Majority of Firms Expect to Lose Grandfathered Status under Health Reform

August 10, 2010 ( - A new survey by Hewitt Associates finds almost all U.S. companies expect they will not preserve much of their existing group health plans under the grandfather provision of the new health reform law.

Ninety percent of companies said they anticipate losing grandfathered status by 2014, with the majority expecting to do so in the next two years, according to a press release. Hewitt explained that companies can lose their grandfathered status if they take certain steps such as reducing benefits, significantly raising co-payment charges, significantly raising deductibles, or changing insurance carriers (see What Does the Interim Final Rule Mean for Grandfathered Plans?).  

According to Hewitt’s survey of 466 companies—representing 6.9 million employees—most companies expect to lose grandfathered status because of health plan design changes (72%) and/or changes to company subsidy levels (39%). Employers also cited consolidation of health plans (16%), changes to insurance carriers (16%), and union negotiations (15%) as additional reasons.   

More than three-quarters of companies (77%) 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%) expect to first lose grandfathered status in 2011 and another 21% 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%) or 2012 (18%).  

“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,” said Ken Sperling, leader of Hewitt’s Health Management practice, in the press release.