Federal Government Makes Changes and Issues Guidance on Grandfathered Health Plans
On November 17, 2010, three federal government agencies, together, issued an amendment to the interim final regulations of the Patient Protection and Affordable Care Act, allowing group health plans to switch insurance companies and still maintain their grandfathered status. Prior to the amendment, group health plans that switched insurance companies lost their grandfathered status under the Act.
The Departments of Health and Human Services, Labor, and Treasury had previously clarified, through frequently asked questions (FAQs), that for a plan that is continuing the same plan policy, there are only six changes that would cause the plan to lose its grandfathered status. These causes still exist, with the exception of the plan having to continue the same policy. The changes include:
- Elimination of all or substantially all benefits to diagnose or treat a particular condition;
- Increase in a percentage cost-sharing requirement;
- Increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points;
- Increase in a co-payment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation);
- Decrease in an employer’s contribution rate towards the cost of coverage by more than 5 percentage points; and
- Imposition of annual limits on the dollar value of all benefits below specified amounts.
Regarding wellness plans associated with group health plans, grandfathered status can also be lost if penalties are imposed rather than rewards.
The FAQs also note that each case is analyzed on a “benefit-package-by-benefit-package” basis; therefore, if one health plan loses its grandfathered status, the grandfathered status of other plans offered by the same company will not be affected.
For more information on the Affordable Care Act, including a link to the FAQs, compliance assistance webinars, and a fact sheet, visit the Department of Labor website.
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