U.S. sets rules for employer healthcare plans

U.S. President Barack Obama answers a question during a news conference in the East Room of the White House in Washington, May 27, 2010. Obama promised on Thursday to hold BP accountable in the catastrophic Gulf of Mexico oil spill and said his administration would do everything necessary to protect and restore the coast.

WASHINGTON (Reuters) - The Obama administration on Monday announced new rules it said would protect Americans who want to keep their current health insurance but critics say the changes could end up causing millions to lose their coverage.

Part of President Barack Obama's healthcare overhaul, the new regulations are meant to discourage companies from making major changes in health insurance benefits.

Health Secretary Kathleen Sebelius said the new rules "make good on the president's promise that Americans can keep their health plan and doctor they like under the new law."

The healthcare reform bill, approved in March after a divisive year-long fight in Congress, exempts insurance plans that existed when the law was passed from implementing some of the healthcare reforms.

The so-called grandfather rule announced by Sebelius lets employers and insurers make routine changes to plans. But if they significantly cut benefits or increase out-of-pocket spending for consumers the companies can lose the exemption.

The rules announced on Monday are part of a series of steps toward implementation of a new law to expand coverage to 32 million uninsured Americans by 2014 and ban certain insurance practices like denying coverage for preexisting conditions.

The changes are being closely watched by investors to see how they will affect the health insurance industry, which includes companies such as Aetna Inc, Cigna Corp and UnitedHealth Group Inc, among others.

About 176 million Americans have employer-sponsored insurance. Companies who lose grandfather status will have to implement reforms like ensuring coverage of preventative care and access to some doctors without a physician referral.

Republicans and groups representing small business owners sharply criticized the strict regulations.

They cited a government analysis that showed up to 80 percent of the 43 million employees of small businesses could lose their exempt status in the next few years.

"ObamaCare's new tagline should be 'if you like your health care plan, too bad,'" said House Republican leader John Boehner. "These job-killing mandates will bring every small business's worst nightmare -- losing their health care coverage -- closer to reality."

The National Federation of Independent Business said small companies will be particularly hard hit if faced with sharp increases in insurance premiums as expected.

"These rules limit flexibility and severely restrict the last line of defense for an employer before making the difficult decision of having to employ the nuclear option: dropping coverage all together," said the group's vice president, Susan Eckerly. "This is another heartbreaking and discouraging outcome from this new healthcare law."