New Affordable Care Act Guidance Helps Some Health Plans Stay Grandfathered

Guidance published by the Departments of Health and Human Services (HHS), Labor and the Treasury (the Agencies) on April 1, 2011 provides welcome clarifications about the workings of the “grandfathered health plan rules” that play a key role in determining what health plans and insurance policies must comply with certain key health insurance coverage reforms enacted as part of the Patient Protection and Affordable Care Act (PPACA), as amended by the Health Care and Education Reconciliation Act of 2010 (the Reconciliation Act) (collectively, the Affordable Care Act). 

Health plans, health insurers and sponsors, fiduciaries and service providers of these arrangements should monitor and consider carefully this and other emerging guidance when making decisions about the design and administration of health benefit programs in response to the Affordable Care Act.

Grandfathered Health Plan Status A Key Determinant of What Health Care Reform Rules Apply

While the Affordable Care Act generally requires that health plans and health insurance policies comply with a series of new mandates established by the Affordable Care Act beginning with the first plan year that begins after September 22, 2010, the Affordable Care Act, Interim Final Regulations originally jointly published June 17, 2010 as subsequently amended on November 17, 2011 (the Regulations).provide that certain plans or coverage existing on March 23, 2010 that qualify as “grandfathered health plans” are subject to only certain provisions of the Affordable Care Act.  The Affordable Care Act and Regulations refer to these plans or health insurance coverage as “grandfathered health plans.”

Qualifying As Grandfathered Health Plan

For plans and insurers wishing to preserve the grandfathered health plan status of their programs, understanding when changes or other events affect the health plan’s ability to qualify as a grandfathered health plan is critical to understanding the consequences and potential costs of proposed plan design changes or certain other actions.

For purposes of determining when an arrangement that existed on March 22, 2010 qualifies as a “grandfathered health plan” for purposes of ACA, the Regulations require that the plan meet certain notification, documentation and other requirements set forth in the Regulations.  The Regulation also provides a health plan that existed on March 23, 2010 will lose its eligibility for grandfathered status if the plan is amended to make significant changes that cut benefits or increase costs to covered persons. In order to avoid a loss of grandfathered health plan status, the Regulations require that except for certain “routine changes” identified in the Regulation, the health plan not have been modified or impacted by certain other changes after March 22, 2011. See HHS, DOL & IRS Rules Define “Grandfathered” Group Health Plans & Health Insurance Coverage under the Patient Protection and Affordable Care Act.  Consequently, sponsors, insurers and administrators of health plans or health insurance policies that intend to rely upon grandfathered health plan status to limit the mandates applicable to their programs under the Affordable Care Act need a clear understanding of what changes and events will disqualify their plan or program for grandfathered health plans status.

April 1 Guidance

The FAQIV guidance jointly published April 1 by the Agencies helps to clarify certain aspects of the workings of the grandfathered health plan rules as construed and implemented under these Regulations. FAQIV, among other things:

  • Clarifies the date that a loss of grandfathered status becomes effective as a result of a plan amendment or other change is the date that the plan amendment or other change that will result in the loss of grandfathered status takes effect under the terms of the plan;
  • Shares a non-exhaustive list of reasons for transferring employees from a grandfathered health plan to another health plan that the Agencies recognize as “bona fide employment-based reasons” that permit the transfer of employees from one grandfathered health plan to another plan without a loss of grandfathered health plan status;
  • States that forfeiture of grandfathered health plan status does not result solely as a result of an increase in the participant co-payment or other cost-sharing under a health plan that results because a drug originally classified as having no generic alternative changes because a generic alternative becomes available and is added to the formulary, with a resulting increase in the cost-sharing level for the brand-name drug;
  • States that for purposes of determining if a health plan has experienced a change in the employer contribution rate that would result in a loss of grandfathered health plan status in a health plan where the employer contribution is determined based on a formula, an increase in the amount of the required employee contribution resulting as plan costs increase will not trigger a loss of grandfathered status if the employer contribution formula (or its underlying elements used to calculate the contribution) does not change;
  • Provides added guidance about when a health plan can add or expand value based design features to a health plan without forfeiting its grandfathered health plan status; and
  • Invites public input about how the Agencies should treat value based plan design or wellness program related additions or changes to health plans for purposes of the grandfathered health plan rules.

