Employee Benefit Views

Once you go grandfathered, don’t go back

Posted June 15, 2010 by By Kelley M. Butler at 12:39PM. Comments (6)

Practically ever since March 23, when President Obama signed the Patient Protection and Affordable Care Act, the $1 million question has been: What can/can’t employers do and still keep their grandfathered status?

Yesterday, federal agencies — specifically, Treasury, Labor and Health and Human Services — have at last provided the answers, sort of.

Distilling down 83 pages of government speak, here are the proposed interim rules on what will cause your health plan to lose its grandfathered status:

1. Eliminating benefits. Not surprisingly, cutting benefits altogether is a no-no, say the feds.

2. Increasing cost-sharing.  Also not so eyebrow-raising.

3. Increasing fixed-amount cost-sharing other than copays*. This means ix-nay on hiking deductibles and out-of-pocket limits. But speaking of copays …

4.  *Increasing copays. Here’s the legalese, courtesy of law firm Chapman Kelly: “Any increase in a fixed-amount copayment, determined as of the effective date of the increase, causes a group health plan or health insurance coverage to cease to be a grandfathered health plan, if the total increase in the copayment measured from March 23, 2010 exceeds the greater of an amount equal to $5 increased by medical inflation, … that is, $5 times medical inflation, plus $5, or  the maximum percentage increase, determined by expressing the total increase in the copayment as a percentage.” Got all that? Okay, moving on.

5. Decreasing employer contributions. So far, you couldn’t increase the amounts employees pay. But the feds also say you can’t trim back the amount you’re putting toward coverage either, as decreasing an employer’s contribution rates toward coverage by more than five percentage points is grounds for losing grandfathering.

In addition to all the stuff you can’t do, here’s a couple things employers must do to maintain grandfathered status:

1. Document your plan or policy terms on that were in place on March 23, basically just to show the government that you didn’t break any grandfathered taboos.

2. Disclose within your plan materials that the plan is a grandfathered health plan. The proposed rule included a sample of what this statement should include:

“This [group health plan or health insurance issuer] believes this [plan or coverage] is a ‘grandfathered health plan’ under the Patient Protection and Affordable Care Act (the Affordable Care Act). Being a grandfathered health plan means that your [plan or policy] does not include certain consumer protections of the Affordable Care Act. Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator at [insert contact information]."

It continues: "[For ERISA plans, insert: You may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa.] [For individual market policies and nonfederal governmental plans, insert: You may also contact the U.S. Department of Health and Human Services at www.healthreform.gov.].”

So, there you have it. Note that these are just proposed interim rules (obviously subject to change), but still better than nothing, I’d say.

What do you think so far? Is your plan sufficiently grandfathered?  Share your thoughts in the comments.


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Posted by: Julie D | June 21, 2010 5:25 PM

Can an employer keep the grandfathered status if the deductible is reduced more than 15% + trend at the benefit or carrier level yet within this range because the employer reimburses deductible through a hired HRA admin istrator or TPA?

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Posted by: James S | June 17, 2010 9:11 AM

Ok, Union plans subject to CBAs are exempt and self funded plans are exempt, but if you don't fall into any of those categories, simply finding a different insurance company to offer the same benefits at a lower cost will force you to lose grandfathered status. "If you like your current insurance you can keep it." Yea right. The way the regulations were written, those who often must shop for a better price will be driven out of their current plans. Some will drop employer sponsored coverage altogether. Of course, isn't that what they wanted in the first place?

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Posted by: Patricia A | June 16, 2010 3:29 PM

Is there anything that says they can't break out the grandfathered group and offer say,retirees, different coverage? Would the remaining active plan still be a grandfathered plan or would that change cause it to lose that status?

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