Question: What can you tell me about “grandfathered” health plans and how that may impact my company’s health insurance plan?
Answer: On June 14, the Internal Revenue Service, along with the Departments of Labor and Health and Human Services released the interim final rules for grandfathered plan provisions of the Patient Protection and Affordable Care Act (PPACA). All employer sponsored group health plans that were in effect on March 23, 2010 are impacted.
The regulations, published in the Federal Register on Thursday, June 17, 2010 provide some clarification on whether or not your health plan can maintain “grandfathered” status, as well as the applicability of the “grandfathering” rules to collectively bargained plans. Generally, the regulations are applicable for plan years beginning on or after September 23, 2010, when many of the market reforms take effect. The regulations also confirm that retiree-only plans are exempt from certain PPACA requirements.
The Patient Protection and Affordable Care Act exempts certain health plans that were in existence on March 23, 2010 –“grandfathered plans” from many new requirements, including benefit mandates, caps on out-of-pocket expenses, limits on age-based premiums, and other consumer protections.
So, what does this really mean to your health plan? Group health plans that were in existence on March 23, 2010 are grandfathered – meaning they do not yet have to comply with some, but not all, of PPACA’s mandates. Including:
Ø Coverage for certain preventive health services without imposing cost-sharing requirements.
Ø The PPACA puts the following rules in place for patients:
Plans that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children).
Plans that provide emergency services may not impose preauthorization or increased cost-sharing for emergency services (in or out of network).
Plans that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.
Ø Fully insured plans must satisfy the requirements of Internal Revenue Code section 105(h)(2). That section provides that a plan may not discriminate in favor of highly compensated individuals as to eligibility to participate and that the benefits provided under the plan may not discriminate in favor of participants who are highly compensated individuals.
Ø Within two years of the date of enactment (March 23, 2010), reporting requirements will be developed for group health plans and health insurance issuers offering group or individual health insurance coverage. The reports will relate to benefit and reimbursement structures that are designed to improve health outcomes, prevent hospital readmissions, improve patient safety, reduce medical errors and implement health and wellness activities.
Ø Group health plans and health insurance issuers offering group or individual health insurance coverage must implement an effective appeals process for appeals of coverage determinations and claims.
Effective for plan years beginning on or after January 1, 2014
Premiums charged for health insurance coverage in the individual or small group market may not be discriminatory and may vary only by individual or family coverage, rating area, age and tobacco use, subject to certain restrictions.
Health insurers that offer coverage in the individual or group market must accept every employer and individual in the state that applies for coverage and must renew or continue in force the coverage at the option of the plan sponsor or the individual.
Group health plans and health insurance issuers offering group or individual health insurance coverage may not establish rules for eligibility or continued eligibility based on health status-related factors. Wellness programs must meet nondiscrimination requirements.
Health insurers offering group or individual insurance coverage may not discriminate against any provider operating within their scope of practice. However, this provision does not require a plan to contract with any willing provider or prevent tiered networks. Plans and issuers also may not discriminate against individuals based on whether they receive subsidies or cooperate in a Fair Labor Standards Act investigation.
Health insurance issuers that offer health insurance coverage in the individual or small group market must provide the essential benefits package required of plans sold in the health insurance exchanges.
Group health plans may not impose cost-sharing or out-of-pocket costs in excess of certain limits. Out-of-pocket expenses may not exceed the amount applicable to coverage related to HSAs and deductibles may not exceed $2000 (single coverage) or $4000 (family coverage). These amounts are indexed in subsequent years.
Ø Group health plans and health insurance issuers offering group or individual insurance coverage must permit certain enrollees to participate in certain clinical trials, must cover routine costs for clinical trial participants and may not discriminate against participants.
Grandfathered plans must comply with the following:
- Group health plans must provide coverage for adult dependent children up to age 26 if the child is not eligible to enroll in other employer-provided coverage.
- Group health plans and health insurance issuers offering group or individual health coverage may not establish lifetime limits on the dollar value of essential benefits.
- Pre-existing condition exclusions may not be applied to enrollees under age 19. Pre-existing condition exclusions are eliminated for all enrollees in 2014.
- Coverage may not be rescinded, except in the case of fraud or non-payment.
Ø Effective for plan years beginning on or after January 1, 2014, employers, group health plans and health insurance issuers offering group or individual health insurance coverage may not require a waiting period of more than 90 days.
The regulations provide rules for determining when changes to the terms of an insured or self-insured plan will (and will not) cause the plan to lose its grandfathered status. For example, the regulations generally permit plans and insurers to make voluntary changes to increase benefits, to conform to required legal changes and to adopt other consumer protections in PPACA without jeopardizing grandfathered status.
A group health plan will cease to be grandfathered if changes are made to the plan that:
- Eliminate all or substantially all benefits to diagnose or treat a particular condition
- Increase percentage cost-sharing requirements or materially increase fixed-amount cost-sharing requirements for participants. Plans can maintain their grandfathered status as long as they do not significantly reduce benefits, raise co-payments or deductibles more than the rate of medical inflation plus 15 percent, switch insurers, add or tighten annual limit
- Materially decrease the employer’s contribution rate toward any tier of coverage by 5 percentage points or more. For example, increasing a participant’s percentage cost-sharing requirement from 20% to 25% will result in the loss of grandfathered status)
- Install an overall annual limit on the dollar value of benefits, if the plan did not impose an overall annual or lifetime dollar limit on March 23, 2010, or decrease the dollar value of an annual limit that was in effect on March 23, 2010
Plan changes that are effective after March 23, 2010 will not cause a plan to lose grandfathered status if the plan changes were made pursuant to (i) a legally binding contract entered into on or before March 23, 2010, (ii) a filing with a state insurance department made on or before March 23, 2010 or (iii) written plan amendments that were adopted on or before March 23, 2010.
Also, to maintain grandfathered status, an employer must include a statement in any plan-related materials distributed to participants that the plan believes it is a grandfathered health plan and providing contact information for questions and complaints; model language for this purpose is included in the regulations.
Last, the regulations provide that an insured group health plan maintained pursuant to a Collective Bargaining Agreement (CBA) ratified before March 23, 2010 is a grandfathered plan at least until the date on which the last of the CBAs relating to the coverage terminates. A self-insured group health plan maintained pursuant to a CBA is subject to the same grandfathering rules as other non-CBA group health plans.
For more information on how the Patient Protection and Affordable Care Act impacts your company visit www.sbam.org/healthcarereform here you will find a timeline on reform, several articles and many answers to the most frequently asked questions about reform.