HR Management & Compliance

Government Issues Health Care Reform Regulations on ‘Grandfathered’ Plans

On June 14, the U.S. Departments of Health and Human Services (HHS), Labor, and Treasury issued new regulations addressing grandfathered plans under health care reform and how such plans can keep their grandfathered status. Although the new health care reform legislation (the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010) requires health plans to provide new benefits, the legislation “grandfathers” plans that existed on March 23, 2010, by exempting them from certain new requirements.

According to a fact sheet released by the departments, the regulations clarify that grandfathered plans will be able to make certain routine changes to their plans without losing their grandfathered status. Such changes include:

  • cost adjustments to keep up with medical inflation;
  • the addition of new benefits;
  • modest adjustments to existing benefits;
  • the voluntary adoption of new consumer protections under the health care reform legislation; and
  • changes to comply with state or other federal laws.

However, grandfathered plans will lose their status if they make significant changes that reduce benefits or raise costs to consumers. To maintain its grandfathered status, a plan cannot:

  • significantly cut or reduce benefits;
  • raise coinsurance charges;
  • significantly raise copayment charges;
  • significantly raise deductibles;
  • significantly lower employer contributions;
  • add or tighten an annual limit on what the insurer pays; or
  • change insurance companies.

The regulations also contain provisions designed to protect consumers from plans abusing their grandfathered health plan status.

According to Secretary of Labor Hilda Solis, “The rule . . . will allow employers to make routine and modest adjustments to co-payments, deductibles and employer contributions to their employees’ premiums without forfeiting grandfather status. This flexibility will encourage employers to continue offering health coverage to their employees and help to ensure coverage for all Americans.” The regulations, the fact sheet, and FAQs can be found on the Employee Benefits Security Administration’s website at

Learn the numerous provisions employers must have in place for their organization’s benefit plans by participating in the all-new extended Web seminar for HR, employers, and health plan administrators: “Employers Health Care Reform Virtual Summit: New Rules, Requirements, and Restrictions.”
Live online Thursday, July 8.