On November 15, 2010, the Department of Health and Human Services, Department of Treasury and Department of Labor jointly announced an amendment to the interim final regulations on grandfathered group health plans confirming that employers may change insurance carriers without losing grandfathered status.
A group health plan that preserves its grandfathered status will be subject to some, but not all, of the market reform provisions under Health Care Reform legislation of 2010. Namely, a grandfathered group health plan will not be subject to the recommended preventive services, non-discrimination, patient protection and enhanced appeal and external review provisions of Health Care Reform. A group health plan generally is eligible for grandfathered status only if it existed as of March 23, 2010, and it does not make certain changes after that date. One of the changes resulting in a loss of grandfathered status that is included under the interim final regulations is when an employer enters into a new policy, certificate or contract of insurance after March 23, 2010 (including a change to insurer carriers).
After receiving considerable comments on this provision, the agencies determined that it was appropriate to amend the interim final regulations on grandfathered group health plans to allow a group health plan to enter into a new policy, certificate or contract of insurance without ceasing to be a grandfathered group health plan, provided that the plan continues to comply fully with the other standards that are set forth in the interim final regulations. This change applies to fully-insured as well as self-funded group health plans (but it does not apply to individual insurance policies).
The amendment to the interim final regulations only applies to a grandfathered group health plan that is entering into a new policy, certificate or contract of insurance which becomes effective on or after November 15, 2010. For example, if a group health plan entered into a new group insurance policy on September 28, 2010, to be effective on January 1, 2011, then the amendment to the interim final regulations would apply to such plan and the mere change of insurance carriers would not cause it to lose grandfathered status. However, the amendment to the interim final regulations does not apply to any new policy that became effective prior to November 15, 2010. For example, if a group health plan changed insurance carriers or entered into a new group insurance policy on July 1, 2010, to become effective on September 1, 2010, then the amendment to the interim final regulations would not apply to such group health plan and thus it would cease to be a grandfathered health plan.
To take advantage of this amendment and preserve grandfathered status, a group health plan that enters into a new policy, certificate or contract of insurance must provide to the new health insurance issuer (and the new health insurance issuer must require) documentation of plan terms (including benefits, cost sharing, employer contributions and annual limits) under the prior health coverage sufficient to determine whether any further change results in a loss of grandfathered status. You also will want to update your group health plan documents (e.g. group health and wrap welfare plan and summary plan description documents) accordingly and must send a notice to plan participants regarding such grandfathered status before the first day of the plan year beginning on or after September 23, 2010.