On June 17, 2010, the Department of Health and Human Services, the Department of the Treasury, and the Department of Labor (collectively the "Agencies") published interim final regulations for group health plans and health insurance coverage relating to the status of grandfathered plans under the Patient Protection and Affordable Care Act ("PPACA" a/k/a the Health Law Reform Act). Houston Harbaugh previously published "
Health Care Reform Summary: What Employers and Individuals Need to Know." In response to comments on these initial regulations, on November 15, 2010 the Agencies issued an amendment (the "Amendment") to these regulations which may assist group health plans in retaining their grandfathered status.
Pursuant to the Amendment, group health plans may enter into new policies, certificates or contracts for insurance without losing grandfathered status, so long as the group health plan continues to meet the other standards required for maintaining grandfathered status. This will allow group health plans to change insurance companies without losing grandfathered status.
The Amendment was enacted to address four primary concerns raised by comments on the initial interim final rules:
- Under the initial rules, self-insured plans were permitted to change their third-party administrators without losing grandfathered status.
- The Amendment assists employers facing involuntary changes in insurance carriers, such as where an insurance company withdraws from a particular market.
- The Amendment addresses concerns that the initial interim final rules would unnecessarily restrict the ability of insurance companies to reissue policies to current plan sponsors for administrative reasons unrelated to changes in the underlying terms of the health insurance coverage.
- Commenters expressed reservations that the initial interim final rules gave insurance companies undue and unfair leverage in negotiating costs of coverage renewals with the sponsors of grandfathered health plans because sponsors desiring to retain grandfathered status would not be able to shop for the same coverage at a lower cost from another insurance company. Such unfair leverage would likely increase healthcare costs, which is contradictory to the intent of PPACA.
The Amendment also contains a new disclosure requirement. In the event that a group health plan desires to change insurance companies, the Amendment requires the group health plan to provide its new insurance company with documentation of its plan terms under the prior coverage that is sufficient to determine if the coverage offered by the new insurance company will meet the remaining requirements for retaining grandfathered status.
The changes set forth in the Amendment are only effective for group health plans. Those who obtain insurance through the individual health insurance market will still lose grandfathered status if such persons enter into new policies, certificates or contracts for insurance.
Your Houston Harbaugh attorney can assist you in determining how these rules will affect your business.