Employers must disclose grandfathered status

In June, the Departments of Health and Human Services, Labor and Treasury jointly issued interim final rules providing guidance on grandfathered health plans under the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act. The regulations provide guidance to employers and sponsors regarding the definition of a grandfathered health plan, as well as the changes that may and may not be made.

Specifically, (among other exemptions) grandfathered health plans: do not have to maintain an appeals process that includes an external review; are not subject to the requirements to provide specified preventive care without any cost sharing to participants; and are not subject to certain nondiscrimination rules.

The interim rules specify a number of changes which would result in the grandfathered health plan losing its status. These include, but are not limited to: entering into a new policy, certificate, or contract of insurance with the plan's insurance issuer; changing the plan to eliminate all or substantially all benefits to diagnose or treat a particular condition; increasing any percentage cost-sharing requirement; and increasing a fixed-amount cost-sharing requirement, other than a copayment (a deductible, for example), if the total percentage increase in the cost-sharing requirement exceeds the "maximum percentage increase."

Changes that will not cause a health plan to lose its grandfather status include: changes to comply with federal or state law; changes to increase benefits; and changes to a plan's third party administrator.