Recently, guidance has been issued under the Affordable Care Act and the Reconciliation Act. The main guidance provides that certain group health plans and health insurance coverage ("Plans") existing as of March 23, 2010, are subject only to certain provisions of the Acts. The regulations provide guidance on what Plans are grandfathered, and what a Plan may and may not do to retain this status. Additional guidance on various aspects of health care reform has also been issued. This can be summarized as follows:
I. What is a Grandfathered Plan?
In order to be a Grandfathered Plan, all of the following must be met:
- A Plan must have individuals enrolled in it on March 23, 2010.
- The Plan has continuously covered someone since March 23, 2010. The determination will be made separately with respect to each benefit package made available under a plan. If one package fails, it seems that other packages could still be grandfathered.
- A Plan must provide a disclosure to participants and beneficiaries claiming the grandfather status and meeting certain other requirements. Model language is provided in the interim final regulations.
- A Plan must also maintain records documenting the terms of the Plan that were in effect on March 23, 2010.
Note: Plans desiring grandfather status should clearly date and preserve Plan documents in effort on March 23, 2010.
II. Situations in Which a Plan Ceases to be a Grandfathered Plan.
Any of the following will cause loss of grandfather status:
- The employer enters into a new policy, certificate, or contract of insurance after March 23, 2010.
- The elimination of all or substantially all benefits to diagnose or treat a particular condition.
- Any increase, measured from March 23, 2010, in a percentage cost-sharing requirement (such as an individual's coinsurance requirement).
- Any increase in a fixed-amount cost-sharing requirement other than a copayment (for example, deductible or out-of-pocket limit) if the total percentage increase in the cost-sharing requirement measured from March 23, 2010, exceeds Medical inflation plus 15 percent.
- Any increase in a fixed-amount copayment that is more than the greater of:
- $5 (increased by medical inflation); or,
- Medical inflation plus 15 percent.
- If the employer decreases its contribution rate for any tier of coverage for any class of similarly situated individuals by more than 5 percentage points below the contribution rate on March 23, 2010.
- Changes in annual or lifetime benefit limits, which means any of the following:
- Addition of a new annual or lifetime limit;
- Decrease in a lifetime or annual limit.
- Anti-abuse rules exist for items such as plan mergers.
III. What Can Be Changed?
The following items can be changed without loss in grandfather status:
- Overall premiums.
- Legally required changes.
- Voluntary compliance with health care reform on increasing benefits.
Comments have been requested on whether changes to any of the following will cause loss of grandfather status:
- Plan structure.
- Provider network.
- Drug formularies.
IV. What Does a Grandfathered Plan Save You From?
Grandfathered Plans will be exempt from the following requirements:
- Cover preventive services without cost-sharing.
- Cannot discriminate in favor of highly compensated individuals in insured plans.
- Must report on quality of care improvement activities.
- Must provide internal and external appeal procedures for claims denials.
- Provide unimpeded access to emergency, pediatric, obstetric, and gynecological care.
V. What Does a Grandfathered Plan Not Save You From?
The following requirements apply to all Plans, even grandfathered plans:
- Prohibition of preexisting condition exclusion or other discrimination based on health status.
- Prohibition on excessive waiting periods.
- Prohibition on lifetime or annual limits for "essential benefits." Recent DOL guidance contains notices that must be given before the first Plan year beginning after September 23, 2010.
- Recent guidance also clarifies that "non-essential health benefits" can be subject to annual limits. Additionally, a Plan may exclude coverage for all benefits related to a particular condition, and this will not be considered to be annual limit.
- Extension of dependent coverage until age 26. Recent DOL guidance contains notices that must be given before the first Plan year beginning after September 23, 2010
- Development and utilization of uniform explanation of coverage documents and standardized definitions.
- Bringing down cost of health care coverage (for insured coverage).
VI. New Preventive Care Regulations
New rules on preventive care were recently announced. The temporary and proposed regulations require plans (other than Grandfathered Plans) to cover preventive services without imposing cost-sharing on beneficiaries.
- The rules take effect for insurance plans that begin on or after September 23, 2010.
- The rules require many preventive services that consist mainly of screening and counseling. Some of the more significant items include preventive services related to blood pressure, cholesterol, cancer, weight loss, smoking cessation, mammograms, colonoscopies, and immunizations.
- The services must be covered without requiring patients to pay deductibles, co-payments, or coinsurance.
- The services must be covered without cost sharing when they are provided in-network. Plans are not required to cover services out-of-network.
VII. Special Collective Bargaining Rules.
- In the case of health insurance coverage maintained pursuant to a collective bargaining agreement ratified before March 23, 2010, the coverage is a grandfathered plan at least until the termination date of the last agreement relating to the coverage that was in effect on March 23, 2010.
- The statutory language of the provision refers solely to "health insurance coverage" and does not refer to a group health plan; therefore, the interim final regulations apply this special rule only to insured plans maintained pursuant to a collective bargaining agreement and not to self-insured plans.
- Collectively bargained plans (both insured and self-insured) that are grandfathered plans are subject to the same requirements as other grandfathered plans, and are not provided with a delayed effective date for which other grandfathered plans must comply.
VII. Limited Exemptions Plans
- Retiree-only plans (those that cover no employees) are exempt from the health reform coverage and cost-sharing standards.
- Exemptions also apply to limited-scope dental and vision plans.
- Exemption for these Plans includes exemption from the bans on lifetime and annual dollar limits.