Healthcare Reform: Regulations

Business attorney Daniel Clevenger comments on recent healthcare reform news and regulations.

DHHS Regulations for Grandfathered Health Plans

Departments of Health and Human Services, Labor, and Treasury have issued new
regulations relating to grandfathered health plans.  Grandfathering allows health plans which were
in effect on March 23, 2010 to preserve their structures and avoid implementation of some of the
requirements of the new health care bill.  The new regulations identify what a grandfathered plan
can and cannot do in order to retain its grandfathered status.
Grandfathered health plans must steer clear of the following in order to preserve grandfather
status:

Grandfathered plans cannot significantly cut or reduce benefits.

Grandfathered plans cannot raise co-insurance charges.  Whatever the co-insurance
requirement was at the time of grandfather status may be preserved, but grandfather plans
cannot increase these percentages.

Grandfathered plans cannot significantly raise co-payment charges.  Plans will be able to
increase co-pays by no more than the greater of $5 (adjusted annually for medical inflation)
or a percentage equal to medical inflation plus 15 percentage points.  For example, if a plan
raises its co-payment from $30 to $50 over the next two years, it will lose its grandfather
status.

Grandfathered plans cannot significantly raise deductibles.  They can only increase
deductibles by a percentage equal to medical inflation plus 15 percentage points.  The DHHS
indicates that medical costs have risen on average of 4-5% in recent years so that would
allow an increase in deductibles of 19-20% between 2010 and 2011, and 23-25% between
2010 and 2012.

Grandfathered plans cannot significantly lower employer contributions.  The grandfathered
plans cannot decrease the percentage of premiums the employer pays by more than 5
percentage points.  

Grandfathered plans cannot add or tighten an annual limit on what the insurer pays.  

Grandfathered plans cannot change insurance companies.  This provision does not apply to
employers that provide their own insurance to their workers which switch plan
administrators or to collective bargaining agreements. 
In addition, the regulations also incorporate the following provisions to prevent against
abuse by grandfathered health plans:

The regulations require a grandfathered health plan to disclose to consumers every time it
distributes materials whether the plan believes that it is a grandfathered plan and therefore
is not subject to some of the additional consumer protections of the Affordable Care Act. 
According to the regulations, this will allow consumers to understand the benefits of staying
in a grandfathered plan or switching to a new plan.  The plan must also provide contact
information for enrollees to have their questions and complaints addressed.

A grandfathered plan’s status will be revoked if it forces consumers to switch to another
grandfathered plan that, compared to the current plan, has less benefits or higher cost
sharing as a means of avoiding new consumer protections; or

A grandfathered plan’s status will be revoked if it is bought by or merges with another plan
simply to avoid complying with the law.

These regulations will help guide employers’ decision making when it comes to
consideration of whether or not to continue in the employer’s grandfathered plan or move to a new
health care plan which incorporates all of the changes under the Affordable Care Act.  To discuss
how these regulations may impact your company’s decision making process and to understand all of the changes under the Affordable Care Act will impact your business, please contactundersigned at (330) 458-2040 or any of our other attorneys in the firm’s health care practice.