ACA: Grandfathered Plans


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The Affordable Care Act, as modified by the Health Care Education Reconciliation Act, (collectively, the “ACA”), includes various group health plan eligibility and coverage mandates, many of which are effective beginning for the first plan year beginning on or after September 23, 2010. However, in an effort to allow individuals to keep existing health plan coverage, Congress exempted plans (that were in existence on March 23, 2010 and covered at least one person continuously on and after that date) from some, but not all, of the ACA’s mandates. Such plans are called “grandfathered plans.”

The Departments of Health and Human Services, Labor, and Treasury have issued an Interim Final Rule (the “Rule”) providing detailed guidance on how grandfathered plan status may be maintained going forward. The Interim Final Rule generally provides that as long as changes made to an existing grandfathered group health plan stay within certain limitations, the plan will continue to be exempt from specified ACA mandates.

Changes That Cause Loss of Grandfathered Plan Status

The Interim Final Rule outlines specific plan design changes that will cause a loss of grandfathered plan status. All such changes are measured against the plan terms in effect on March 23, 2010. These include:

HDHPs

Grandfathered HDHPs may increase their fixed-amount cost-sharing without losing grandfathered status, if the increase is necessary to maintain HDHP status.

Click here for a printable summary of these requirements and a listing of ACA provisions that are exempted by virtue of a plan’s grandfathered status.

It is important to note that:

Disclosure and Recordkeeping Requirements for Grandfathered Plans

Participant Disclosure
The Rule requires that all plan materials (including the SPD, insurance certificate, and any other materials describing plan benefits) distributed to participants contain a statement indicating that the plan is a grandfathered plan, and that as a result, certain “consumer protections” under the ACA do not apply. Plan materials must also provide contact information for participants to utilize if they have questions or complaints. Click here for the model disclosure statement that is included in the Rule.

Plan Recordkeeping
A group health plan that wishes to keep grandfathered plan status must maintain, and make available for inspection, records documenting the terms of the plan or health insurance coverage in effect on March 23, 2010, as well as any other documents necessary to verify, explain, or clarify its status as a grandfathered health plan. This is necessary to provide the basis against which any future plan changes will be measured.

The Rule does not specify the form of documentation that will be accepted for this purpose, so it is important that employers have readily available all plan documentation, including:

Plan Changes in Process

The Rule includes special transitional rules for group health plans that may have made changes after the effective date of the ACA. Specifically, changes effective prior to March 23, 2010, or changes effective after that date that were adopted on or before March 23, 2010, pursuant to legally binding contract or written plan amendment will be considered part of the grandfathered plan.

Changes made after March 23, 2010, and before June 14, 2010, will not cause a plan to lose grandfathered status, as long as those changes are revoked or modified to come within the modifications permitted by the Rule effective as of the first day of the first plan year (in the individual market, policy year) beginning on or after September 23, 2010.

Special Grandfathered Plan Rules for Collectively Bargained Plans

Insured Plans
Insured health plan coverage maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers, and ratified before the effective date of the ACA, is grandfathered health plan coverage at least until the date the final collective bargaining agreement relating to that coverage terminates. An amendment to an insured collectively bargained plan made to conform to a requirement in the ACA is not treated as a termination of the collective bargaining agreement.

As an exception to the general rule under the Interim Final Rule, changing the insurance issuer after the effective date of the ACA and prior to the expiration of all in-force collective bargaining agreements related to that coverage will not cause the plan to lose grandfathered status. However, after the final collective bargaining agreement related to the plan expires, that coverage is treated as grandfathered health plan coverage only until it would otherwise lose grandfathered status under the conditions outlined in the Interim Final Rule for all plans. The determination of grandfathered status is made by considering changes to the terms of the coverage after March 23, 2010. Therefore, changes made during the period of a collective bargaining agreement could still cause the plan to lose grandfathered status, but only after expiration of the last in-force collective bargaining agreement related to that plan.

Self-Insured Plans
There are no special exceptions to the grandfathered plan rules for self-insured collectively bargained plans. Therefore, a self-insured plan maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers is only a grandfathered health plan to the extent that it satisfies the conditions outlined in the Interim Final Rule, as described above, and does not make any plan design changes that would result in the loss of grandfathered health plan status.

Effective Date
The Rule clarifies that there is no delayed effective date for ACA requirements that apply to collectively bargained plans. Grandfathered collectively bargained health plans are subject to the same requirements as other grandfathered health plans, so changes may be required to bring a collectively bargained health plan into compliance with ACA in the middle of the period during which one or more collective bargaining agreement related to a plan are in effect.

 

Additional Resources

FAQs

Interim Final Regulation

Amendment Relating to Grandfathered Status

Fact Sheet on Amendment Relating to Grandfathered Status