Health Care Reform: Considering Changes to Your Health Plan
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively the “Act”) mandates a host of new requirements for employer-provided health plans. The Act did, however, exempt employer-provided health plans that were in place on March 23, 2010 from certain provisions of the Act so long as the plan meets certain requirements (“grandfathered plans”).
To be a grandfathered plan, an employer-provided health plan must (1) be in place on March 23, 2010, (2) continuously provide coverage to one or more individuals, (3) avoid implementing any of the changes described below, (4) provide a notice in all materials describing plan benefits that, among other things, states that the employer believes the plan is a grandfathered plan, (5) maintain records documenting the plan’s terms on March 23, 2010 (along with any other documents necessary to explain or verify its grandfathered status), and (6) make such records available upon request to participants, beneficiaries, and federal officials. Grandfathered plan status is determined separately for each benefit package (e.g., PPO, HMO); therefore, changes to one benefit package may result in that package losing grandfathered status while grandfathered status for another package is maintained.
Plan Changes Triggering Loss of Grandfathered Status
- Eliminates all or substantially all benefits to diagnose or treat a particular condition;
- Increases a percentage cost-sharing requirement above the level on March 23, 1010;
- Increases a fixed amount cost sharing requirement (other than copayments) by a percentage (measured from March 23, 2010) by more than the sum of medical inflation and 15 percentage points;
- Increases copayments by an amount that exceeds the greater of: a 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 measured from March 23, 2010;
- Decreases the employer contribution rate by more than five percentage points below the contribution rate on March 23, 2010; or
- Changes the plan’s annual limits in any of the following ways:
-The plan imposed an overall lifetime dollar limit on benefits but no overall annual dollar limit on benefits as of March 23, 2010, and then adopts an overall annual dollar limit lower than the overall lifetime dollar limit in effect on March 23, 2010; or
-The plan imposed an overall annual dollar limit on benefits as of March 23, 2010, and then decreases the annual dollar limit.
Benefits of Grandfathered Status
- Cover preventive care services at 100% with no cost sharing;
- If dependent coverage is offered, cover children up to age 26 even though the child’s employer makes coverage available to him or her (exemption ends in 2014);
- Provide coverage of certain routine patient costs for items and services furnished in connection with participation in a clinical trial, and comply with certain nondiscrimination requirements based on health status;
- Disclose certain enrollee information to the federal government and the state insurance commissioner, such as claims payment policies and practices;
- For insured plans, comply with nondiscrimination rules which prohibit discrimination in favor of highly compensated individuals;
- Revise appeals process to include an external appeal and the acceptance of evidence and testimony during internal appeal; and
- Eliminate the preauthorization or referral requirements for such services as OB/GYN, pediatrician, and emergency services.
- Cost Analysis of Savings from Plan Changes