By: Helios on August 9th, 2010

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Health Care Reform Update — Grandfathered Plans

The Department of Health and Human Services, along with other government Agencies, continues to provide guidance regarding how and when both insured and self-insured health plans can keep their "grandfathered" status. Employers may keep their existing plans, provided those plans were in place on March 23, 2010, while providing new benefits required under the reform measures. However, plans will lose this "grandfather" status if they choose to significantly cut benefits or increase out-of-pocket spending for their employees. Further, employees participating in plans that make such changes will gain new consumer protections.

We're continuing to learn about the detailed layers of health care reform, including:

  • Plans will not lose grandfathered status for voluntary changes made to increase or adopt consumer protections in the health reform law, or to conform to legal rules. However, plans that decrease covered benefits, increase enrollees' contributions or cost-sharing methods, or change annual or lifetime limits will generally lose grandfathered status. Perhaps of more significant importance, insured plans generally cannot change carriers without losing grandfather status.
  • Coverage subject to a Collective Bargaining Agreement (CBA) in effect on March 23, 2010, must comply with the same coverage and cost-sharing standards — such as eliminating certain lifetime limits — at the same time non-CBA grandfathered plans must comply. However, insured CBA coverage will be considered grandfathered until the last agreement in effect on March 23, 2010, expires — even if the insurance carrier changes in that period.
  • These grandfather regulations apply separately to each benefit package available under a group health plan. For example, it appears that if a group health plan includes several benefit options, such as a PPO or HMO, the loss of grandfathered status for one benefit package will not affect the status of other packages.
  • Retiree-only plans, as well as limited-scope dental and vision plans and other "excepted benefits," remain exempt from the health reform coverage and cost-sharing standards, including the bans on lifetime and annual dollar limits.

It should be noted that plans claiming grandfathered status must include a statement (model language to be provided) and contact information in plan materials given to participants. Plans must keep records of plan terms in effect on March 23, 2010, and any other documents that verify or explain grandfathered status.

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Lee Butler, SPHR, Managing Director