On June 14, 2010, the Department of the Treasury, Department of Labor and Department of Health and Human Services jointly released the highly anticipated interim final rules (“Rules”) addressing how health plans can retain “grandfathered” status under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the “Health Care Reform Legislation”).
Grandfathered Plans Are Exempt From Certain Requirements of the Health Care Reform Legislation
As background, the Health Care Reform Legislation provides that certain group health plans and health insurance coverage existing as of March 23, 2010 are allowed limited exemptions from certain provisions of the Health Care Reform Legislation (i.e., they are “grandfathered health plans”). For example, grandfathered health plans are not subject to the requirement that preventative health services be covered without cost-sharing.
Certain Steps Must Be Followed to Retain Grandfathered Status
Under the Rules, to retain grandfathered health plan status, certain steps must be followed. For example, a plan must include a statement in any plan materials provided to participants and beneficiaries that the plan believes it is a grandfathered health plan, including contact information for questions and complaints (model language is provided in the Rules).
According to the Rules, a plan will lose grandfathered health plan status if it:
– Eliminates all or substantially all benefits to diagnose or treat a particular condition (e.g., if the plan eliminates all benefits for diabetes);
– Increases a percentage cost-sharing requirement (e.g., co-insurance) by any amount;
– Increases a fixed-amount cost-sharing requirement (e.g., deductibles or out-of-pocket maximums) if the increase exceeds the rate of medical inflation plus 15 percentage points;
– Increases a fixed-amount co-payment requirement if the increase exceeds the greater of (1) $5 increased by the rate of medical inflation, and (2) the rate of medical inflation plus 15 percentage points;
– Decreases the employer contribution rate if the decrease is more than 5 percentage points below the contribution rate in effect on March 23, 2010; or
– Implements certain changes in annual limits on the dollar value of benefit.
Look for Additional Analysis in the Near Future
The Rules were issued as interim final rules and comments will be accepted for the next 60 days. Based on these comments, additional changes may be made to the Rules. However, these changes will be prospective only. As we further analyze the implications of these Rules, we will be issuing more detailed information through additional SGR Client Alerts and webinars.
For more information on these Rules and the Health Care Reform Legislation, contact your SGR Executive Compensation and Employee Benefits counsel.