The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the Act), includes provisions for the grandfathering of group health plans in existence on the date of enactment, or March 23, 2010. Since most employers who currently offer employee benefits plans had their group health plans in place on March 23, 2010, most employer group health plans initially will be considered grandfathered plans.
While the term may imply that “grandfathered plans” are exempt from all of the provisions of the Act, this is not the case. Grandfathered plans are subject to several key provisions of the Act. So it is important for an employer to understand how the grandfathered provisions apply to its group health plan.
What is a Grandfathered Plan?
A grandfathered plan is any group health plan, including both insured and self-funded plans, and any health insurance coverage (including coverage from the individual health insurance market) in which an individual was enrolled on March 23, 2010.
Certain changes to a group health plan or health insurance coverage after March 23, 2010 may cause the plan or coverage to lose its grandfathered status. However, the Act does not describe the circumstances under which a plan or coverage will lose its grandfathered status. Until regulations are issued on the subject, it is not clear whether changes to covered benefits will cause a plan or health insurance coverage to lose its grandfathered status or whether changes in insurance carriers or a change from self-insured to fully insured, or vice versa will cause a group health plan to lose its grandfathered status. What is clear is that a plan’s grandfathered status will not be jeopardized if (1) current enrollees are permitted to re-enroll; or (2) new employees (and their dependents) are permitted to enroll; or (3) existing enrollees enroll family members in the group health plan or health insurance coverage. It is generally expected that amending a plan specifically to comply with the Act will not jeopardize the plan’s grandfathered status.
How do the Grandfathered Provisions Apply to Collectively Bargained Plans?
In the case of health insurance coverage maintained pursuant to a collective bargaining agreement ratified before March 23, 2010, the provisions of the Act are not effective until the date on which the last of the collective bargaining agreements relating to the coverage terminates.
What Provisions of the Act are Not Applicable to Grandfathered Plans?
Grandfathered plans are not subject to the following provisions of the Act:
- Expansion of the nondiscrimination requirements to fully insured group health plans
- Implementation of new internal and external claims and appeals procedures
- Requirement to include patient protection provisions (e.g. prohibition on limiting the types of providers that may be designated as a primary care provider)
- Requirement to provide preventive care
If a grandfathered plan loses its status as a grandfathered plan at any time, these provisions will immediately apply to the plan.
What Provisions of the Act are applicable to Grandfathered Plans?
The following key provisions are applicable to grandfathered plans for plan years beginning on or after September 23, 2010:
- Prohibition on lifetime limits on essential health benefits
- Prohibition on the imposition of unreasonable annual dollar limits on essential health benefits (HHS is to issue guidance on this)
- Prohibition on pre-existing conditions for children under age 19
- Prohibition on rescissions
- Requirement to provide dependent coverage to adult children up to age 26, but only if the adult child is not eligible to enroll in other employer provided coverage
- Preparation and distribution to participants of uniform explanation of coverage The following key provisions are applicable to grandfathered plans on or after January 1, 2014:
- Prohibition on annual dollar limits on essential health benefits
- Prohibition on waiting periods in excess of 90 days
- Prohibition on pre-existing conditions for all individuals
- Requirement to provide dependent coverage to adult children up to age 26, regardless of whether the adult child is eligible for other coverage
Tips for Employers Sponsoring Grandfathered Plans
Until more guidance is issued clarifying the circumstances under which a grandfathered plan could lose its grandfathered status, employers that are interested in maintaining their grandfathered status should proceed with caution in modifying their existing group health plans. Regulations relating to grandfathered plans are expected to be published in the very near future, and Bricker & Eckler will share additional information as it becomes available.
In the meantime, determine amendments necessary to bring your plan into compliance with the Act. Counsel should review this list, as well as any other proposed amendments or communications to employees, to determine whether these are likely to impact your plan’s grandfathered status.