Interim Final Rules Issued for Grandfathered Health Plans Under the PPACA

On June 17, 2010, the Internal Revenue Service, the Employee Benefits Security Administration of the United States Department of Labor, and the United States Department of Health and Human Services issued interim final rules for grandfathered health plans under the Patient Protection and Affordable Care Act (PPACA, and commonly referred to as the Health Care Reform Act).   See Fed'l Register, Vol. 75, No. 116, 34538 et seq.  President Obama signed the PPACA into law on March 23, 2010.

Under the PPACA, group health plans and health insurance coverage existing as of March 23, 2010 are not subject to all PPACA provisions.  The PPACA refers to these plans and coverage as "grandfathered health plans".  For example, a grandfathered health plan is not required to provide the coverage of preventative health services without cost sharing as the PPACA mandates for non-grandfathered health plans, but the PPACA still prohibits grandfathered health plans from eliminating lifetime limits or rescinding coverage (other than on the grounds of fraud or misrepresentation).  In subjecting grandfathered health plans to some, but not all, PPACA mandates, the PPACA seeks to balance maintaining existing coverage with the PPACA's goal of expanding access to and improving quality of health care.  Permitting grandfathered health plans is designed to ease the transition of the health care industry into the PPACA.

To be a grandfathered health plan, the health plan or coverage must have provided continuous coverage to someone since March 23, 2010.  If if coverage for all pre-March 23, 2010 participants and beneficiaries is terminated after March 23, 2010, the health plan would still be grandfathered if the health plan covered a new participant or beneficiary before the termination of the coverage of the former participants and beneficiaries.  To maintain status as a grandfathered health plan, the health plan must include a statement in the plan materials provided to all participants and beneficiaries that it is a grandfathered health plan and must provide contact information for questions and complaints.

If health insurance coverage was maintained under a collective bargaining agreement prior to March 23, 2010, the coverage is a grandfathered health plan until the expiration of the collective bargaining agreement.  The health plan remains grandfathered during the term of the agreement even if there is a change in the issuer of the health plan.  If coverage is renewed with the issuer under a new collective bargaining agreement upon the expiration of the former collective bargaining agreement, the health plan would remain grandfathered, provided that there are no changes to the health plan that would cause the plan to cease to be grandfathered.

Employers may provide their comments on the proposed interim final rules by August 16, 2010 to the agencies that are issuing the rules.  Employers should consult with their attorneys, accountants, and employee benefits providers to determine whether their current health plans or coverage will be grandfathered under the PPACA.