ACA Compliance for Employers: Is your health plan still grandfathered?

To maintain status, plans must pay close attention to its benefits and contribution levels.

The topic of grandfathered status was huge just a short three years ago, but since March 2010 it has taken a backseat to the masses of regulations and proposed rules under the ACA. As plan designs are assessed and updated for 2014, those employers with grandfathered status need to decide if maintaining this status is the best option. They also need to ensure that if this is determined to be the best option, that the plan is truly still grandfathered!

A grandfathered plan is a group health plan, including self-insured plans or individual coverage, in which an individual was enrolled as of the original enactment date of the ACA: March 23, 2010. A grandfathered plan is not required to be amended for certain changes unless there is a change in the plan’s status.

The advantages of maintaining grandfathered status are many:

Grandfathered plans are NOT required to meet the following requirements under ACA:
  • Coverage of preventive care without cost-sharing, including contraceptives for women
  • Limitations of out-of-pocket limits
  • Essential health benefits and the metal levels
  • Guaranteed issue and renewal (only insured plans)
  • Non-discrimination rules for fully insured plans (delayed indefinitely, awaiting final regulations)
  • Expanded claims and appeal requirements
  • Expanded patient protections
  • Coverage of routine costs for clinical trials
  • Modified community rating (insured plans only)
Most ACA requirements apply to grandfathered plans:
  • 90-day wait period maximum
  • Patient-Centered Outcomes Research Institute (PCORI) fee
  • Transitional Reinsurance Fee
  • Summary of Benefits and Coverage (SBC)
  • Marketplace notice
  • No rescission of coverage
  • Lifetime and annual dollar limits on coverage prohibition
  • Dependent child coverage to age 26
  • Pre-existing coverage elimination
  • W-2 reporting
  • Employer shared responsibility penalty
  • Employer reporting to IRS (6055/6056)
  • Excise tax on high cost plans
  • Auto enrollment (for employers with more than 200 full-time employees)

To maintain grandfathered status, a plan must pay close attention to its benefits and contribution levels as of March 23, 2010, and must not:

  • Eliminate or substantially eliminate benefits for a condition
  • Increase cost sharing percentages
  • Increase copayments by more than $5 or a percent equal to medical inflation plus 15%, whichever is greater (current medical inflation is 9.5%)
  • Raise fixed-amount cost-sharing other than copays more than medical inflation plus 15%
  • Lower the employer contribution rate by more than 5% for any group of covered individuals
  • Add or reduce an annual limit
  • Maintain all records of plan designs and contribution levels as of March 23, 2010, and any changes since that date
  • Include a notice about the plan’s grandfathered status in enrollment communications

Certain changes can be made and still maintain grandfathered status:

  • Change insurers or third-party administrators (TPAs) as long as benefits do not change
  • Move between self-insured and fully insured status as long as benefits do not change
  • Make changes required by law
  • Make any changes other than one that is prohibited above (i.e., change to eligibility rules)
  • Increase benefits
  • Move drugs to a different copay tier (generic status)
  • Pass premium increases to employees (as long as the increase is shared pro rata)
  • Add new employees and/or family members to the plan

Violating any one of the requirements will forfeit grandfathered status.

Keeping grandfathered status is completely up to the plan sponsor. Care should be taken in forecasting and plan design as the full implementation of the employer responsibility mandate goes into effect and could have significant impact on plan funding.

 

 

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