Tuesday, June 15, 2010

Grandfathers Are Goners (Unless You're In A Union)

Another example of how the devil of Obamacare is in the details.

Last weekend, Rep. Bill Posey (R., Fla.) posted a federal report, published in a collaboration between the HHS and Labor Departments and the IRS, documenting the government's interpretation of Obamacare's "grandfathering" rules—the rules that were touted as allowing individuals to keep their existing health plans. David Hogberg and Sean Higgins of Investor's Business Daily read through the report, which stated that the "midrange estimate is that 66% of small employer plans and 45% of large employer plans will relinquish their grandfathered status by the end of 2013." The government also provided a low estimate and a high estimate; at the high end, the report projects that 80% of small employers, and 69% of all plans, would lose their status by 2013.

Another interesting tidbit uncovered by Hogberg and Higgins is that labor unions are exempted from the rules that normal plans have to follow:
Page 81 of the regulations says this regarding health plans that are part of “collective bargaining agreements” — i.e., labor union plans:
(f) Effect on collectively bargained plans — (1) In general. In the case of health insurance coverage maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers that was ratified before March 23, 2010, the coverage is grandfathered health plan coverage at least until the date on which the last of the collective bargaining agreements relating to the coverage that was in effect on March 23, 2010 terminates.
That wording is a bit convoluted, but the document provides an example of how this would work:
Example 1. (i) Facts. A group health plan maintained pursuant to a collective bargaining agreement provides coverage through a group health insurance policy from Issuer W on March 23, 2010. The collective bargaining agreement has not been amended and will not expire before December 31, 2011. The group health plan enters into a new group health insurance policy with Issuer Y for the plan year starting on January 1, 2011. (ii) Conclusion. In this Example 1, the group health plan, and the group health insurance policy provided by Y, remains a grandfathered health plan with respect to existing employees and new employees and their families because the coverage is maintained pursuant to a collective bargaining agreement ratified prior to March 23, 2010 that has not terminated.
Those who are not part of a collective bargaining agreement get treated differently. According to page 76 of the regulations, “an employer or employee organization enters into a new policy, certificate, or contract of insurance after March 23, 2010 ... then that policy, certificate, or contract of insurance is not a grandfathered health plan with respect to the individuals in the group health plan.” In other words, a business would not be able to change insurance carriers and retain their “grandfathered status.”
First the delay in the excise tax on Cadillac plans, now this. You gotta give those labor unions their due—they sure know how to shape legislation.

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