Health Reform: Changing Insurance Carriers

Cox Smith Employee Benefits E-Alert

Health Reform: Changing Insurance Carriers

In a surprising reversal, several government agencies amended their joint interim final regulations on grandfathered plans to provide that group health plans will not lose grandfathered status solely because they enter into a new policy, certificate, or contract of insurance. A group health plan that is grandfathered is only subject to some of the health care reform mandates.

Previously, the regulations provided that insured plans would lose their grandfathered status if they changed insurance carriers or entered into a new policy with the same carrier. Also, self-insured plans that moved to an insured arrangement would lose grandfathered status. Under the new interim final regulation, a plan or sponsor may enter into a new policy, certificate, or contract of insurance without loss of grandfathered status. However, all other changes that would cause loss of grandfathered status (as described below) remain in effect. The amended rule applies to new policies that are effective on or after November 15, 2010 and is not effective retroactively. Therefore, an employer that implemented a new policy prior to November 15, 2010 will not have a grandfathered plan even if it made no other changes to the plan. However, the rule offers protection to employers who obtained a new policy before that date if the policy goes into effect after that date.

To maintain grandfathered status, health plan sponsors that enter into a new insurance policy must provide the new health insurance issuer with documentation of prior plan terms (including benefits, cost sharing, employer contributions, and annual limits) sufficient to determine whether any of the changes would terminate grandfathered status.

Any of the following changes will still cause a plan to lose its grandfathered status:

  • Substantially or completely eliminating benefits to diagnose or treat a particular condition;
  • Increasing the co-payment percentage by any amount;
  • Increasing fixed-amount co-payment charges, deductibles, or out-of-pocket limits beyond established limits;
  • Reducing the level of employer contributions for any tier of coverage by more than 5%, measured against the period including March 23, 2010; and
  • Adding or decreasing annual dollar limits.

For more information on grandfathered status, please see our prior e-alert: Health Reform: Grandfathered Status Clarified.

Please contact any of the employee benefits lawyers listed if you would like to discuss grandfathered status or any other health care reform changes in more detail.

Katherine Patton Noll
Mary M. Potter
Joshua A. Sutin
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