Benefit News
ACA Grandfathered Plan Final Rule Released
December 14, 2020
On December 11, 2020, the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (collectively, the Departments) announced a final rule that provides greater flexibility for grandfathered plans under the Affordable Care Act (ACA). A grandfathered plan is a group health plan or health insurance coverage that was in existence on March 23, 2010 (the date the ACA was passed), that has not made certain prohibited changes to lose its grandfathered status.
The final regulations are effective for plan amendments effective on or after June 15, 2021.
Background
The ACA provides that grandfathered health plans are subject to certain, but not all, of its provisions, as long as they are able to maintain their status as a grandfathered health plan. Regulations regarding maintaining grandfathered status were finalized in 2015 (referred to as the 2015 final rules). In general. there are six types of changes (measured from March 23, 2010) that will cause a group health plan or health insurance coverage to cease to be grandfathered:
- The elimination of all or substantially all benefits to diagnose or treat a particular condition;
- Any increase in a percentage cost-sharing requirement (such as coinsurance);
- Any increase in a fixed-amount cost-sharing requirement (other than a copayment) (such as a deductible or out-of-pocket maximum) that exceeds certain thresholds;
- Any increase in a fixed-amount copayment that exceeds certain thresholds;
- A decrease in the employer (or employee organization) contribution rate toward the cost of coverage of any tier of coverage for any class of similarly situated individuals by five (5) or more percentage points below the rate for the coverage period that includes March 23, 2010; or
- The imposition of annual limits on the dollar value of all benefits for group health plans and insurance coverage that did not impose such a limit prior to March 23, 2010.
The 2015 final rules also outlined certain changes to a group health plan or coverage that could be made that would not result in a loss of grandfathered status.
More recently, on July 10, 2020, the Departments issued a proposed rule that would amend current regulations to allow grandfathered health plans greater flexibility to make changes to certain types of cost-sharing requirements without causing a loss of grandfathered status. This final rule adopts the provisions of the proposed rule without making substantial changes.
The Final Rule
The final rule provides additional flexibility for grandfathered plans in two significant ways:
Increased Flexibility for High Deductible Health Plans (HDHP) The rule clarifies that HDHP coverage may increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain its status as an HDHP without losing grandfathered status. This clarification is intended to ensure that participants and beneficiaries enrolled in that coverage remain eligible to contribute to a health savings account (HSA). Thus, if a plan is subsequently amended after June 15, 2021 to increase the deductible limit by an amount that is necessary to comply with the HSA definition of a high deductible health plan, it will not cease to be a grandfathered health plan, even though the increase may exceed the maximum percentage increase otherwise permitted to retain grandfathered status.
Alternative Inflation Adjustment for Fixed Amount Cost Sharing Increases The final rule also includes a revised definition of maximum percentage increase that relies on the premium adjustment percentage, rather than medical inflation, to account for changes in healthcare costs over time, providing for an alternative inflation adjustment standard for fixed amount cost-sharing increases made on or after June 15, 2021. This alternative method is intended to allow plans and issuers to better account for changes in the costs of health coverage over time. This additional flexibility may allow additional plans to maintain their grandfathered status, despite certain changes being made to the plan.
For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:
949.833.2983
inquiries@burnhambenefits.com
Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.