"Grandfathered" Health Plans Defined by HHS
On June 14, 2010 the Department of Health and Human Services (HHS) released guidance on the grandfathering provision of the Patient Protection and Affordable Care Act (PPACA, as amended by the Health Care and Education Act).
A “grandfathered” health plan is an existing group or individual health plan in effect on 3/23/10, or in effect under a collective bargaining agreement that was ratified before 3/23/10. Grandfathered health plans will be permitted to make routine changes that do not significantly cut benefits or increase the cost of the plan to participants.
The guidance specifically identifies what changes will cause plans to lose their grandfathered status:
- Cannot significantly cut or reduce benefits.
- Cannot raise co-insurance charges- grandfathered plans cannot raise the percentage of co-insurance required under the plan.
- Cannot significantly raise co-payment charges- grandfathered health plans may not raise co-payment charges more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points.
- Cannot significantly raise deductibles.
- Cannot significantly lower employer contributions by more than 5%.
- Cannot add or tighten an annual limit on what the insurer pays- grandfathered plans cannot tighten any annual dollar limit in place as of 3/23/10, and plans with no annual limit cannot put one in place unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit. This is viewed as more protective of high-cost enrollees.
- Cannot change insurance companies- this does not apply when employers that provide their own insurance to their workers switch plan administrators or to collective bargaining agreements.
- A plan will also lose grandfathered status if it forces participants to switch to another grandfathered plan that has less benefits or costs more or if it is bought by or merges with another plan in an effort to avoid complying with the law.
Grandfathered plans must also disclose to participants every time it distributes materials that the plan is grandfathered and is not subject to some requirements of the Affordable Care Act. The disclosure must include contact information for enrollees to have their questions and complaints addressed.
The Department of Labor’s Employee Benefits Security Administration has posted the following on its website:
Interim Final Regulation, available at http://www.federalregister.gov/OFRUpload/OFRData/2010-14488_PI.pdf
Fact Sheet, available at http://www.healthreform.gov/newsroom/keeping_the_health_plan_you_have.html
FAQs, available at http://healthreform.gov/about/grandfathering.html