Employee Benefits-Governing Departments Amend Regulation On “Grandfathered” Health Plans Under The Affordable Care Act

According to a Press Release, the Departments of Health and Human Services, Labor and Treasury (the “Departments”) have amended their regulation on grandfathered health care plans.

By way of background, on June 17, 2010, the Departments issued the “grandfather” regulation. This regulation addressed how employer-sponsored group health care plans can retain their grandfathered status, which exempts them from certain new requirements under the Affordable Care Act (such as nondiscrimination and external claims review). The grandfather regulation includes a number of rules for determining when changes to a health care plan causes the plan to lose its grandfathered status. For example, a plan could lose its grandfather status if the employer makes certain significant changes to the plan that reduce benefits or increase costs to participant. The Departments have adopted an amendment which modifies one aspect of the original regulation.

Previously, one of the ways a health care plan could lose its grandfather status was if the employer changed issuers – switching from one insurance company to another. The original regulation only allowed self-funded plans to change third-party administrators without necessarily losing their grandfathered plan status. The new amendment allows all insured group health care plans to switch insurance companies without losing grandfathered status, so long as the structure of the coverage, as offered by the new insurer, does not violate one of the other rules for maintaining this status.