Monday, November 29, 2010

Changes to Grandfathered Group Health Care Plans

Group Health Plans Got New Grandfathering Guidelines

On June 17, 2010, the Departments of Health and Human Services, Labor and Treasury (the “Departments”) released interim final regulations relating to the status of grandfathered health plans under the Patient Protection and Affordable Care Act (PPACA). These regulations set forth rules (outlined in a previous blog post) for determining whether or not a plan qualifies as grandfathered, how that status is maintained, and how a grandfathered plan loses the coveted status. One such rule provided that a group health plan would lose its grandfathered status if the plan entered into a new policy, certificate or contract of insurance after March 23, 2010.

Five months later, on November 15, 2010 the Departments issued an amendment generally allowing group health plans to switch insurance companies without forfeiting grandfathered status, as long as the plan is not changed in a manner that violates any of the other rules for maintaining grandfathered status. There are a few major circumstances through which this change protects the health care recipient:

  • An insurer may stop selling a certain type of plan
  • A company may change hands
  • An employer may find a plan offering similar healthcare coverage at a lower cost
  • Insurance carriers are less likely to impose unfair renewal rate increases on group plans that are clinging to their grandfathered plan status
  • Third-party administrators may now be changed for all grandfathered health care plans (including individual)

The November 15th amendment does seem to make the grandfathering process easier and more consumer-friendly. However, it is important to note that this applies to grandfathered group plans only; individual health insurance policyholders who change their insurance carrier still will lose grandfathered status. Also, the amendment isn’t retroactive, as plans that lost grandfathered status between March 23, 2010 and November 15, 2010 cannot regain get their status back.

Is this good? We think so, except for the fact that the Departments chose not to make the amendment retroactive to March 23rd, which in our viewpoint would have been more consistent.

Does this mark the beginning of many changes to PPACA? We think it’s possible, but of course only time will tell.

Until next time,

Andrew Herman

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