Due to the fervency and multitude of public comments concerning the grandfathered-status rule in the Patient Protection and Affordable Care Act (PPACA), regulators had little choice but to make an amendment allowing group health plan employers to change to health insurers providing a similar and lower cost coverage, while also not losing their grandfathered-status.
On November 15, officials from the Department of Health and Human Services, Department of Labor, and The Treasury Department issued an amendment to the grandfathered health plans interim final rules. Specifically, the new amendment enables an employer to offer the same heath coverage through a different health plan carrier, but still be able to retain their grandfathered status. However, the new coverage must be under a new insurer that doesn’t involve a significant cost increase. And, the new coverage cannot significantly decrease the benefit levels or otherwise violate any provision contained in the grandfathered-status regulations.
Unfortunately, the amendment will only apply in cases of insured group health plans. This means that those changing their health insurance carrier and changing their policy outside of the employer will lose their grandfathered-status. Before the amendment, a plan could lose the grandfathered-status in the event a plan design was implemented that increased member cost or reduced member benefits. An employer group health plan was also tagged as non-grandfathered compliant when an employer changed their insurance company. According to PPACA, plans that are self-funded are limited to only changing third-party administrators; else they lose their grandfathered status. In relation to previous projections made regarding the grandfathering rules as under the PPACA, estimates by federal regulators now suggest that the amendment will create a small increase in how many plans are able to maintain the grandfathered status.
Regulators at The Department of Labor say that the amendment was created in response to public commentary and concern about the PPACA, mainly the following:
- Prior to the amendment, plans that are self-insured were able to change the company employed to deal with the paperwork and risk loss of the grandfathered-status if the cost and benefit did not change. However, employers that only changed their insurance company, keeping benefits the same under the new health plan, were not able to and keep the grandfathered status. Now, since the amendment, every employer will be able to maintain their grandfathered plan, while still changing the third party administrator or insurance company.
- There is an unwarranted and unjust leverage by the insurance company when negotiating coverage renewal prices if employers must stay with a specific insurance company or risk losing the benefit and flexibility of having a grandfathered plan.
Circumstances will always exist where a group health plan could need the leeway in making administrative changes that wouldn’t have an impact on the cost or benefits of the plan; for example, when an insurance company stops offering/providing coverage in a market, or when a company has a change in ownership. Now, under the amendment, the employer in both of the above examples can continue their grandfathered status.
