AMENDMENT TO REGULATIONS ALLOWS INSURED PLANS TO CHANGE CARRIER AND RETAIN GRANDFATHERED STATUS
On June 17, 2010, the Departments of Health and Human Services, Labor and the Treasury issued detailed regulations setting forth how health plans could retain a grandfathered exemption from certain new requirements under the Health Care Reform Law. Under the original regulation, an insured plan would lose its grandfathered status if the employer changed insured carriers. Government officials expressed concern that the rule imposing the loss of grandfathered status by a simple change in carrier could give carriers unfair leverage at renewal. It was also argued that the restriction on changing carriers was unfair because self-insured plans were able to change their stop-loss carriers without impact.
Under amended regulations, issued on November 17th, employers who offer the same level of coverage through a new insurance carrier will retain their grandfathered status as long as the change in the carrier does not result in significant cost increases, a reduction in benefits, or other changes which, in the original rule on grandfathering, would have resulted in the loss of grandfathered status. Under the recently issued regulations, employers can now shop for new carriers without fear of losing their grandfathered status. There is a significant amount of dispute among employers and health plan professionals on whether retaining grandfathered status is worth satisfying the requirements. The decision is an individual one, based primarily on existing plan design.
This Update is not intended to be legal advice, but rather is intended to inform the reader of problem areas and recent developments in labor and employment law. If legal advice is required concerning a particular matter, your attorney should be consulted.