Under the new health care reform legislation, passed in March, employer-based plans that qualify for "grandfathered" status are exempt from several key requirements to which new plans will be subject. (See InsideCounsel's June Cover Story, "Perplexing Prescription: Examining the New Health Care Law.")
However, the law did not spell out how an existing plan qualifies for grandfathering, raising many questions for employers.
This week, the Department of Health and Human Services issued regulations that answer those questions. According to an explanation on the healthreform.gov website, grandfathered plans:
- Cannot significantly cut or reduce benefits.
- Cannot raise co-insurance charges.
- Cannot significantly raise co-payment charges. Compared with the co-payments in effect on March 23, 2010, grandfathered plans will be able to increase those 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.
- Cannot significantly raise deductibles. Compared with the deductible required as of March 23, 2010, grandfathered plans can only increase these deductibles by a percentage equal to medical inflation plus 15 percentage points.
- Cannot significantly lower employer contributions. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points.
- Cannot add or tighten an annual limit on what the insurer pays.
- Cannot change insurance companies. If an employer decides to buy insurance for its workers from a different insurance company, this new insurer will not be considered a grandfathered plan. This does not apply to self-insured plans that switch plan administrators or to collective bargaining agreements.