"Up to 80 percent of small businesses will be forced to give up their current plans due to new Obamacare regulations."
Senate Republican Conference on Thursday, March 22nd, 2012 in a Web video
Senate Republican web video says Obama's health care law 'forces' businesses to give up plans
Senate Republicans focused on what they called the president’s "broken promises" near the two-year anniversary of the health care law.
A Web video posted March 22, 2012, by the Senate Republican Conference details eight promises it says President Barack Obama has broken, countering with claims of its own.
We’re checking a few of them -- for example, the claim that Obama didn't keep his promise about reducing health care premiums. (We found Republicans’ response Mostly False.)
In this check, we’re focusing the Republicans' response to Obama's statement on Aug. 15, 2009: "No matter what you've heard, if you like your doctor or health care plan, you can keep it."
Back then, we found a similar claim by the president just Half True.
In this case, we’re fact-checking the response, offered by the Senate Republican Conference video in text on the screen:
"Reality: Up to 80% of small businesses will be forced to give up their current plans due to new Obamacare regulations."
We wondered, is that the case?
‘Relinquishing their grandfathered status’
We talked with Kyle Downey, communications director for the Senate Republican Conference.
He pointed us to a table that includes an 80 percent figure. The table was published as part of the government’s interim final rules on "grandfathered status" for group health plans and health insurance coverage under the Patient Protection and Affordable Care Act.
It matches a table published by Health and Human Services, also in June 2010.
Grandfathered status means that employer plans are allowed to remain largely as they were before the law was enacted.
As long as a health care plan doesn’t substantially change, it won’t have to comply with all parts of the new health care law, for example, the requirement that preventive health services be covered without any cost sharing. That provision was the subject of the recent contraceptives debate.
(All plans will have to meet some of the law’s requirements, such as no coverage exclusions for children with pre-existing conditions, no lifetime limits on coverage and extending parents’ coverage to young adults under 26.)
An employer may even switch to a similar plan with a different insurer, as long as it doesn’t make changes such as cutting benefits or increasing out-of-pocket spending.
If employers made such changes, say, by raising co-pays by more than $5, it would have to comply with the rest of the law, triggering requirements for a wider range of benefits that could cost more.
The 80 percent reflected the high-end estimate of the number of small employer plans that may "relinquish" grandfathered status by 2013. By comparison, the mid range estimate was 66 percent. The low-end estimate was 49 percent.
Is giving up grandfathered status the same thing as small businesses being "forced to give up their current plans"?
Not necessarily, said experts we spoke with on both sides of the health care debate.
Timothy Jost, a health care law expert at Washington and Lee University School of Law, argues that small employers won’t be "forced" to give up their plans under the new law. They would have to change their plans themselves to lose their grandfathered status.
"If a small business (or individual, or large business) keeps its current plan, it is grandfathered, period," he said.
Eighty percent of small businesses may lose grandfathered status "simply because they change their plans so much that they are no longer the same plan," he said.
Jonathan Gruber, an economist at the Massachusetts Institute of Technology who was a consultant to both the Gov. Mitt Romney and Obama administrations in designing their health care plans, also takes issue with the word "forced."
"A key thing to watch out for in this debate is mixing up voluntary actions with ‘forced’ actions," he said. "What the (Health and Human Services) memo says is that almost 80 percent of small firms will move out of grandfathered plans. It doesn’t say that they will be forced out — most of the moves will be voluntary as firms move to plans that they prefer. We don't know what the split is between voluntary and involuntary moves. Even before Obamacare, most small firms change plans over time."
Downey, the Senate Republican Conference spokesman, and health care expert Michael Tanner of the libertarian Cato Institute, argued the law will force employers to change plans.
Downey disagrees with Jost’s assessment that a plan change by an employer that would trigger loss of grandfathered status makes it a different plan.
"The idea that losing grandfathered status means the plan has changed is a bit silly — a $5 co-pay increase is enough to trigger loss of grandfathering," Downey said. "The idea that such a small co-pay is tantamount to changing one's plan is frankly absurd."
In other words, he argues that since a small change can trigger the requirement to comply with the health care law, it’s essentially forcing employers to comply.
Tanner, the author of the report "Bad Medicine: A guide to the real costs and consequences of the new health care law," argues that changes would be forced because "if you lose grandfathered status, when you renew, you have to come into compliance."
And the law will make it harder for employers to maintain their current plans, his report says. Insurers won’t be able to enroll new business customers in plans that don’t comply with the law, meaning they may stop offering them. That would "force" companies to lose their grandfathered status, he argued.
"There's no doubt that a significant number of them will have to because of the new law," he said. "... I think 80 percent is the high end of the range, but there's no doubt that a lot of people will be impacted in that way."
How many businesses might change because they have no choice compared with those that shift voluntarily to pursue cheaper, better coverage?
"It's really hard to tell," he said.
Health and Human Services argues the switches will be primarily voluntary.
"The new health care law creates an online marketplace where small business owners can easily compare plan benefits and costs and determine if they qualify for a new tax credit for health insurance, which brings greater transparency and competition and affordability to the market," said Erin Shields, communications director for health care for HHS. "When this new marketplace is online, it will be easier for small businesses to compare their options and choose the best private insurance plan for themselves and their employees.
"Of course small business owners also have the option to keep the plan they had before the law was passed as well."
A Senate Republican Conference video argues that "up to 80 percent of small businesses will be forced to give up their current plans due to new Obamacare regulations." In doing so, it is choosing an estimate that is at the high end of a range that also includes estimates of 66 and 49 percent, but the video does say "up to."
Businesses give up that status by changing their plans, whether by choice or because of the exigencies of the market. The health care law doesn’t directly force businesses to give up their plans, which makes the statement only partially accurate. We rate it Half True.