The Departments of Health and Human Services, Labor and Treasury recently issued an interim final rule on what constitutes a grandfathered health plan under the Patient Protection and Affordable Care Act.
Under the regulations, a grandfathered health plan is defined as an employer-sponsored group health plan, either insured or self-insured, or individual insurance coverage that existed as of March 23, 2010. The rule also lists the changes that may and may not be made to plans seeking the grandfathered status.
Changes that will cause a plan to lose its grandfathered status include:
- Elimination of all or substantially all benefits to diagnose or treat a particular condition, even if that condition affects only a few covered individuals;
- Increases in an individual’s percentage coinsurance requirement (e.g., increasing from 20% to 30% coinsurance);
- Increases in fixed-dollar cost-sharing (such as deductibles and out-of-pocket expense limits, but not co-payments) in excess of the rate of medical inflation since March 23, 2010, plus 15 percentage points;
- Increases in co-payments in excess of the greater of (1) the rate of medical inflation, plus 15 percentage points, or (2) $5.00, as adjusted for medical inflation;
- Decreases in the employer contribution on the cost of any tier of coverage by more than 5% of its contribution rate in effect on March 23, 2010. The total cost of coverage is to be determined in the same manner as the COBRA continuation premium; and
- Certain changes to lifetime and annual benefit limits that would be adverse to plan participants.
Overall, plan changes enacted before March 23, 2010, with an effective date after that date, will not cause a loss of grandfathered status. If an employer or plan sponsor has amended a group health plan since March 23, 2010, that would cause a plan to lose its grandfathered status under the new guidance.
The employer or plan sponsor, however, may reverse those amendments before the first plan year beginning on or after Sept. 23, 2010 (typically, the 2011 plan year) and retain grandfathered health plan status. Health plan changes that are not specifically prohibited (e.g., benefit improvements) will not cause a health plan to lose its grandfathered status.
If you have any questions, please contact us as soon as possible to discuss these significant health care reform changes.