Federal Regulatory Guidance and Actions: Grandfathered Health Plans

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CAD flagThis is one in a series of NCSL documents offering assistance to states in interpreting and implementing the Affordable Care Act.

Grandfathered Health Plans

Title I, Subtitle C, Part 2, Section 1251 

Guidance/Information - Health and Human Services (HHS) 

June 14, 2010

Interim Final Rules

Interim Final Rules for Relating to Status as a Grandfathered Health Plan under the Patient Protection and Affordable Care Act

  • Applies to certain group health plans and health insurance coverage existing as of March 23, 2010, and referred to as grandfathered health plans as it relates to those individuals enrolled before that date or new employees. Includes both insured and self-insured group health plans.
  • Comments on the rule are due on or before Aug. 15, 2010.
  • Disclosure of grandfathered status: Each plan must notify its members of their grandfathered health plan status.
  • If a plan or health insurance coverage intends to be a grandfathered health plan, it must include a statement in any plan materials provided to participants or beneficiareis describing the benefits provided, and that the plan or coverage is intended to be a grandfathered health plan within the meaning of the Affordable Care Act. The regulation provides model language for this purpose.

 Table 1. - List of the New Health Reform Provisions of Part A of Title XXVII of the PHS Act that Apply to Grandfathered Health Plans

PHS Act Statutory Provisions

Application to Grandfathered Health Plans

Section 2704 Prohibition of preexisting condition exclusion or other discrimination based on health status.

Applicable to grandfathered group health plans and group health insurance coverage.

Not applicable to grandfathered individual health insurance coverage.

Section 2708 Prohibition on excessive waiting periods.

Applicable

Section 2711 No lifetime or annual limits.

Lifetime limits: Applicable to grandfathered group health plans and group health insurance coverage. Not applicable to grandfathered individual health insurance coverage.

Annual limits:

Section 2712 Prohibitions on recissions.

Applicable

Section 2714 Extension of dependent coverage until age 26 (who are not eligible for employer sponsored coverage).

Applicable

Section 2715 Development and utilization of uniform explanation of coverage documents and standardized definitions.

Applicable

Section 2718 Bringing down cost of health care coverage (for insured coverage).

Applicable to insured grandfathered health plans.

Provides that a group health plan or health insurance coverage no longer will be considered a grandfathered health plan if a plan sponsor or issuer:

  • Eliminates 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 measured from March 23, 2010.
  • For a group health plan or group health insurance coverage, an employer or employee organization decreases its contribution rate by more than 5 percentage points below the contribution rate on March 23, 2010.
  • With respect to annual limits (1) a group health plan, or group or individual health insurance coverage, that, on March 23, 2010, did not impose an annual or lifetime
  • limit on the dollar value of all benefits imposes an overall annual limit on the dollar value of benefits, (2) a group health plan, or group or individual health insurance coverage, that, on March 23, 2010, imposed an overall lifetime limit on the dollar value of all benefits but no overall limit on the dollar value if all benefits adopts an overall annual limit at a dollar value that is lower than the dollar value of the lifetime limit on March 3, 2010, or (3) a group health plan, or group or individual health insurance coverage, that, on March 23, 2010, imposed an overall annual limit on the dollar value of the annual limit (regardless of whether the plan or health insurance coverage also imposes an overall lifetime limit on the dollar value of all benefits).

Plans that are collectively bargained and ratified prior to March 23, 2010, will not have their status as a grandfathered plan terminated if they amend coverage to conform their agreement to any requirements added by the Affordable Care Act.

Effect on States

  • HHS does not intend to use its resources to enforce the requirements of HIPAA or the Affordable Care Act with respect to nonfederal governmental retiree-only plans or with respect to excepted benefits provided by nonfederal governmental plans.
  • States may continue to apply state law requirements except to the extent they prevent application of the Affordable Care Act requirements.
  • States have significant latitude to impose requirements on health insurance issuers that are more restrictive than the federal law.