Summary of Grandfathered Regulations for Group Plans
This summary of the grandfathering regulations is provided to help you better understand factors that affect grandfathered status.
For plan years beginning on or after October 1, 2010, group health plans must comply with certain healthcare reform provisions. If your plan is not a grandfathered group health plan, your plan must comply with all the healthcare reform provisions. If your plan is a grandfathered plan, your plan must comply with only some of these provisions.
What is a grandfathered plan?
Grandfathered plans do not have to comply with some of the healthcare reform requirements. According to healthcare reform regulations, a group health plan that existed on March 23, 2010, is a grandfathered plan. New employees (whether newly hired or newly enrolled) and new family members may be added to that plan without the loss of grandfathered status. However, changes to the health plan may result in the loss of grandfathered status for the plan. The grandfathering regulations define changes that will result in the loss of grandfathered status.
What plan changes will result in the loss of grandfathered status?
The following changes to plan coverage that existed on March 23, 2010, will cause a group health plan to lose its grandfathered status:
- Excluding benefits to diagnose or treat a particular condition
- Increasing the percentage of coinsurance
- Increasing deductibles or out-of-pocket maximums by more than medical inflation (the medical portion of the Consumer Price Index) plus 15 percent
- Increasing copayments by more than the greater of (a) medical inflation plus 15 percent or (b) $5 increased by medical inflation
- Decreasing employer contribution percentage by more than five percent
- Adding an overall annual dollar limit on plan benefits (even if permissible under the healthcare reform rules) if the plan did not have an overall (comprehensive) annual or lifetime limit on March 23, 2010
- Adding a lower annual dollar limit on plan benefits than the overall (comprehensive) lifetime dollar limit or, if lower, the overall (comprehensive) annual dollar limit, that the plan had on March 23, 2010
- Entering into a new group health insurance contract (with the same or a new insurer) with an effective coverage date before November 15, 2010
Please note that grandfathered status applies to each benefit option independently. So, for example, if a group had three benefit options as of March 23, 2010, each option is subject to grandfathered regulations separately from the other options. If changes are made to one benefit option that results in the loss of grandfathered status, it does not affect the other options.
What plan changes will NOT result in the loss of grandfathered status?
The following changes to the plan coverage that existed on March 23, 2010, will NOT cause a group health plan to lose its grandfathered status for purposes of healthcare reform:
- Changes to premiums
- Changes required by law
- Changes to voluntarily comply (or voluntarily comply early) with healthcare reform provisions
- Changes to add benefits or increase benefits in favor of the plan member
- Entering into to a new group health insurance contract (with the same or a new insurer) with an effective coverage date on and after November 15, 2010
- For self-funded groups, changing claims administrators
What is considered "plan coverage" on March 23, 2010?
The potential loss of grandfathered status is based on changes made to the plan's coverage as it existed on March 23, 2010. Grandfathering regulations allow any plan changes that were adopted in a written plan amendment before March 23, 2010, even if the adopted plan amendment was not effective until after March 23, 2010.
Changes that would result in the loss of grandfathered status made to a plan after March 23, 2010, but before the issuance of the grandfathering regulations, may be modified to qualify for grandfathered status. However, this modification must be made no later than the first day of the plan year beginning on and after October 1, 2010.
Important Grandfathering Documentation Requirements
Grandfathered Status Model Notice: A plan will lose grandfathered status if it does not include in its plan materials a disclaimer informing plan members that the plan is grandfathered for purposes of healthcare reform. Health and Human Services/Department of Labor/Treasury prepared a model disclaimer notice that plans can use for this purpose.
- This model notice may be found at www.dol.gov/ebsa/grandfatherregmodelnotice.doc
Keep Grandfathered Documentation: You must retain documentation proving the plan is a grandfathered health plan for as long as grandfathered status is claimed and afterwards for the time period required by other applicable laws, such as ERISA.
Special Health Plans
Grandfathering regulations provide that retiree-only plans and HIPAA-excepted benefit plans (dental, vision, flexible spending plans) are exempt from healthcare reform provisions. These plans do not have to comply with the provisions - regardless of whether these plans would be considered grandfathered or non-grandfathered.
Rules for Collectively Bargained Plans
Collectively bargained plans with collective bargaining agreements ratified on or before March 23, 2010, are considered a grandfathered plan and must comply with healthcare reform's grandfathering provisions until the time the agreements are terminated or expire. After the expiration or termination of the agreements, these plans must look back to plan coverage on March 23, 2010, and determine whether it must then comply with grandfathering or non-grandfathering provisions. These plans make this determination based on the changes made since March 23, 2010. However, the fact that an underwritten or self-funded plan entered into a new underwritten health insurance contract (with the same or a new insurer) with an effective coverage date prior to November 15, 2010, is disregarded. If the plan is now non-grandfathered, the plan must comply with non-grandfathered provisions no later than the date the collective bargaining agreements terminate.
For collectively bargained plans with agreements ratified after March 23, 2010, the determination of whether that plan is grandfathered or non-grandfathered is made the exact same way that any other group health plan determines its grandfathered status. These plans will be either grandfathered or non-grandfathered based on the changes made to benefits and/or employer contributions. If an underwritten or self-funded plan entered into a new underwritten health insurance contract between March 23, 2010, and November 15, 2010, that fact alone will cause the plan to lose grandfathered status. If an underwritten or self-funded plan enters into a new underwritten health insurance contract on or after November 15, 2010, then that fact alone will not cause it to lose grandfathered status. If the plan made any changes between March 23, 2010, and June 17, 2010, that would cause it to lose grandfathered status, the plan can take advantage of the transition rules to amend their plan to remove those changes effective no later than the first day of the plan year beginning on and after October 1, 2010.
During your group's renewal process with Blue Cross and Blue Shield of Alabama, it's important for you to let your Blue Cross Representative know if you intend to keep grandfathered status. For example, we will not know if you intend to decrease your employer contribution rate by greater than five percent. In the meantime, if you have any questions, please contact your Blue Cross Representative.
More Information About Grandfathering
- Complete Grandfathered Regulations
- Non-Grandfathered vs Grandfathered Group Plan Comparison
- Model Notice