A grandfathered plan is a group health plan or health insurance coverage (group or individual) in which an individual was enrolled on March 23, 2010. Grandfathered plans include self-funded employer-sponsored plans, and insured group and individual health plans in effect on this date. A grandfathered group health plan complies with disclosure and recordkeeping requirements, and has not made any plan changes since that date that would cause grandfathered status to be lost. In general terms, plan changes that can cause loss of grandfathering include: elimination of benefits, increasing coinsurance, increasing fixed dollar cost-sharing (copays, deductibles and out-of-pocket limits) beyond allowed amounts, and the plan sponsor's decrease in its contributions toward the cost of coverage by more than 5%.
Why would grandfathered status be important to group health plans and health insurers on the group side?
A grandfathered plan is exempt from some, but not all, of the key requirements of Subtitles A and C of Title I of the new law. Exemptions include, but are not limited to:
Appeal requirements: Non-grandfathered plans must have an internal review process, and external review process that meets NAIC Uniform External Review Model Act or standards set by HHS.
Choice of Provider requirements: must allow the plan member to designate a child's pediatrician as the primary care provider; may not require authorization or referral for a participating OB-GYN.
Non-discrimination requirements: Section 105(h) (non-discrimination rules prohibiting highly-compensated employees from receiving more favorable eligibility terms or benefits) is extended to insured group health plans.
Preventive Services requirements: Certain preventive services must be covered without cost sharing.
May individuals be added to a grandfathered plan without impacting its grandfathered status?
Yes. Individuals (whether new hires or new enrollees) and their dependents may be enrolled in the grandfathered plan after March 23, 2010 without jeopardizing the plan's grandfathered status. If a customer does away with their other carrier and UHC becomes full replacement, adding employees to the existing UHC grandfathered plan does not impact the plan's grandfather status.
Can an employer or plan sponsor, who is keeping their plan design, change insurers or third party administrators without jeopardizing their plan's grandfathered status?
As a result of a November 15, 2010 amendment to the grandfather IFR, a plan sponsor can retain grandfather status for a plan even if it changes insurance carriers, with a new coverage effective date, on or after November 15, 2010, providing no other changes have been made that would revoke its grandfather status.
Plan sponsors who elect to change third party administrators (administering a self funded product) can also maintain their plan's grandfathered status provided that no other changes exceed the standards set forth in the reform legislation and IFR.
Please note: Plan sponsors who elected to enter into a new insurance policy or contract of insurance with a different insurance carrier, with a coverage effective date after March 23, 2010 but prior to November 15, 2010, did lose their grandfathered status, regardless of plan design, unless the plan was maintained pursuant to a collective bargaining agreement.
What are some of the key provisions of the new healthcare reform law not subject to the grandfathering provision?
The following provisions go into effect for grandfathered plans on the first plan year that begins on or after September 23, 2010:
Prohibition of rescissions, except in cases of fraud or misrepresentation.
Required coverage of dependents up to the age of 26, except that grandfathered plans may exclude from coverage adult children who are eligible for other employer sponsored group health coverage for plan years beginning before 2014.
Prohibition of preexisting condition exclusions for enrollees who are under the age of 19.
Prohibition of lifetime dollar limits on "Essential Health Benefits."
Restriction on annual dollar limits on "Essential Health Benefits" until 2014.
Note: The term "Essential Health Benefits" is very broadly defined to include wide-open categories (i.e., hospitalization, laboratory services, mental health and substance use disorder services), therefore we will need regulatory guidance to understand which types of benefits are subject to lifetime and annual limits.
Do the special exemptions for plans maintained pursuant to a collective bargaining agreement apply to plans administered on a self funded basis?
No, the language in PPACA refers solely to "health insurance coverage" and does not refer to plans administered on a self funded basis. The IFR clarifies that the collectively bargained exception to grandfather status applies only to insured collectively bargained plans-not collectively bargained plans administered on a self funded basis.
How does changing funding (self-funded to fully insured or from fully insured to to self-funded) impact grandfathering status?
Under the amended IFR, a move between funding types does not automatically cause loss of grandfather status. As long as the transfer from one funding model to another is not accompanied by any other plan changes that would run afoul of the grandfather rules, the group may remain grandfathered.
Does the loss of grandfathering provisions with regards to copays, deductibles, and coinsurance apply to Medical and Rx? Specifically, can customers change their Rx copays without losing grandfathering status?
The grandfather provisions apply to both Medical and Rx, so increases in Rx copays must be done within the rules to maintain grandfather status.
Can a customer have a benefit plan that is grandfathered and one that is not?
Yes, different plans and plan options of a group can be handled separately for purposes of grandfathering.