The Federal Government has issued Interim “Final” Regulations (scheduled for publication in the June 17, 2010 Federal Register) that tell employers what changes can be made to “Grandfathered Health Plans” yet still maintain their “grandfathered” status.
“Grandfathered Plans” are those plans that existed on March 23, 2010, when the Patient Protection and Affordable Care Act (PPACA) was enacted. If an employer enters into a new (not renewed) policy, certificate or contract of insurance after March 23, 2010, then that new policy, certificate or contract of insurance is not a grandfathered plan. As long as a plan stays grandfathered, it need not comply with a number of new requirements for plans. However, PPACA does not address at what point changes to a group health plan are significant enough to cause the plan to cease to be grandfathered. The answer is found in these new regulations.
Under the newly issued regulations, grandfathered plans are permitted to make “routine” changes and still remain exempt from some of the provisions in PPACA. “Routine” changes include adding new benefits; or making modest adjustments to employer contributions, premiums, co-payments and deductibles.
According to Department of Labor Secretary Hilda Solis, “plans that make significant changes that reduce benefits or increase costs to consumers will forfeit their grandfathered status.” Under the regulations, a health plan can lose its grandfathered status if it:
- Eliminates all or substantially all benefits to diagnose or treat a particular condition.
- Increases deductibles, out-of-pocket limits or co-payments by more than the rate of medical inflation plus 15 percentage points.
- Reduces the employer’s contribution rate so that the employer’s share of the total cost of coverage declines by more than 5 percentage points below the contribution rate on March 23, 2010.
- Increases a percentage cost-sharing requirement above the level at which it was on March 23, 2010.
- Reduces the overall annual limit on the dollar value of benefits paid for covered services.
The regulations also impose new disclosure and record-keeping requirements on a plan seeking to maintain grandfathered status.
According to estimates released with the regulations, about 51 percent of all employer plans will lose their grandfathered status by the end of 2013. Small businesses may be the hardest hit by the regulations. Estimates indicate that as many as 80 percent of small businesses will lose their grandfathered status.
If you want more information on maintaining your health plan’s grandfathered status or PPACA more generally, please contact a Taft attorney.