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More information about the grandfathering provision released
The recently enacted health care reform legislation includes a "grandfathering" provision that permits groups and individuals to retain the coverage that they had in place as of March 23, 2010. In light of this grandfathering provision, you may be receiving questions from your clients about whether their coverage is grandfathered, and, if so, what that means to them. The U.S. Department of Health and Human Services, the Department of Labor and the Internal Revenue Service have released additional guidance that may help answer some of your clients' questions. Highlights of this guidance include:
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In general, a group health plan or group or individual health insurance coverage is considered "grandfathered" if it had members enrolled before March 23, 2010.
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Any new policies sold in the group or individual market after March 23, 2010, are not grandfathered, even if the product was offered before March 23, 2010.
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Administrators for grandfathered plans are required to provide documentation to participants and beneficiaries for plans that are grandfathered. Regulators have provided model language for this.
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If a plan made changes before the interim final rules on grandfathering were issued and those changes would impact the plan's grandfathered status, the plan has a grace period within which it can revoke or modify these changes to maintain its grandfathered status.
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Changes that will cause the loss of grandfathered status include:
o Eliminating all (or substantially all) benefits to diagnose or treat a particular condition;
o Increasing coinsurance by any amount above the level at which it was set on March 23, 2010
o Increasing fixed amount cost-sharing requirements (for example, deductibles and out-of-pocket maximums, but not copayments) in effect on March 23, 2010, by more than the sum of medical inflation plus 15 percentage points;
o Increasing copayments above the level in effect on March 23, 2010, by an amount that exceeds the greater of: (1) the sum of medical inflation plus 15 percentage points, or (2) $5 increased by medical inflation;
o Reducing employer or employee organization contributions based on the cost of coverage or a formula by more than 5 percentage points below the contribution rate on March 23, 2010;
o Reducing an overall annual dollar limit or adding a new overall annual dollar limit, compared with what was in effect on March 23, 2010;
o Switching consumers to a grandfathered plan that, compared with the current plan, has fewer benefits or higher cost sharing as a means of avoiding new consumer protections; or
o Merger, acquisition or similar business restructuring if the principal purpose of the action is to avoid complying with the Patient Protection and Affordable Care Act (PPACA).
o the addition of family members of an individual who is enrolled in a grandfathered plan;
o the addition of new employees into an employer's grandfathered plan;
o one or more individuals enrolled on March 23, 2010, cease to be covered (provided that the plan or coverage has continuously covered someone since March 23, 2010);
o voluntary changes to increase benefits;
o amendments required to conform to legal requirements/changes;
o the voluntary adoption of other PPACA consumer protections; or
o changing third-party administrators (TPAs), provided the TPA change is made without exceeding the standards described above that would impact a grandfathered plan's special status.
o Continue offering the plan or coverage in effect on March 23, 2010, with limited changes;
o Significantly change the plan or coverage to comply fully with the newly enacted health care reform legislation (in this case the plan loses its grandfathered status); or
o No longer offer a plan.
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Plans that were part of a collective bargaining agreement ratified before March 23, 2010, are considered grandfathered until at least the date on which the last of the collective bargaining agreements terminates. However, these plans are still required to implement the changes that other grandfathered plans without a collective bargaining agreement are required to implement beginning on September 23, 2010 (for example, lifetime limits and rescission requirements). After the last of the agreeements relating to the coverage terminates, the grandfathered status is subject to the requirements in the final regulations.
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There may be additional changes to these interim final rules as the government is accepting comments on what actions would result in the loss of grandfathered status. Our company is providing input into these requirements as allowed by law.
We are conducting an in-depth analysis of this regulatory guidance and how it may impact plans we offer to your clients. We will share additional details with you in the coming weeks. | 
