Simply stated health care

For some employers and individuals, the interim rule on grandfathered plans leaves them cranky and out of sorts.

The new health reform law “grandfathered” existing health plans, exempting the plans from certain provisions. This followed the much-repeated promise that Americans could keep the health plan they loved.

What that meant was not exactly clear. Following the release by the Department of Health and Human Services (HHS) of the 100-plus pages of the interim rule, it is not much clearer. Legislation that is not simple. Stop me if you’ve heard that before.

Since our goal is to keep health care simple and informative, we will take a shot at simplifying the rule.

The Grandfathered Status

The following are requirements for health plans in qualifying for grandfathered status:

• The health plan was in place as of March 23, 2010
• It can apply to individual, small and large group health plans
• Plans can lose the grandfathered status if certain changes are made to the plan

Collectively bargained plans are exempt from health reform provisions until the termination date of the bargained agreement. In addition, there is an exemption from the health reform requirements for retiree-only health plans.

What Does a Plan Get With the Status?

So what does the grandfathered status deliver to health plans? As mentioned, one benefit is the exemption from some of the provisions of the new health reform law.

The following reviews some of those provisions and their effective dates.

Effective September 23, 2010 or January 1, 2011 (for calendar year health plans)

Does NOT Apply to Grandfathered Health Plans:

• Coverage for adult children up to the age of 26
  • Only applies to grandfathered plans if the adult child is NOT eligible for another employer-sponsored health plan
• Coverage for certain preventive services, such as immunizations and screenings
• Essential benefits with limits on cost-sharing, e.g., copayments, deductibles
• Coverage for treatment that is part of a clinical trial
• Employer requirement for submission of annual reports to HHS

Applies to ALL Plans:

• The banning of limitations and exclusions on pre-existing medical conditions for individuals under the age of 19
• Forbids a health plan from rescinding coverage for an individual, except in the case of fraud or misrepresentation
• Prohibits a lifetime limit on essential benefits
• Allows only restricted annual limits (as defined by HHS) on essential benefits

Effective January 1, 2014

Does NOT Apply to Grandfathered Health Plans:

• Limiting out-of-pocket costs to $5,950 for individual coverage and $11,500 for family coverage
• Capping deductible to a maximum of $2,000 for individual coverage and $4,000 for family coverage

The limits for out-of-pocket costs and deductibles are current requirements for high deductible health plans. The amounts will likely change by 2014.

Applies to ALL Plans:

• Dependent coverage for children up to the age of 26, regardless of eligibility for another employer-sponsored plan
• The banning of limitations and exclusions on pre-existing medical conditions for ALL individuals
• The prohibition of annual limits
• The limiting of plan waiting periods for new enrollees to no more than 90 days

Easy Come – Easy Go

Losing grandfathered status is probably easier than retaining it. The following are some of the ways a health plan loses that status:

• A significant reduction in benefits
• Any increase in coinsurance
  • The amount the individual pays
  • Example: an increase from 20 percent to 25 percent
• A significant increase in copayments the individual must pay
• A significant increase in deductibles
• A significant decrease in the amount the employer contributes
• A change in insurers

The interim rule defines “significant” with a dollar and/or percentage measurement.

The Rule Makes Some Cranky

The release of the interim rule upset some employers that sponsor health coverage that found all the restrictions difficult. Some see the loss of the grandfathered status as a foregone conclusion, leaving employers with the high cost of complying with new rules.

The likelihood of individuals and small group employers hanging on to the current health plan they love appears slim. On the other hand, that may not be a bad thing if the state health exchanges offer a more competitive health plan than what individuals or small groups have now.

So there you have the high-level view of some of the provisions of the interim rule for grandfathered plans. Knowing it’s an interim rule is enough to make anyone cranky.

Resources: Health Reform.gov Questions and Answers: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans

Fact Sheet: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans

Notice of Disclaimer –Cathy Miller is not an attorney and cannot provide legal advice. The information provided is for your general background only, and is not intended to constitute legal advice as to your specific circumstances. We recommend you review legislation with legal counsel.