Draft Grandfather Health Plan Rules Leaked

Stay tuned.  Health reform is about to get very interesting.

A draft version of the interim final rule for “grandfathered” health plans was accidentally leaked last Friday when it was posted on a government web site.  The draft, which is no longer on the website, was issued by the departments of the Treasury, Labor, and Health and Human Services.  The draft was pulled down within a few hours of its accidental posting after the draft (see page 50) was reported to estimate that about 51 percent of all employer health plans will have to relinquish their grandfather status by 2013.

Please note that the attached draft regulation is a DRAFT.  It is not final, but it is very insightful.  Here are some of the major points contained in this 83 page draft:

Summary of Events that Trigger Loss of Grandfather Status

The interim final regulations provide that a group health plan or health insurance coverage no longer will be considered a grandfathered health plan if a plan sponsor or an issuer:

• Eliminates all or substantially all benefits to diagnose or treat a particular condition. The elimination of benefits for any necessary element to diagnose or treat a condition is considered the elimination of all or substantially all benefits to diagnose or treat a particular condition;
• Increases a percentage cost-sharing requirement (such as coinsurance) above the level at which it was on March 23, 2010;
• Increases fixed-amount cost-sharing requirements other than copayments, such as a $500 deductible or a $2,500 out-of-pocket limit, by a total percentage measured from March 23, 2010 that is more than the sum of medical inflation and 15 percentage points.
• Increases copayments by an amount that exceeds the greater of: a total percentage measured from March 23, 2010 that is more than the sum of medical inflation plus 15 percentage points, or $5 increased by medical inflation; or
• For a group health plan or group health insurance coverage, an employer or employee organization decreases its contribution rate by more than five percentage points below the contribution rate on March 23, 2010.

Changing an insurance carrier or entering into a new insurance contract with the same carrier (not a renewal) after March 23, 2010 will be enough to lose grandfathered status.  Changing an ASO vendor is OK and will not cause the loss of grandfathered status.

Grandfathered Health Plan Document Retention and Disclosure Requirements

To maintain grandfathered health plan status under these interim final regulations, a plan or issuer must maintain records that document the plan or policy terms in connection with the coverage in effect on March 23, 2010, and any other documents necessary to verify, explain or clarify is status as a grandfathered health plan. The records must be made available for examination by participants, beneficiaries, individual policy subscribers, or a State or Federal agency official.

Plans or health insurance coverage that intend to be a grandfathered health plan, also must include a statement, in any plan materials provided to participants or beneficiaries describing the benefits provided under the plan or health insurance coverage, and that the plan or coverage is intended to be a grandfathered health plan within the meaning of section 1251 of the Affordable Care Act. In these interim final regulations, the Departments provide a model statement plans and issuers may use to satisfy the disclosure requirement. 

Here is the model statement as it appears in the draft regulation: 

This [group health plan or health insurance issuer] believes this [plan or coverage] is a ―grandfathered health plan‖ under the Patient Protection and Affordable Care Act (the Affordable Care Act). Being a grandfathered health plan means that your [plan or policy] does not include certain consumer protections of the Affordable Care Act. Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator at [insert contact information]. [For ERISA plans, insert: You may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa.] [For individual market policies and nonfederal governmental plans, insert: You may also contact the U.S. Department of Health and Human Services at www.healthreform.gov.]