Interim Final Rule Grandfathered Health Care Plans

The new amendment to the interim final rule “allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, so long as the structure of the coverage doesn't violate one of the other rules for maintaining grandfathered plan status,” it said.

A change of issuers in the individual market will still result in the loss of grandfathered status, the fact sheet said.

Under the amended rules, employers that offer the same level of coverage through a new issuer can remain grandfathered as long as the change does not result in significant cost increases, a reduction in benefits or other changes in the original rule.

The amendment “will result in a small increase in the number of plans retaining their grandfathered status relative to the estimates made in the grandfathering regulation,” the fact sheet said. The agencies did not produce a range of estimates for the number of affected groups “given considerable uncertainty about the response to this amendment,” it said.
In the interim final rule issued in June, the administration estimated that, under the most likely scenario, 51 percent of all employer plans will lose their grandfathered status, affecting 87 million people. For that reason, the regulation has drawn heavy criticism from congressional Republicans and some business groups.

The primary difference in regulations that an employer would face from having grandfathered status is the application of new appeals procedures.

Other Rules Will Apply

A lot of the other rules will already apply to grandfathered plans. Grandfathered plans must abide by bans on lifetime limits and rescissions, rules restricting annual limits, as well as the requirement that adult children up to age 26 be allowed to be covered on parents' plan.
In the fact sheet, the agencies said the change was made in response to many comments on the provision in the original rule. A group health plan may need to make administrative changes that do not affect benefits or costs, which could happen if an insurer stops offering coverage in a market, it said. Companies can also change ownership.

There was also concern that the original provision could have the inadvertent effect of interfering with health care cost containment. Forcing employers to stay with the same insurer could give the insurance company “undue and unfair leverage in negotiating the price of coverage renewals,” it said. “Allowing employers to shop around can help keep costs down while ensuring individuals can keep the coverage they have.”

The proposed and interim final rules will be published in the November 17 Federal Register.