On November 15, 2010, the Departments of Health and Human Services, Labor, and Treasury issued an amendment to earlier health care reform laws. The amendment addresses how employers can maintain the “grandfathered” status of their health plans.
Grandfathered health plans (those plans that were in existence prior to March 23, 2010 and remain in force with only limited changes) are exempt from many of the new benefit mandates and reporting requirements. The regulations include rules for determining when changes to a health plan would cause the plan to lose its grandfathered status. The amendment modifies one of these rules.
The original regulations allowed self-funded plans to change third-party administrators or stoploss carriers without a resulting loss of grandfathered status as long as the benefits and costs to employees stayed essentially the same. Under the original regulations, fully insured plans that simply changed insurance companies while maintaining the same benefits under their plan would lose grandfathered status.
Now, with the amendment, all employers will have the flexibility to change insurance carriers or third-party administrators without losing grandfathered status. The amendment creates the opportunity for employers to shop for the best deal while maintaining the same level of benefits in their plans. Price negotiations at renewal will continue to be possible. In addition, when circumstances cause a group health plan to make administrative changes which don’t affect the benefits or costs of a plan (for example, if an insurer stops offering coverage), the employer can maintain grandfathered status under this amendment.
The new Grandfathered Plan Amendment is only effective on or after November 15, 2010. If an employer changed insurance carriers between March 23, 2010 and November 14, 2010, the coverage does not appear to be grandfathered, as the rule is not retroactive.
The federal government expects this amendment to result in a small increase in the number of plans retaining their grandfathered status compared with the estimates made in the original regulations. In the earlier regulations, it was estimated that in 2010, 55% of small employers and 36% of large employers made at least one change in cost-sharing parameters above the thresholds for maintaining grandfathered status.
The other triggers for the loss of grandfather status remain place. These include:
- reduction in or elimination of a benefit
- increase in percentage of co-insurance
- increase in deductibles or out-of-pocket limits greater than 15% above medical inflation
- increase in co-pays greater than 15% of medical inflation plus $5.00
- decrease in percentage of employer premium contributions by more than 5%
Note: Some health insurance issuers have notified their employer groups that they will not continue to offer grandfather-eligible plans upon plan renewals. If your plan is fully insured, you should verify with your carrier whether or not grandfathering will be available for your plan.
The deadline for comments is December 17 (30 days after the scheduled publication of the rules). Those who wish to comment should refer to file code OCIIO-9991-IFC2 and may submit comments by mail to the Office of Consumer Information and Insurance Oversight, Department of Health and Human Services, Attention: OCIIO-9991-IFC2, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201; or electronically at http://www.regulations.gov (follow the instructions under the “More Search Options” tab).