The U.S. Department of Health and Human Services, Department of Labor and Department of Treasury June 17 issued an
interim final rule for group health plans and health insurance coverage relating to their status as “grandfathered health plans” under provisions of the Patient Protection and Affordable Care Act, or PPACA.
Under PPACA, “grandfathered plans” are certain group health plans and health insurance coverage which existed on March 23. Grandfathered plans are required to comply with some, but not all, of the health reforms contained in PPACA.
The interim final rule states that routine changes—such as adding new benefits or making modest adjustments to existing benefits—will not cause a plan to lose grandfathered status. However, grandfathered plans will lose their status if there are significant changes made that reduce benefits or increase costs. Grandfathered plans must also follow certain document retention and disclosure provisions in order to maintain their status.
The following changes to a plan, as it existed on March 23, will cause the plan to lose grandfathered status:
- Changing insurance companies;
- Raising co-insurance charges;
- Increasing copayments by more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points;
- Raising deductibles by more than a percentage equal to medical inflation plus 15 percentage points;
- Decreasing employer contributions by more than five percentage points;
- Adding or tightening annual dollar limits; or
- Eliminating or significantly cutting benefits to diagnose or treat a particular condition.
Further, to retain grandfathered status, the rule provides that a plan must maintain records that document the plan or policy terms that were in effect on March 23 and those records must be made available for examination by a participant, beneficiary, individual policy subscriber or state or federal agency official. In addition, plans are required to include a statement saying the plan “believes it is a grandfathered plan.” The statement should be included in any plan materials distributed to participants that describe benefits under the plan.
According to the final rule, good faith efforts to comply with the requirements will be taken into consideration and, under a grace period, an employer may modify or revoke any changes made prior to June 14 that would cause a plan to lose its grandfathered status.
The interim final rule is effective immediately but is still subject to change, and will be open for public comment until August 16.
For more information on grandfathered health plans, visit the Health and Human Service website for a fact sheet and a question and answer page. For more information on the interim final rule, visit www.abc.org/finalregulations.