Important Health Care Update: Change in Grandfathered Plan Definition

Health Care Update: Change in Grandfathered Plan Definition

The Department of Health and Human Services (HHS) has recently made an amendment to the definition of a group health plan’s “grandfathered” status.  Grandfathered health plans are not required to meet some of the new requirements of the Patient Protection and Affordable Care Act (PPACA), otherwise known as the healthcare reform law.  See the previous article What Is A Grandfathered Plan? for more details.   A grandfathered plan will lose its exemption if certain changes are made to the plan, such as significantly changing deductibles, co-pays, and employee contributions.  Originally, a plan could lose its grandfathered status if a fully insured plan changed insurance carriers.  The HHS has since amended the definition to allow health plans to change insurance carriers without losing their grandfathered plan status, as long as the plan continues to maintain the same benefit levels.

So why was the change made?  In June 2010, the HHS had finalized the definition of a “grandfathered” health plan.  At the time, they had asked for the public to submit comments about this regulation, and it was because of these comments that the HHS has changed the definition.  Those who submitted comments raised some good points about situations where an employer has no choice but to change carriers, due to their existing carrier leaving the market, or the company being bought out.  There was also concern about insurance carriers taking advantage of rate negotiations at renewal time for employers who felt they had no choice but to stay with them to remain grandfathered.  This change also levels the playing field between large companies, who can afford to self-insure and were allowed to change third party administrators, and smaller employers, who are most likely fully insured and can now change insurance carriers.

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