Monday, July 12, 2010
On June 17, 2010, the Employee Benefits Security Administration (EBSA) released its “interim final” rules on the “grandfather” provisions of the Patient Protection and Affordable Care Act (Act). Under the PPACA, certain hearth care plans, which were in effect on or before March 23, 2010, are exempted from some but not all provisions of the Act. Current grandfathered plans may lose their status, as a grandfathered plan should, if at some time in the future; they make certain changes to their plan design and features.
Under the Act, should a plan lose its grandfathered status, the plan would become subject to the full weight of the ACT. This could prove to be problematic for any organization that has several plans. The loss of grandfathered status in one plan DOES NOT mean the loss of grandfathered status in all other plans. Each plan stands alone with respect the being grandfathered or not. However, it could result in an additional administrative issues having to manage a mixed bag of plans. One employer with which I am familiar has several dozen plans, some with collectively bargained agreements, and others without such agreements. The grandfathering status of each plan has to be view separately from the status of others.
One surprising turn of events is that collectively bargained plans were not totally exempted from the provisions of the Act as might have been expected. Historically, most Federal benefits legislation has provided for a broad exclusion of collectively bargained agreements. Collectively bargained plans that are “fully” insured will be considered grandfathered if the plan was in effect on or before March 23, 2010. Fully insured plans will continue to be considered grandfathered as long as they continue to meet the grandfathering rules. However, those collectively bargained health care plans, which are “self-funded”, are subject to the Act’s provisions in the same way that any other self-funded plan is.
Grandfathered plans could lose their grandfathered status if they:
- Demand employees switch plans to avoid compliance.
- Eliminate benefit provisions.
- Engage in divestitures or acquisitions to circumvent compliance.
- Fail to inform their employees of their grandfathered status.
- Fail to maintain documentation to support grandfathered status.
- Impose new or decreased annual limits.
- Significantly decrease employer contributions.
- Significantly increase deductibles, co-payments,
Co-insurance payments.
Grandfathered status, much like self-funded status provided an exemption from mandated benefits, relived plans from meeting some of the provisions of the Act. Loss of that status could prove to be unpleasant at least.
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