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CCH® BENEFITS — 05/11/10

Health Reform 2010, Grandfathered Health Plans

from Spencer’s Benefits Reports: For the next few weeks, Spencer’s Benefits Reports will highlight specific provisions in the new health reform law which affect employer-sponsored plans.

Sec. 1251 of the Affordable Care Act concerns grandfathered health plans.

Individuals who are enrolled in a group health plan or individual health coverage at the date of enactment of the Patient Protection and Affordable Care Act may not be required to terminate that coverage. Any group health plan or health insurance coverage to which this provision applies is considered a “grandfathered health plan.” Thus, individual or group health plans providing coverage on March 23, 2010, are grandfathered.

Grandfathered plans are exempt from many of the provisions governing new plans, including these:

• Insured health plan compliance with nondiscrimination rules;
• Requirement to provide preventive care services;
• Requirement to provide emergency services without preauthorization;
• Implementation of effective claims appeals processes;
• Selection of any participating primary care provider;
• Insurance premium rates limitations;
• Guaranteed availability and renewal;
• Prohibition on discrimination based on health status; and
• Essential benefits coverage package and limited insured annual cost sharing.

However, grandfathered plans are subject to the following new provisions in the Public Health Service Act (PHSA):

• PHSA Sec. 2708, prohibiting excessive waiting periods (effective for plan years beginning on or after Jan. 1, 2014);
• PHSA Sec. 2711 prohibiting annual and lifetime limits (effective for plan years beginning on or after Sept. 23, 2010);
• PHSA Sec. 2712, prohibiting rescissions (effective for plan years beginning on or after Sept. 23, 2010);
• PHSA Sec. 2714, extending coverage to adult children younger than age 26 (effective for plan years beginning on or after Sept. 23, 2010);
• PHSA Sec. 2704, eliminating preexisting condition exclusions (effective for plan years beginning on or after Jan. 1, 2014); and
• PHSA Sec. 2714, relating to extension of dependent coverage in a grandfathered group health plan, but only if the dependent is not eligible to enroll in an eligible employer-sponsored health plan (effective for plan years beginning before Jan. 1, 2014).

Finally, grandfathered plans also must comply with these reform provisions for plan years beginning on or after March 23, 2010:

• Requirements to provide uniform explanations of coverage and standardized definitions (PHSA Sec. 2715).
• Requirements to provide loss-ratio reports and rebate premiums if loss ratios fall below 80% (Sec. 2718).

Family members, new employees. As long as the terms of the group plan or insurance coverage allow it, family members of an individual may enroll in a grandfathered plan in which that individual is enrolled. This rule applies if the individual was enrolled in the grandfathered plan on the date of enactment and the coverage is later renewed.

A grandfathered group health plan also may provide for the enrollment of new employees and their families.

Although the law does not require individuals to terminate their existing coverage, the law also does not prevent a group health plan from dropping those grandfathered plans. Thus, whether an individual can maintain her existing coverage will depend in large part on whether the plan sponsor or insurer continues to provide that type of grandfathered plan.

So far, there are no guidelines for maintaining a grandfathered plan or for determining what changes to the plan (such as cost, deductibles, coverage) would end the grandfathered status.

Effective date. This provision is effective on March 23, 2010.

CCH Law, Explanation And Analysis Of Health Reform Act Is Available

CCH's Law, Explanation And Analysis of the Patient Protection and Affordable Care Act of 2010 provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. Included in the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. A hard-copy version of the book is available for $149.

For more information or to order the hard-copy version of the book, please call (800) 248-3248 or click http://hr.cch.com/Products/ProductID-7127.asp. Discounts are available for multiple copies.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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