Tuesday, June 15, 2010

HHS releases regulations for grandfathered health plans

On Monday the U.S. Departments of Health and Human Services (HHS), Labor and Treasury proposed interim final regulations for group health plans to maintain grandfathered status under the Patient Protection and Affordable Care Act (PPACA).

In addition to the guidance provided in the PPACA, these new regulations specify that grandfathered plans will lose their grandfathered status if they make any of the following changes:

Significantly cut or reduce benefits. Grandfathered plans must continue to cover care for major diseases and illnesses currently covered by the plan, such as diabetes, cystic fibrosis and HIV/AIDS.
Raise coinsurance amounts. Grandfathered plans cannot increase the plan’s coinsurance percentage if they wish to maintain their grandfathered status.
Significantly raise co-pay amounts. Grandfathered plans may increase co-pay amounts by no more than the greater of $5 or a percentage equal to medical inflation plus 15%.
Significantly raise deductibles. Grandfathered plans may increase deductibles by no more than a percentage equal to medical inflation plus 15%.
Significantly lower employer contributions. Grandfathered plans can decrease the percent of premium the employer pays by no more than 5%.
Add or tighten an annual limit. Grandfathered plans cannot tighten any annual dollar limit in place as of March 23, 2010. Grandfathered plans cannot impose a new annual dollar limit unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as their lifetime limit.
Change insurance carriers. Grandfathered plans cannot decide to buy insurance from a difference insurance company and maintain their grandfathered status. This regulation does not prevent grandfathered plans that provide their own insurance from switching plan administrators or to a collective bargaining agreement.

Employers that wish to remain grandfathered must also maintain plan documents and records to verify their plan's status as a grandfathered plan and provide a notice to participants and beneficiaries stating that the plan is grandfathered.

The interim final regulations also give regulators the flexibility to disregard plan changes adopted before June 14, 2010 that "modestly exceed" the allowable changes set forth in the new rules.

For more information on these regulations, please refer to the Interim Final Regulations, Groom Law Group Memorandum or the HHS Fact Sheet.

For the PPACA definition of and provisions for grandfathered health plans, please refer to our April 20 post, What is a grandfathered health plan?.

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