How much a health plan may change before losing grandfathered plan status was addressed in a final Affordable Care Act rule issued on Nov. 13 by the three U.S. departments that administer ACA reform. The rule (which takes effect on Jan. 1, 2017) finalizes familiar pieces of agency guidance, many of them issued in 2010.
The rule also addresses some comments on proposed rules and subregulatory guidance, but makes very few changes. As a final rule, they will be harder to reverse than if they still had temporary or subregulatory status, experts noted.
- Grandfathered health plans remain grandfathered if they remain unchanged and uninterrupted since March 2010. Uninterrupted means at least one person remained in the program. Grandfather status is made separately for each benefit package made available under a group health plan or health insurance coverage. The rule finalizes ACA FAQs Part II, which say if any one benefit package (for example, a PPO, an HMO and a point-of-service) ceases to have grandfather status, the status of the other packages will not be affected, the rules states. Notification of grandfathered status has to take place at the same time as summary plan descriptions are issued, but more often is unnecessary. Plans have to keep records in connection with grandfather status. That is described in, and carried over from, ACA FAQs Part IV. Mergers, acquisitions and restructurings must not have as their principal purpose covering new individuals under a grandfathered health plan, the rule says. It also describes acceptable reasons for employers to transfer workers into a grandfathered plan.Grandfather status can be lost because a plan: (1) eliminates all or substantially all benefits for a particular condition; (2) changes copayments 15 percentage points or more than medical inflation; (3) decreases the employer contribution rate by more than 5 percentage points from what existed in March 2010; (4) changes the reimbursement categories (tiers) in prescription drug plans (see ACA FAQs Part VI); and others. Note: According to a 2014 survey, 37 percent of plans are grandfathered plans and 26 percent of employees in ERISA-covered plans are in a grandfathered plan, the rule states.
- In its prohibition of pre-existing condition exclusions, the rule finalizes guidance that was in ACA FAQs Part V to clarify this is not the same as excluding a category of benefits. If the exclusion does not depend on when a beneficiary developed the condition, it is a permissible exclusion of a category. No restricted enrollment periods or increased premiums are allowed to discriminate against people with pre-existing conditions, the rule states.
- The rule codifies June 28, 2010 interim final rules (75 Fed. Reg. 37188) and ACA FAQs parts IV, XI, XV and XXII on lifetime and annual dollar limits on benefits. Under the law, annual and lifetime dollar limits may not be applied to essential health benefits. Note: Large employers (with 50 and more employees) do not have to provide essential health benefits. To comply with the no-limit rule, they must know what benefits are categorized as EHBs, by selecting the valid benchmark plan for their state. (Note: EHB benchmark plans are mainly small group plans, but a small number are state employee plans.)The rule also states that benefit limits are prohibited whether they are incurred in-network or out-of-network. The rule on dollar limits has been in effect for all group plans since January 2014.
- The rule’s statement on the ACA’s prohibition on rescissions finalizes guidance that appeared in temporary rules issued on June 28, 2010 (75 Fed. Reg. 37188). Rescission is defined as declaring a policy to be void even though the plan member enrolled and already paid premiums. The prohibition covers not just individuals’ medical history, but also situations when an individual makes a mistake on an enrollment form. However, a plan’s prospective refusal to insure a member because he or she failed to pay premiums or contributions is not a rescission. And if a member commits fraud or misrepresents facts, rescission is not prohibited.
- The rule also adopts interim rules about the extension of coverage of dependent children to age 26, without change. No qualification — neither financial dependence, residency with the participant, student status, employment, etc. — can be allowed to get in the way of this coverage, it says. The only criteria for non-eligibility are that the listed dependent: (1) is not the participant’s child, or (2) has exceeded age 26. Tapering off of coverage as a child approaches age 26 is prohibited. And the rule says, if an HMO requires beneficiaries to work, live or reside in a service area in order to be eligible (which would put some college-age children out of coverage), that HMO would be violating the provision.
- The rule finalizes a long list of rules, technical releases and FAQs on the ACA’s internal claims and appeal and external review processes, also without substantial change. Plans must use the process when a rescission of coverage is occurring; participants and beneficiaries must get a notification on emergency care no later than 72 hours after receiving the claim; claims review vendors must not be selected due to their track record of saving the plan money; claimants must get a reasonable opportunity to respond to evidence supporting a denial. The DOL released a parallel rule governing the claims procedure that plans providing disability benefits must use.
Click here for more information on grandfathered health plans. For more information on the ACA’s claims and review rules, click here.