HEALTHCARE REFORM UPDATE! “Grandfather” Health Plan Guidance:
September 30, 2010
The government has released guidance eagerly awaited by employers seeking to retain their plans' "grandfather" status to avoid certain mandates within the health care reform law.
The U.S. Department of Treasury, Health and Human Services, and Labor released interim final regulations June 14, 2010, that address the applicable exemptions for grandfathered health plans and the changes that can and cannot be made to plans seeking to retain their grandfather status.
To be a grandfathered plan, the plan must have had a least one individual enrolled in coverage on March 23, 2010, and much have continuously covered someone since then. No new policies sold after March 23, 2010 will be considered grandfathered . Plans renewed after June 17, 2010 will have to comply with the terms of the regulation in its entirety without any grace period
or good faith compliance standard or lose their grandfathered status.
The Patient Protections and Affordable Care Act (PPACA), enacted March 23, 2010, left it to the regulators to decide how much a health plan can change without forfeiting that status.
Provisions applying to Grandfathered and Non-Grandfathered Plans
Grandfathered status does not exempt a health plan from any existing state or federal laws or requirements nor does it exempt a plan from all of PPACA's provisions. Effective for plan years beginning after September 23, 2010, all private health insurance, including grandfathered plans, will be subject to the following new requirements:
• Lifetime limits on the dollar value of benefits for any participant or beneficiary are prohibited
• Annual benefit limits on coverage will be limited to non-essential benefits (as defined by the Department of Health and Human Services) beginning prior to January 1, 2014. Annual limits will be prohibited entirely for subsequent plan years
• The age of a dependent must be increased to age 26 and dependents can be married
• Rescissions of health plan coverage are prohibited except for cases of fraud or when enrollees make an intentional misrepresentation of material fact as prohibited by the terms of the plan. Coverage may not be cancelled without prior notice to the enrollee.
Advantages of Maintaining Grandfathered Status
Grandfathered plans are exempt from some, but not all of PPACA's requirements. Here are some of the requirements they are exempt from:
• The extension of rules prohibiting discrimination in favor of highly compensated employees to insured plans
• The establishment of an externa l review process for benefit claim appeals
• The prohibition against pre-authorization requirements for OB/GYN and emergency services
• New Department of Health and Human Services (HHS) reporting requirements regarding plan efforts to improve participant health, safety and wellness
• New HHS reporting requirements regarding claim payment policies, enrollment/disenrollment, claim denials and cost sharing
• Certain cost-sharing restrictions
• Certain mandated benefits relating to choice of providers, emergency services, coverage of clinical trials and internal and external review requirements
• The requirement that certain preventive care benefits be covered at the first dollar level
In addition, grandfathered plans have delayed compliance deadlines (until January 1/2014) for several of the Act's requirements:
• Guarantee issue of coverage
• Modified community rating provisions
• Limits on plan deductibles and co-payments
Changes that Do Not Cause Loss of Grandfather Status
• Changes to a policy or plan's premiums
• Changes to comply with federal or state law
• Changes to voluntarily comply with provisions of PPACA or to increase benefits
• Changes to a plan's third -party administrator
Changes that Do Cause Loss of Grandfather Status
• Changing health insurance carriers
• Replacing a health insurance plan
• Elimination of a particular benefit to diagnose or treat a particular condition
• Increase in co-insurance by any amount above the level established by your plan as of March 23, 2010
• Increase in deductible or out-of-pocket maximum by more than the rate of medical inflation* plus 15%
• Increase in co-payment for any service by more than the greater of $5 (adjusted for medical inflation *), or the rate of medical inflation* plus 15%.
• Decrease in employer contribution rate toward the cost of any tier of coverage by more than 5% below the contribution rate on March 23, 2010.
• Changes in lifetime or annual limits made after March 23, 2010 that would be adverse to plan participants
Advantages of Maintaining Grandfathered Status• The application of Internal Revenue Code Section 105(h) to fully-insured group health plans, relating to discrimination in favor of highly compensated individuals
• Certain mandated benefit s relating to choice of providers, emergency services, coverage of clinical trials and inte rnal and external review requirements
• The requirement that certain preventive care benefits be covered at the first dollar level
• * *Guarantee issue of coverage
• **Modified community rating provisions
• **Limits on plan deductibles and co-payments
Grace Period
Plans that made routine changes to policies in between the enactment of PPACAand June 17, 2010, a good-faith compliance standard will be applied and changes that only modestly exceed any of the requirements listed above will be allowed for the current plan year. Plans that made significant changes prior to June 17, 2010, that would cause them to lose grandfathered status will also be allowed a grace period lasting until the start of the next plan year beginning after September 23, 2010, to bring their coverage terms in line with the requirements of PPACA and its resulting regulations.
*As measured from March 23, 2010
**Provisions effective January 1, 2014
More News:
- HEALTHCARE REFORM UPDATE! Ten Ways HealthCare Reform Will Impact Your Business - October 13, 2010 If you like your plan, you may not be able to keep it. In order for you to keep... (Read More)
- HEALTHCARE REFORM UPDATE! Change in Employers W-2 Reporting Requirement - October 22, 2010 The White House has announced a one-year delay of a measure in the healthcare... (Read More)
- Students Away at School Counting on Their Parents Homeonwers Insurance Policy Might Be at Loss - September 4, 2009 Are parents and students covered for Property and Liability coverage for students... (Read More)
- Renting a Car? Should You Buy the Insurance Offered by the Rental Car Company? - September 10,2009 Should I Buy the Insurance Offered by the Rental Car Company? Whether you... (Read More)
- Commercial Insurance Rates Are Still Dropping - August 12, 2009 Despite public perception that the slow economy is encouraging insurance companies... (Read More)
