Overview of Grandfathered Plans (Part 2)

Overview of Grandfathered Plans (Part 2)

by Clarke & Company Benefits Posted on: October 9, 2014Categories: HR & Compliance   

HEALTH CARE REFORM PROVISIONS

Which Health Care Reform Rules Do Not Apply to Grandfathered Plans?

The health care reform law specifically exempts grandfathered plans from certain requirements of the law. Grandfathered health plans are not required to comply with the following health care reform provisions:

• Coverage of Preventive Health Services. Effective for plan years beginning on or after Sept. 23, 2010, group health plans and health insurance issuers offering group or individual health insurance coverage must provide coverage for certain preventive health services without imposing cost-sharing requirements. Additional preventive health services for women must be covered without cost-sharing effective for the plan year beginning on or after Aug. 1, 2012.
• Patient Protections. Effective for plan years beginning on or after Sept. 23, 2010, the health care reform law requires the following protections for patients:
  • Group health plans and health insurance issuers offering group or individual health insurance coverage that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children);
  • Group health plans and health insurance issuers offering group or individual health insurance coverage that provide emergency services may not impose preauthorization or increased cost-sharing for emergency services (in or out of network); and
  • Group health plans and health insurance issuers offering group or individual health insurance coverage that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.
• Nondiscrimination Rules for Fully Insured Plans. Fully insured plans will have to satisfy the requirements of Internal Revenue Code section 105(h)(2). This section provides that a plan may not discriminate in favor of highly compensated individuals as to eligibility to participate and that the benefits provided under the plan may not discriminate in favor of participants who are highly compensated individuals. This provision will be effective sometime after regulations are issued. The regulations will specify the effective date.
• Quality of Care Reporting. Reporting requirements will be developed for group health plans and health insurance issuers offering group or individual health insurance coverage. The reports will relate to benefit and reimbursement structures that are designed to improve health outcomes, prevent hospital readmissions, improve patient safety, reduce medical errors and implement health and wellness activities.
• Improved Appeals Process. Effective for plan years beginning on or after Sept. 23, 2010, group health plans and health insurance issuers offering group or individual health insurance coverage must implement an improved appeals process and meet minimum requirements for external review. A grace period until plan years beginning on or after Jan. 1, 2012, was provided for some elements of the process.
• Insurance Premium Restrictions. Effective for plan years beginning on or after Jan. 1, 2014, premiums charged for health insurance coverage in the individual or small group market may not be discriminatory and may vary only by individual or family coverage, rating area, age and tobacco use, subject to certain restrictions.
• Guaranteed Issue and Renewal of Coverage. Effective for plan years beginning on or after Jan. 1, 2014, health insurance issuers offering health insurance coverage in the individual or group market in a state must accept every employer and individual in the state that applies for coverage and must renew or continue in force the coverage at the option of the plan sponsor or the individual.
• Nondiscrimination in Health Care. Effective for plan years beginning on or after Jan. 1, 2014, group health plans and health insurance issuers offering group or individual insurance coverage may not discriminate against any provider operating within their scope of practice. However, this provision does not require a plan to contract with any willing provider or prevent tiered networks. Plans and issuers also may not discriminate against individuals based on whether they receive subsidies or cooperate in a Fair Labor Standards Act investigation.
• Comprehensive Health Insurance Coverage. Effective for plan years beginning on or after Jan. 1, 2014, health insurance issuers that offer health insurance coverage in the individual or small group market must provide the essential benefits package required of plans sold in the health insurance exchanges.
• Limits on Cost-Sharing. Effective for plan years beginning on or after Jan. 1, 2014, certain group health plans may not impose cost-sharing or out-of-pocket costs in excess of certain limits. Out-of-pocket expenses may not exceed the amount applicable to coverage related to HSAs and deductibles may not exceed $2000 (single coverage) or $4000 (family coverage). These amounts are indexed for subsequent years. The annual deductible limit applies to health plans in the small group market, while the out-of-pocket maximum applies to all non-grandfathered health plans.

Update—On April 1, 2014, President Obama signed into law the Protecting Access to Medicare Act of 2014 (H.R. 4302), which repealed the annual deductible limit under the ACA. This repeal is effective as of the date that the ACA was enacted, back on March 23, 2010.

• Coverage for Clinical Trials. Effective for plan years beginning on or after Jan. 1, 2014, group health plans and health insurance issuers offering group or individual insurance coverage must permit certain enrollees to participate in certain clinical trials, must cover routine costs for clinical trial participants and may not discriminate against participants.

 

Which Major Health Care Reform Rules Do Apply to Grandfathered Plans?

The provisions described below apply to both grandfathered and non-grandfathered health plans. Keep in mind that this is a description of major provisions that affect health plans, not an exhaustive list of how health care reform might affect your company.

• Extension of Dependent Coverage. Effective for plan years beginning on or after Sept. 23, 2010, group health plans must provide coverage for adult children up to age 26. For plan years beginning before Jan. 1, 2014, grandfathered plans may exclude an adult child under age 26 from coverage if the adult child is eligible to enroll in an employer-sponsored health plan, other than a group health plan of a parent.
• Elimination of Lifetime and Annual Limits. Effective for plan years beginning on or after Sept. 23, 2010, group health plans and health insurance issuers offering group or individual health coverage may not establish lifetime limits on the dollar value of essential health benefits. Group health plans may also not establish unreasonable annual limits. Effective for plan years beginning on or after Jan. 1, 2014, annual limits on the dollar value of essential health benefits are prohibited.
• Elimination of Pre-existing Condition Exclusions. Effective for plan years beginning on or after Sept. 23, 2010, pre-existing condition exclusions may not be applied to enrollees under age 19. Pre-existing condition exclusions are eliminated for all enrollees for plan years beginning on or after Jan. 1, 2014.
• Limits on Rescissions. Effective for plan years beginning on or after Sept. 23, 2010, coverage may not be rescinded, except in the case of fraud or intentional misrepresentation of material fact. Policyholders must be notified prior to cancellation.
• Limits on Waiting Periods. Effective for plan years beginning on or after Jan. 1, 2014, group health plans and health insurance issuers offering group or individual health insurance coverage may not require a waiting period of more than 90 days.
• Summary of Benefits and Coverage. Health plans and health insurance issuers must provide a summary of benefits and coverage (SBC) to participants, beneficiaries and applicants. There are specific content and format guidelines for the SBC. Issuers were required to start providing the SBC to health plans by Sept. 23, 2012. For participants and beneficiaries who enroll or re-enroll in plan coverage during an open enrollment period, plans and issuers must start providing the SBC with the open enrollment period that begins on or after Sept. 23, 2012. For participants and beneficiaries who enroll in plan coverage other than through an open enrollment period, the SBC must be provided starting with the plan year that begins on or after Sept. 23, 2012.
• Reporting Medical Loss Ratio. Effective for plan years beginning on or after Sept. 23, 2010, health insurance issuers offering group or individual health insurance coverage must annually report the percentage of premiums spent on non-claim expenses. Beginning Jan. 1, 2011, insurers must provide rebates if more than the applicable percentage is spent on non-claims costs.

 

MORE INFORMATION

More information on grandfathered plans is available through www.healthcare.gov/law/features/rights/grandfathered-plans/index.html.