Don't Double that Co-payment! Changes to U.S. Health Plans End Health Care Reform Exemptions
Some U.S. health care reform rules apply to all plans, but many do not apply to grandfathered plans – that is, plans in existence on March 23, 2010 that have not materially changed benefits. For example, grandfathered plans do not have to provide non-discriminatory insured benefits or eliminate employee co-pays for preventive care, although they are subject to many aspects of the reform.
On June 14, 2010 the three agencies responsible for interpreting health care reform clarified which changes end grandfathered status. The rules permit benefit increases, but take a very strict view about which new costs or benefit limits grandfathered plans are permitted to make.
A plan may lose its grandfathered status if it eliminates benefits to diagnose or treat a particular condition or if the employer’s share of benefit costs declines by more than 5 percentage points. Annual dollar limits cannot be reduced, and deductibles and co-payments cannot be increased by a percentage greater than the percentage rate of medical inflation plus 15 percentage points or, for co-pays, $5 increased for inflation. These are just examples, and there are many other disqualifying changes.
The new regulations are effective on publication. Recognizing that some rules were not anticipated, the regulations provide that changes adopted before March 23, 2010 or pursuant to a written agreement entered into before March 23, 2010 will not be taken into account. The regulations also establish a transition rule that changes that would cause a plan to lose grandfathered status and were adopted prior to publication of the regulations may be repealed or modified retroactively. This appears to be a limited opportunity, through December 31 for calendar year plans.
U.S. employers need to familiarize themselves with these rules because while some employers may decide to fore-go grandfathered status to preserve flexibility, a mistaken assumption that a plan has grandfathered status may cause significant compliance failures. Further, any changes made since March 23 should be reviewed as soon as possible to determine whether they should be revoked or modified.
