Grab-Bag Guidance on Grandfathered Plans

However, readers are able to submit questions to us (and we have received quite a few! – see below for details).  So, following up on our recent column on the grandfathered plan rule (see What Does Being ‘Grandfathered’ Really Mean Under HCR?), this week we turn our attention to specific reader questions on that topic. 

As we recently summarized, the grandfather rule allows a plan that was in existence on date of enactment of PPACA (March 23, 2010) to remain “grandfathered” unless certain changes are made.  A grandfathered plan is exempt from some of the PPACA rules, but not all of them (for a complete list, see our recent column).   

A grandfathered plan also is limited in what changes it may make and remain grandfathered.  If it makes any of the following changes, it will lose grandfathered status (regulators have referred to these as the “Six Deadly Sins”): (1) eliminating a particular benefit; (2) adopting or decreasing an overall annual limit; (3) increasing a coinsurance percentage by any amount; (4) decreasing employer contributions by more than 5%; (5) increasing a deductible or out-of-pocket maximum by more than 15%; or (6) increasing a copay by more than the greater of $5 or 15%. 

And now to your questions . . . 

Are we allowed to increase deductibles by 15% per year or only one time?   

All of the permitted percentage increases are cumulative from March 23, 2010.  This means that a grandfathered plan only is permitted to increase a deductible up to a total 15% (adjusted for medical inflation) from March 23, 2010.  So if a plan increases a deductible by 5% each year, at some point, it will reach the 15% maximum and not be able to make further increases without losing grandfathered status.   

We do not offer coverage for part-time workers.  If we changed our plan to begin offering this, would it affect our grandfather status? 

This change alone should not impact your grandfathered plan status.  Generally, a plan may make changes that are more generous and retain grandfathered status.  In addition, changes to eligibility (where no other change is made) likely would not fall under one of the six “deadly sins” above so would be permitted (although these types of changes can be a little trickier, so depends on the particular facts). 

For a self-funded plan, how do we calculate whether the employer contribution decreases by 5%?  Is this based on the claims the employer pays? 

For self-funded plans, the contribution rate in the grandfather rule is based on the COBRA premium.  So the plan would look to the COBRA premium it charges a participant as the overall rate and then look to the amount of employee contribution charged per pay period as the employee portion.  That will determine what the employer is paying (of the COBRA rate) versus the employee.  It is this employer rate that cannot be reduced by more than 5%.  

My plan applied for a waiver.  Do we need to worry about grandfathered plan status? 

The waiver rule and grandfathered plan rule are different and apply to different PPACA requirements.  The waiver application (generally for mini-med or limited benefit plans) is only a waiver from the annual limit rules.  The rest of the PPACA rules continue to apply.  So, even if a plan is approved for a waiver from the annual limit rules, it would need to look to whether it is grandfathered to determine how the other rules apply (for example, the age 26 rule, preventive care rules, and appeals and external review rules).