012. This timing is similar for companies with fully insured medical plans, with the vast majority expecting to lose status in 2011 (46 percent) or 2012 (18 percent).

"Employers reviewing their existing health care strategies in light of reform are focused on answering two questions: What changes do I need or want to make to my health care plans? And how can I make them without significantly increasing costs?” said Ken Sperling, leader of Hewitt’s Health Management practice. “After assessing the grandfather provision, large companies realize they already comply with many of the requirements of non-grandfathered plans, so the changes they’ll need to make aren’t likely to add a significant cost or administrative burden. Most large employers would rather have the flexibility to change their benefit programs than be tied down to the limited modifications allowed under the new law.”

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