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:: Feds Ease Grandfather Rule Requirements For Insured Plans

The federal agencies regulating under the PPACA have determined that changing issuers should not result in a loss of a plan’s grandfathered status.

The new guidance was anticipated inasmuch as a change in insurers is frequently necessary and the distinction between self-funded plans (that could change claims administrators) and insured plans (which heretofore could not change insurers) was arbitrary and senseless. Individual insurance policies remain subject to the rule forbidding changes in insurers.

From the fact sheet on the new guidance:

On June 17th, the Departments of Health and Human Services, Labor, and the Treasury (the Departments) issued the “grandfather” regulation which, by addressing how health plans can retain a “grandfathered” exemption from certain new requirements, helps protect Americans’ ability to keep their current plan if they like it. At the same time, Americans in grandfathered plans will receive many of the added benefits that the new law provides. The regulation also minimizes market disruption and helps put us on a path toward the competitive, patient-centered market of the future.

The grandfather regulation includes a number of rules for determining when changes to a health plan cause the plan to lose its grandfathered status. For example, plans could lose their grandfather status if they choose to make certain significant changes that reduce benefits or increase costs to consumers. This amendment modifies one aspect of the original regulation.

Previously, one of the ways an employer group health 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. Today’s amendment allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, so long as the structure of the coverage doesn’t violate one of the other rules for maintaining grandfathered plan status.

(cross posted on erisaboard.com)

The amendment to the interim rule can be read in its entirety here.