As Iowa employers look ahead to the next open enrollment periods for their group health plans, a key consideration will be whether it’s worthwhile to maintain their status as “grandfathered” plans.

Under the federal health-reform law enacted on March 23, businesses that offer group health coverage can potentially remain grandfathered. That means they can avoid having to comply with many provisions of the legislation, provided they don’t reduce benefits or increase the cost-share they’re asking employees to contribute by more than a certain amount.

“Our initial advice on the grandfathering was to tread carefully if you’re looking at making any changes, because you don’t want to inadvertently lose grandfathered status,” said Alice Eastman Helle, an employee benefits attorney with Brown, Winick, Graves, Gross, Baskerville and Schoenebaum PLC in Des Moines. Now, as health plan renewal periods approach, “I suspect that’s when they’ll look at whether they want to maintain their grandfathered status, or just give it up and take a different approach.”

On June 14, the U.S. Treasury Department, in interim guidance issued jointly with the Department of Labor and Department of Health and Human Services, provided a list of actions that would cause businesses to lose their grandfathered status.

Those companies that remain grandfathered will be exempt from a number of requirements under health-care reform, among them:

• establishing an internal appeals process for employees whose claims are denied;

• providing preventive care without cost-sharing;

• application of non-discrimination rules on benefits to all employees.

However, grandfathered health plans are still subject to a number of requirements under the health-reform act, including restrictions on pre-existing conditions limitations, recissions of coverage and coverage limits and the requirement that plans cover dependent children up to age 26.

Additionally, maintaining grandfathered status restricts the extent to which employers can shift costs to employees or shop for more affordable coverage, Helle said.

“It’s a cost-benefit analysis,” she said. “Some of the costs are just hard-dollar costs, and then others are the employee satisfaction areas that are a little harder to measure.”

Some clients have asked whether amending their plans to comply with mental health parity rules or other legal changes would jeopardize grandfathered status, Helle said. However, the interim rules issued last month clarified that such changes are permissible.

“Also, if there are certain provisions of health-care reform the companies decide to comply with that they didn’t have to because they were grandfathered, that’s still OK,” Helle said. “I don’t know that people will be clamoring to do that, but if they say, ‘We like that (rule); let’s do that one,’ that in itself won’t make them have to comply with everything.”

An issue that’s still undecided is whether companies that switch from a group health plan to self-insured status, or vice versa, can remain grandfathered.

“I can’t, quite frankly, see a situation where you wouldn’t lose grandfathered status, just because you’re probably not going to have the same benefits or have the same kind of cost-sharing,” Helle said. “But at least that in and of itself under the current rules doesn’t cause loss of grandfathered status. So it’s at least theoretically possible to switch, as long as you have the same benefits and cost-sharing situation.”

For some group plans that provide richer health benefits for highly compensated employees, it may be advantageous to remain grandfathered. Beginning in 2011, the same non-discrimination rules that currently apply only to self-insured plans will apply to insured plans as well.

The majority of employers, both large and small, are likely to lose their grandfathered status before 2014, according to the U.S. Department of Labor, which estimated that up to eight out of 10 companies with fewer than 100 employees could lose grandfathered status before 2014, and up to two-thirds of large companies would lose that status by then as well.

Joe Teeling, chairman and CEO of Bearence Management Group, a West Des Moines-based benefits broker, agrees with that prediction.

“The requirements to stay grandfathered are difficult,” Teeling said. “I don’t see long-term very many plans keeping their grandfathered status.”

At this point, Teeling said he’s seeing a variety of reactions from clients. “We have some clients that very much want to keep their grandfathered status; we have some clients that don’t really care whether they keep their grandfathered status,” he said. “I think most aren’t sure at this point.”

Asked if many clients are talking about dropping health coverage altogether, Teeling said most of the discussion is centered on what happens in 2014, when companies with 50 or more employees must offer “minimum essential coverage” to their employees or pay a penalty. The penalty will be $2,000 per full-time employee per year, not counting the first 30 employees.

“Some are thinking that it would be less expensive to pay the fines for not having coverage,” he said. “If you look at the way it’s set up, the fines for not having coverage are not very much. That will have to be modified if they don’t want to see a lot of (companies) dropping coverage.”

For now, caution is the operative word, Teeling said.

“People are really reaching out for information to make sure they know what’s going on,” he said. “It’s overwhelming, even to someone in the business who stays abreast of it.”