Articles

Proposed HHS Rules Regarding What is Required to Maintain a Plan’s Grandfathered Status

Michael Browning June 14, 2010

Our previous white paper on dependent eligibility under health care reform highlighted the importance of maintaining your plan’s grandfathered status in order to reduce the cost-impact of the Patient Protection and Affordable Care Act (PPACA). HMS has access to a copy of the proposed rules regarding how plans can maintain their grandfathered status. You can download the document here.

Upon initial review of the document here are a few items that should be noted by employers.

The following changes will cause a health plan to lose its grandfathered status:

1. Elimination of Benefits - The elimination of all or substantially all benefits to diagnose or treat a particular condition causes a group health plan or health insurance coverage to cease to be a grandfathered health plan. For this purpose, the elimination of benefits for any necessary element to diagnose or treat a condition is considered the elimination of all or substantially all benefits to diagnose or treat a particular condition.
2. Increase in percentage cost-sharing requirement – Any increase, measured from March 23, 2010, in a percentage cost-sharing requirement (such as an individual’s coinsurance requirement) causes a group health plan or health insurance coverage to cease to be a grandfathered health plan.
3. Increase in a fixed-amount cost-sharing requirement other than a copayment – Any increase in a fixed-amount cost-sharing requirement other than a copayment (e.g., deductible or out-of-pocket limit), 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 percentage increase in the cost-sharing requirement measured from March 23, 2010 exceeds the maximum percentage increase (as defined in paragraph (g)(3)(ii) of this section).
4. Increase in a fixed-amount copayment - 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:
   1. An amount equal to $5 increased by medical inflation, as defined in paragraph (g)(3)(i) of this section (that is, $5 times medical inflation, plus $5), or
   2. The maximum percentage increase (as defined in paragraph (g)(3)(ii) of this section), determined by expressing the total increase in the copayment as a percentage.
5. Decrease in contribution rate by employers and employee organizations – A group health plan or group health insurance coverage ceases to be a grandfathered health plan if the employer or employee organization decreases its contribution rate (as defined in paragraph (g)(3)(iii) of this section) towards the cost of any tier of coverage for any class of similarly situated individuals (as described in §54.9802-1(d)) by more than five percentage points below the contribution rate for the coverage period that includes March 23, 2010.

If an employer intends to maintain its grandfathered status it must perform two administrative duties:

• Document the plan or policy terms on that were in place on March 23, 2010 (The data PPACA was signed into law). Having this documentation available is very important if it is required by outside parties to validate that the plan has not made any changes that would cause it to lose its grandfathered status.
• Disclose within its 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]. [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.]

We will be distributing more information regarding this proposed rule and what strategies employer’s can use to reduce the cost-impact of the PPACA rules.

Tags: Dependent Audit, Dependent Eligibility Audit, Dependent Eligibility Verification Audit, Dependent Verification Audits, DEVA, Employee Benefits, Health Care Reform, Ineligible Dependents, Patient Protection and Affordable Care Act, PPACA, Reduce Health Care Costs