July 07, 2010

Grandfathering Regulations Released

The Department of Health and Human Services (HHS) recently released the regulations for grandfathering — a topic of great interest for health plans. The Patient Protect and Affordable Care Act allows health plans that were in place on March 23, 2010, when the Act became a law, to be “grandfathered” and therefore be exempt from some of the new provisions.

Specifically, a grandfathered health plan is an existing group health plan (or for individuals an individual policy) in which a person was enrolled on March 23, 2010 - the date the reform law was enacted.  By definition, any policy effective April 1, 2010, or later is not a grandfathered health plan because no member was enrolled on March 23rd.

The HHS regulations explain how individuals or groups with grandfathered coverage can keep their current grandfathered policy, and what circumstances will cause a policy to lose grandfather status.

Grandfathered health plans are exempt from some, though not all, of the new insurance reforms. Therefore, these policies will generally be less expensive than a non-grandfathered (reform) policy, both today and in the future.  The new -non-grandfathered policies will contain more benefits and flexibility, but they may cost more to purchase and to maintain over time. The additional benefits could result in rate differentials between the grandfathered and non-grandfathered (reform) plans.

The new regulations on “grandfathering” explain how employers with health coverage in place on March 23, 2010, can keep their current plan and under what circumstances they could lose grandfather status.

Changes that will NOT cause a loss of grandfather status:

  • Increasing or decreasing premiums
  • Changing policy benefits as required to comply with federal or state law
  • Increasing benefits or reducing deductibles, coinsurance, or copayments
  • Making changes to provider networks (future regulations may change this)
  • Making changes to drugs listed on a prescription drug formulary or moving drugs between drug tiers (future regulations may change this)
  • Changes to newly acquired mergers and acquisitions to an existing group

Changes that WILL cause a loss of grandfather status:   

  • Significantly cutting or reducing benefits
  • Increasing the coinsurance percentage members must pay
  • Increasing copayments or deductibles by more than a specific amount
  • A significant decrease in employer contributions
  • Adding or tightening annual limits
  • Changing insurance companies or carriers 
  • Moving to another product

Questions and Answers

Why should I care if my policy is a grandfathered policy?  
Grandfathered policies are exempt from some, though not all, of the new insurance reforms. Therefore, these policies will generally be less expensive than a non-grandfathered (reform) policy, both today and in the future. The reform policies will contain more benefits and flexibility, but they may cost more to purchase and to maintain over time. The addition of these benefits could result in rate difference between the grandfathered and non-grandfathered (reform) policies.

How do I know if my policy is a grandfathered policy or not?   
If your policy was in effect on March 23, 2010, and you made no changes to it since that time, your policy is a grandfathered policy.  

If your policy was in effect on March 23, 2010 but you made changes to it since then, such as increasing your deductible, coinsurance, or copayments, or dropping maternity coverage, then your policy is no longer a grandfathered policy. It is a reform policy. We will be adding extra benefits to your policy at your policy’s anniversary.

If your policy was not in effect until April 1, 2010, or later, you do not have a grandfathered plan. You have a reform policy. We will be adding extra benefits to your policy at your policy’s anniversary.  

A detailed chart on what provisions apply or do not apply to grandfathering is available in the HHS regulations.

Because the Act did not provide advance notice that making policy changes could impact grandfather status, the good news is that the law provides a window of opportunity to allow you to change your policy again, to maintain grandfather status.  If you made benefit changes effective between April 1, 2010, and June 14, 2010 that resulted in the loss of grandfather status, you can ask to go back to your old benefit design.  All benefit changes would be made on a go-forward basis, leaving all claims processed in accordance with the design in place at the time the claim was incurred.  The appropriate premium rate would be applied to the changed policy.

How do I get my grandfathered status back?   
You must notify Blue Cross or HMO Louisiaa if you wish to change back to your prior benefit design and reinstate grandfather status. Contact your producer or the Customer Service number listed on your ID card. Your producer will need to submit a Change of Status card.

What if my effective date is April 1, 2010 or later, or I made changes to my old policy that converts it to a reform policy? Do I need to do anything if I want to keep my reform policy status?  
If you bought your policy with an effective date of April 1, 2010, or later, or made changes to your policy that made your policy lose grandfather status, then on your next policy anniversary, your policy will automatically be updated to include the new reform benefits, and your policy will be premium-rated accordingly. You don’t need to do anything to make this happen. If you are happy with your status, you don’t need to do anything at all. As mentioned previously, the addition of reform benefits could result in rate differences between the grandfathered and reform policies.

 

The information on this website is based on BCBSLA’s review of the national healthcare reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.