On November 15, 2010, the Internal Revenue Service, the Department of Labor, and the Department of Health and Human Services jointly issued an amendment to the interim final rules relating to status as a grandfathered plan under the Patient Protection and Affordable Care Act. With the amendment, insured group health plans are now able to change health insurance coverage without that action alone resulting in a loss of grandfathered status. Prior to the amendment, if an insured group health plan entered into a new policy, certificate or contract of insurance, it would lose its grandfathered status. Self-insured group health plans, on the other hand, were allowed to change third party administrators without a similar loss in status.
The Departments gave these four principal concerns from commenters as impetus for the amendment:
1. The inconsistent treatment of insured and self-insured plans (as mentioned above);
2. Questions concerning the circumstances in which a group health plan changes its issuer involuntarily (for example, if the issuer withdraws from the market), yet the plan sponsor wants to maintain its grandfathered status with the new issuer;
3. The unnecessary restriction on the ability of issuers to reissue policies of current plan sponsors for other administrative reasons unrelated to any change in the underlying terms of the health insurance contract (e.g., to transition the policy to a subsidiary of the original issuer or to consolidate a policy with its various riders or amendments); and
4. The undue and unfair leverage issuers have in negotiating the price of coverage renewals with the sponsors of grandfathered plans, which interferes with the health care cost containment that tends to result from price competition.
The amendment applies only to changes in coverage effective on or after November 15, 2010. The date the coverage is effective is the operative date, not the date a contract for a new policy, certificate or contract of insurance is entered into. For example, if a plan signs an agreement with an issuer on September 16, 2010, but it is not effective until January 1, 2011, that plan will not lose its grandfathered status as a result of the change. It is important to note, however, that when the plan changes its policy, certificate or contract, it cannot change the underlying benefit terms in a way that would cause the plan to lose its grandfathered status under existing rules (i.e. eliminate benefits, change copays and deductibles, etc.). The amendment requires the plan to give its new issuer documentation of the plan terms that were in effect under the prior health coverage so that the new issuer will be able to determine if any changes will cause the plan to lose grandfathered status.
If you have any questions regarding this information, or healthcare reform in general, please contact Jon Grossman at 412.594.5574 or Jo-Anne Mineweaser at 412.594.3920, or jgrossman@tuckerlaw.com or jmineweaser@tuckerlaw.com
