Health Care Reform: Grandfathering Rules and Plan Design Changes as prepared by i.2 Independence2, LLC's International Law Firm Calfee, Halter & Griswold, LLP.
This third in a series "highlights potential pitfalls under health care reform for employers considering changes to their group health plans. Any employer considering plan changes, including design changes as a way to decrease the cost of coverage before open enrollment, should evaluate the changes against requirements to maintain 'grandfathered' status under recently released regulations. Failure to maintain grandfaathered status can have signficant ramifications for employers.
Grandfathered status and its significance
Any group health plan in which an idividual was enrolled on March 23, 2010, (the law's enactment date) and which has continuaously covered an individual since this date is 'grandfathered' under the new law. This means that the plan may avoid or delay the application of some potentially burdensome requirements under the new law. These requirements include:
> nondiscrimination rules for insured plans;
> external claims review requiarements;
> additional coverage requirements such as immunization or preventive care without cost sharing;
> the extension of coverage to a child under age 26 prior to 2014 even if the child is covered under his or her employer's plan; and
> the elimination of preexisting conditions exclusions for individuals age 19 or older.
Loss of grandfathered status
Prior to the issuance of the regulations, we knew that a plan's grandfathered status would not be lost for any of the following reasons:
> participants' family members enroll in the plan upon reneewal pursuant to the plan's terms as of March 23, 2010;
> new employees and their family members enroll in the plan; or
> the plan extends dependent coverage to age 26, as required by the law.
It was not clear, however, whether certain changes would be significant enough to cause the loss of grandfathered status. The regulations prove much needed guidance about changes that trigger a loss of grandfathered status.
Under the regulations, a plan will lose its grandfathered status if:
> Employer contribution - The employer contribution rate for any tier of coverage (e.g. single, family) is reduced by more than five percentage points below the contribution rate in effect on March 23, 2010. For self-insured plans, contributions by an employer are equal to the total cost of coverage minus the employee contributions for the coverage.
> Percentage cost-sharing - A percentage cost-sharing requirement (e.g. coinsurance percentage) is increased from the plan's requirement as of March 23, 2010.
> Fixed amount cost-sharing - A fixed-amount cost-sharing requirement other than a copayment (e.g. deductible, out-of-pocket maximum) is increased by more than 15% from the plan's requirement in effect on March 23, 2010, as adjusted for medical inflation.
> Copay - A copay is increased from the paln's March 23, 2010, copay by more than the greater of: (1) $5 or (2) 15% as adjusted for medical inflation.
> Annual Dollar Limit
An annual dollar limit in place on March 23, 2010, is reduced
> New policy
A new insurance policy replaces an existing policy after March 23, 2010, (e.g. prior insurance policy is not renewed).
> Particular condition
Benefits for a particular condition are eliminated. This includes the elimination of a necessary element to diagnose or treat a condition.
The regulations provide that grandfathered status is available to each benefit package provided under a group health plan. Thus, if a single plan provides two or more medical plan options and a new policy of Insurance is obtained for only one option, then only the option covered by the new policy will lose grandfathered status.
As you can easily tell from this and the past two postings that the Health Care Reform Act is anything but 'reform'!
It should be noted that Calfee goes on with three more articles relating to this Health Care Reform, one actually starting with an effective date of March 23, 2010 and extending to January 1, 2014 giving not only the effective dates but also the 'Description' and 'Employer Considerations'. I simply don't have the patience to continue with this piece of Bureaucratic Bullshit legislation!
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