Can you really keep your health plan? The limits of grandfathering under the Affordable Care Act.

• Author: Leonard, Elizabeth Weeks

1. Introduction II. Background III. The Rhetoric: You Can Keep Your Health Plan IV. Deregulation of Employer Health Insurance: ERISA V. The Reality: It Depends on What You Consider "Your Plan" A. ACA Requirements Applicable to Grandfathered Plans B. ACA Exemptions for Grandfathered Plans C. Effect of Requirements and Exemptions on Grandfathered Plans VI. Reregulation of Employer Health Insurance: Grandfather Regulations A. Implementing Regulations B. Other ACA Constraints C. Predicted Impact on Small and Large Firms 1. Small Firms 2. Large Firms VII. Conclusion I. INTRODUCTION

   Recent reform of the American health care system has been bait-and-switch. The bait is populist rhetoric; the switch is reregulation. The Obama Administration (the Administration) promises us one thing but gives us something else. Administration experts assure us that what we are getting is what we should prefer, if we could be trusted to make good decisions for ourselves. Amid the comprehensive federal health reform debate culminating in passage of the Patient Protection and Affordable Care Act of 2010 (ACA or Affordable Care Act), (1) President Obama promised, "if you like your health plan, you can keep your health plan." (2) If you were already happy with your current health care plan, nothing would have to change. (3) The Affordable Care Act codified that promise as the "grandfather rule." (4) This Article examines the validity of the promise, concluding that, in fact, our plans will change and will have to comply with ACA's extensive new federal health insurance regulatory regime. It may well be that we will neither notice nor object to the changes. Nevertheless, the reality is different than the rhetoric.

   This Article describes the operation of the Affordable Care Act's grandfather rule as one example of the Obama Administration's decidedly paternalistic approach to reregulation, despite sounding populist themes. (5) For a presidential candidate who touted his community organizer roots, (6) the Administration's methodology is notably top-down and expert-driven. Rather than convince the electorate of the merits of sometimes controversial reforms, the Administration has shown a preference for proceeding through the executive branch rulemaking process. Through this approach, the Administration leaves politically popular promises apparently undisturbed while otherwise bringing about the desired changes through less transparent, more expedited channels. The trend is especially evident in the context of federal health reform.

   Before returning to ACA's grandfather rule, consider two additional examples of regulatory paternalism amid health reform: first, the "death panels" controversy, which arose from a House proposal to provide Medicare coverage for end-of-life counseling between patients and doctors. (7) Popular protest over the grossly misperceived provision as authorizing government panels of experts to make end-of-life decisions for patients resulted in Congress striking it from the Bill. (8) Then, several months after the Affordable Care Act passed, the very same Medicare end-of-life counseling provision reappeared deep within pages of regulatory rulemaking, backed by studies published in British and American medical journals and unnamed "physicians, health care providers, and others." (9) After the media brought the rule to light, (10) the end-of-life counseling provision was quickly excised by regulatory amendment. (11) Although that particular attempt to bypass the political process was thwarted, the sequence of events reveals the administration's apparent deference to popular opinion followed by executive branch rulemaking to achieve reregulatory objectives.

   Another example of regulatory bait-and-switch involves the Affordable Care Act's provision for state innovation waivers. As strong protest over the individual health insurance mandate and other state-based objections mounted in the year after ACA's enactment, (12) President Obama highlighted the possibility of state waivers from his hard-fought signature legislation. (13) Under ACA Section 1332, "Waiver for State Innovation," states may apply to the federal government for waivers from a number of specific ACA requirements, effective January 1, 2017. (14) In a speech to the National Governors Association in February 2011, President Obama expressed support for amendments allowing states to obtain waivers, including from the individual mandate, three years sooner than 2017. (15) Section 1332 and the President's willingness to fast-track state waivers are consistent with popular preferences for state flexibility, innovation, and diversity. (16)

