• Grandfather Relief for Insured Plans
  • November 19, 2010 | Author: Megan Hladilek
  • Law Firm: Faegre & Benson LLP - Minneapolis Office
  • An amendment to the grandfather regulations allows insured plans to change insurance carriers without losing grandfather status. We’ve discussed the limits and effects of grandfather status in several other posts and a webcast. In general terms, if an existing plan significantly reduces benefits or increases costs, then additional provisions of health care reform apply to the plan, including non-discrimination rules.

    What changed? Under the interim final rules from June 17, 2010, an insured plan would lose grandfather status if it changed insurance carriers. This recent amendment reverses that position for policies that are effective on or after November 15, 2010. The amendment does not apply to changes before November 15, 2010. The relief only relates to the change in insurance carrier. All other grandfather restrictions still apply.

    Who does this affect? Insured group health plans, such as small employers, will be able to shop between insurance carriers. Also, many executive benefit plans are insured. If executive benefit plans are group plans, not individual coverage, then the insurance carrier can be changed without jeopardizing grandfather status. This means that a discriminatory insured plan can change insurance carriers as of November 15, 2010 without exposing the plan to the new non-discrimination rules.

    Why was this change made? The agencies identified three reasons for the amendment. First, some group health plans may be required to change insurance carriers, such as when the existing carrier no longer offers coverage. Second, competition between insurance carriers may help keep costs down. Third, the amendment treats insured group health plans the same as self-insured group health plans.

    Today’s guidance resolves one of many outstanding questions about grandfather status. The guidance is in the form of an amendment to the interim final regulations rather than final regulations. The agencies received over 1,000 public comments on grandfather status. This relief was published now to minimize the disruption to plans with policies effective on or after November 15, 2010. We are still waiting for final regulations that may address the other outstanding questions. The agencies acknowledge that they are still reviewing the comments received and plan to issue regulations “in the near future.”