FAQIV is only one of a continuous stream of new guidance about the Affordable Care Act and other federal and state health benefit program mandates which plan sponsors, insurers, administrators and fiduciaries need to understand and respond to effectively as they deal with their health benefit programs and arrangements.  Ms. Stamer is scheduled to conduct training on these and other health benefit requirements for a number of organizations over the upcoming month.  For information about these and other training opportunities or for other resources and information, see here or contact Ms. Stamer directly.

For Help or More Information

If you have questions or need help understanding or responding to the Regulations, with other health benefit design, administration or operations concerns, or with other employee benefits, compensation, labor or employment or other workforce management concerns, please contact the author of this update, Board Certified Labor and Employment attorney and management consultant Cynthia Marcotte Stamer here or at (469)767-8872.

Past Chair of the American Bar Association (ABA) Health Law Section Managed Care & Insurance Interest Group, Chair of the ABA RPTE Employee Benefit and Other Compensation Committee, and a council member of the ABA Joint Committee on Employee Benefits, Ms. Stamer is nationally recognized for her more than 23 years pragmatic and innovative health program work.

Board certified in labor and employment law by the Texas Board of Legal Specialization with extensive leading edge health plan experience, Ms. Stamer has worked continuously throughout her career helping health plan sponsors, fiduciaries, administrators, insurers and others design, administer and defend health and other employee benefit and insurance programs domestically and internationally. She is widely recognized for her experience helping design and implement legally compliant self-insured and insured health reimbursement, mini-med, high-deductible health plans, limited benefit plans, 24-hour and occupational medicine, ex-pat and medical tourism, deductible reimbursement and other creative health benefit programs to solve a wide range of financial and other challenges while coping with changing regulatory and market realities. Her work includes both working with clients to design, document, implement and administer these and other arrangements, as well as the development of wellness and disease management, claims administration and appeals, eligibility, and other administrative services, processes and technologies.  She also works with plan fiduciaries, plan sponsors, insurers, administrators, brokers and advisors, bankruptcy trustees, creditors, debtors, service providers and their officers and directors about the prevention, investigation, mitigation and resolutions of civil and criminal liability arising from suspected or known benefit administration claims, breaches of fiduciary duty, privacy and data security breach, vendor disputes and other disputes arising in relation to employee benefit and insurance arrangements.  As a continuing part of this representation, Ms. Stamer regularly represents and defends plan sponsors, fiduciaries, third party administrators and other service providers and management officials in dealings with the Department of Labor, Department of Justice, Department of Health & Human Services, Department of Defense, Securities and Exchange Commission, state insurance regulators, state attorneys general and other federal and state regulators and prosecutors and private plaintiffs in connection with investigations, prosecutions, audits and other actions arising from employee benefit, insurance and related arrangements and products.

Recognized in the International Who’s Who of Professionals and bearing the Martindale Hubble Premier AV-Rating, Ms. Stamer also is a highly regarded author and speaker, who regularly conducts management and other training on a wide range of labor and employment, employee benefit, human resources, internal controls and other related risk management matters.  Her writings frequently are published by the American Bar Association (ABA), Aspen Publishers, Bureau of National Affairs, the American Health Lawyers Association, SHRM, World At Work, Government Institutes, Inc., Atlantic Information Services, Employee Benefit News, and many others. For a listing of some of these publications and programs, see here. Her insights on human resources risk management matters also have been quoted in The Wall Street Journal, various publications of The Bureau of National Affairs and Aspen Publishing, the Dallas Morning News, Spencer Publications, Health Leaders, Business Insurance, the Dallas and Houston Business Journals and a host of other publications. In addition to her many ABA leadership involvements, she also serves in leadership positions in numerous human resources, corporate compliance, and other professional and civic organizations. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, World At Work, the ICEBS, SHRM and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

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©2011 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press.  All other rights reserved.

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