   But the reality, again, belies the rhetoric. States may qualify for waivers only if they can demonstrate that the coverage provided under their waiver plans will be "at least as comprehensive" as the exchanges, with "coverage and cost sharing protections" that are "as least as affordable" as ACA. (17) States also must demonstrate that their plans will provide coverage to "at least a comparable number of [state] residents" as ACA's provisions and will not increase the federal deficit. (18) In effect, states may obtain waivers only if they can, on their own, using different strategies, figure out how to achieve the same coverage, consumer protection, and cost-containment goals as the comprehensive federal legislation. Given the innumerable hours spent and compromises brokered in order to enact ACA at the federal level, it seems a pipe-dream to suggest that states will be able to come up with novel plans that meet the strict statutory and regulatory waiver conditions. Accordingly, the broad federal requirements will almost certainly take effect nationwide, with few if any meaningful state waivers granted. (19) The Administration voices support for state innovation while effectively making federal law the only plausible approach.

   Similarly, ACA's grandfather rule promises that we can keep our health plans, but in reality, our health plans will likely not be able to keep their grandfathered status for very long. Section 1251 of the Affordable Care Act expressly preserves plans in existence on the date of enactment, (20) March 23, 2010, and excepts them from a number of new federal requirements under ACA. (21) Like the end-of-life counseling and state innovation waiver provisions, the Administration enacted reregulation not at the level of public, congressional debate, but through the intricacies of administrative rulemaking. The regulations implementing ACA's grandfather rule establish narrow parameters for plans to retain grandfathered status. (22) In essence, plans can make changes only for the benefit of plan participants and at the expense of the plan. (23) Under those strictures, it will be nearly impossible for most plans to meet the requirements; accordingly, most will almost surely forfeit grandfathered status.

   The Administration acknowledges that grandfathered plans will likely cease to exist within a few years of ACA's enactment, but assures us that we will not notice the change or will prefer our new ACA plans anyway. (24) But that was not the promise. The bait-and-switch approach to reregulation risks credibility and trust. Moreover, the Administration achieves its ends not through direct, accountable processes, but indirectly by establishing regulatory parameters that will all but force plans to give up grandfathered status and comply with ACA. In effect, when you lose your health plan, you will blame your plan, your insurer, or your employer, not the government. The Administration, which wrote the regulations setting the requirements for grandfathered plans, technically upholds its deregulatory promise but at the same time achieves its reregulatory agenda.

2. BACKGROUND

   Political observers and cognitive scientists have offered various explanations for the Republican Party's apparently greater success at controlling the political message and framing issues in ways that resonate with voters. (25) The suggestion is that Republicans are willing to appeal to the public's emotions and cognitive biases. (26) Democrats, on the other hand, cling to an enlightenment view of the electorate as dispassionate, rational thinkers who can be convinced of the right choice if given the facts, statistics, and science to support it. (27) Republicans, to great success, dismiss Democrats' intellectualism as "fuzzy math" and Ivy League elitism. (28) Bill Clinton was one recent Democratic politician who took a chapter out of the Republican playbook and succeeded with emotional appeals and messaging. (29) President Obama, our current Democratic "Professor in Chief," similarly made a concerted effort to overcome the Republicans' characterization of him as an unemotional, bookish leader. (30) His rhetoric is bottom-up, self-determinative, and deeply democratic. (31) But in reality President Obama demonstrates a strong preference for expert decision-making and a firm guiding hand. (32) Consistent with that approach, the Administration hired some of the academy's brightest minds to nudge Americans in the right direction. (33)

   President Obama's perhaps most effective slogan in the health reform debate is the promise, "if you like your health plan, you can keep your health plan." (34) The promise was initially made in response to the proposed "public option" health plan and was intended to assuage fears that inserting even an optional government health insurance plan into the mix would dramatically alter existing market dynamics, effectively forcing employers out of the business of health insurance. (35) The proposed public option was dropped from the congressional health reform bills, but President Obama stuck with the slogan, repeating it on White House health reform websites and to various audiences. (36)

   As a matter of framing, the promise works on several fronts. (37) It allays voters' concerns about "socialized medicine" and "big...