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November 2010 - Grandfather Provision Amendment
On November 17th, the Department of Health and Human Services, Department of Labor and Treasury, who are jointly responsible for the new insurance market reforms under PPACA, issued an amendment to the grandfathered plan rule that refers when a plan changes insurance carriers.
Under the original rule, any change in insurance carrier effective after March 23, 2010, would be an automatic loss grandfathered status. The rules provided that a self funded plan could change third party administrators (TPAs), and maintain grandfathered status.
The amendment provides that a health plan that otherwise satisfies grandfathered plan requirements, will not lose grandfather status merely because the plan enters into a new insurance policy or contract with a new insurer after March 23, 2010. The amendment states that a health plan must provide the new insurer with documentation of its plan terms, including benefits, cost sharing, employer contributions, and annual limits, sufficient to determine whether there has been any significant changes that would otherwise trigger a loss of grandfather status .
The amendment has very specific effective dates by which a plan must have been in force in order for the amendment to apply. The amendment will apply where the effective date of the new policy is on or after November 15, 2010. If the effective date of the new policy is before November 15, 2010, the amendment will not apply (this was the date the amendment was issued by the agencies, prior to being published in the Federal Register). So, if a plan changed carriers after March 23, 2010, and the new policy was effective July 1, 2010, the plan has lost grandfathered status (because the new amendment had not been issued). However, if the plan changed carries after March 23, 2010, but the new policy is not effective until January 1, 2011, the amendment does apply. The plan and carrier would need to review what, if any, changes were made as a result of the change in carriers to determine if the plan can maintain grandfathered status.