|
The Affordable Care Act provides that persons/groups are entitled to keep the coverage that was in effect as of March 23, 2010 (the date of enactment). The term used for such plans in the Act is a “Grandfathered Plan” [referred to as GFP].
Notwithstanding the status as GFPs, the Act nevertheless imposes certain health care insurance reforms on all group and individual plans. The provisions applicable to GFPs are prohibitions against pre-existing conditions exclusions [not applicable to individual policies], prohibition of waiting periods in excess of 90 days, lifetime and annual limits [annual limits not applicable to individual policies], prohibition on rescissions, dependent coverage extension up to age 26 and disclosure of certain plan information. Other insurance provisions will not have to be followed by GFPs, such as certain patient protection and preventive services without cost-sharing. [See attached Snapshot of Insurance Reform Provisions].
The Act did not provide for a sunset date [expiration of status date] nor did it provide any further direction as to what may cause a GFP to lose its status. Individuals, employers and carriers have been hesitant since enactment to make any changes to their plans in fear of loosing GFP status. On June 14, 2010, the IRS, and the Department of Labor and Health and Human Services issued joint “interim final regulations” providing guidance as to what might be modified in a GFP to cause the loss of its status [Regulations attached] [Q&A attached].
Generally, a Grandfathered Plan will lose its status if it:
1.Eliminates coverage for currently existing diseases/conditions.
2.Increases co-insurance from rate at 3/23/10.
3.Increases deductible or out of pocket limit by an amount greater than medical inflation plus 15%.
4.Increases co-pay by an amount greater than medical inflation plus 15% or $5 increased by medical inflation.
5.Decreases employer’s contribution of premium payment by 5% or more.
6.Imposes lifetime or annual limits that did not exist; imposes annual limits previously non-existent to a limit higher than existing lifetime limits; provides for decreases in limits.
7.Changes insurance companies. Self-insured plans should be able to change third party administrators.
The Regulations also contain “anti-abuse” rules that pertain to mergers or acquisitions of companies in an attempt to take advantage of the other’s GFP and prohibits transfers of employees amongst plans.
An Employer who desires to maintain a GFP is required to provide notice to participants that it believes the Plan is subject to GFP status and must maintain records concerning its Plan as of 3/23/10 as well as any changes thereafter. This is to verify that the Plan qualifies for GFP status. Model language for notification can be found at §54.9815-125IT [pg 76 of the Regulations].
The Government anticipates that as high as 64% and as low as 36% of large employers will lose GFP status and as high as 80% and as low as 49% of small employers will lose GFP status.
Authored by: Cheri D. Green
This Newsletter is a publication of the Health Care Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi.. The Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.
|
