Health Care Reform (the Patient Protection and Affordable Care Act) will not kick into high gear until 2014, but plan sponsors and HR staff need to take compliance action now.
Group health plans need to prepare and distribute participant notices by the beginning of the plan year starting on or after September 23, 2010. For calendar year plans, the deadline for some of these notices will be the open enrollment period which precedes the January 1, 2011 plan year.
For plans which intend to maintain their status as grandfathered plans in order to preserve plan provisions in effect as of March 23, 2010, the recently released multi-agency interim final rule provides the details. Grandfathered status can provide a plan exceptions from certain requirements of the Health Care Reform legislation, including adult child coverage to age 26 even for children eligible for other coverage, new claims appeal requirements, new anti-discrimination rules for fully-insured plans and first dollar coverage of certain preventive services. However, grandfathered status can easily be lost if the plan is changed to eliminate benefits, increase the cost to employees or reduce the employer’s contributions toward coverage costs. For example, if a fully insured group plan that is not a collectively bargained plan changes insurance carriers and nothing else, grandfathered plan status will be lost.
The grandfather rules require, among other things, disclosure of the information contained in the following model notice:
This [group health plan or health insurance issuer] believes this [plan or coverage] is a “grandfathered health plan” under the Patient Protection and Affordable Care Act (the Affordable Care Act). As permitted by the Affordable Care Act, a grandfathered health plan can preserve certain basic health coverage that was already in effect when that law was enacted. Being a grandfathered health plan means that your [plan or policy] may not include certain consumer protections of the Affordable Care Act that apply to other plans, for example, the requirement for the provision of preventive health services without any cost sharing. However, grandfathered health plans must comply with certain other consumer protections in the Affordable Care Act, for example, the elimination of lifetime limits on benefits.Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator at [insert contact information]. [For ERISA plans, insert: You may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform.This website has a table summarizing which protections do and do not apply to grandfathered health plans.] [For individual market policies and nonfederal governmental plans, insert: You may also contact the U.S. Department of Health and Human Services at www.healthreform.gov .]
This notice should be included in plan documents, open enrollment materials and other participant communications relating to group health benefits under grandfathered plans.
For group health plans that are making design changes in accordance with the Health Care Reform legislation, the Department of Labor has provided the following model language for the text of required participant notices:
- The elimination of the lifetime limit on the dollar value of benefits requires notice of that change to both enrolled employees and eligible employees who are not enrolled in coverage. These individuals must then be permitted thirty (30) days to enroll or change coverage options. The model text is posted at:
- Individuals whose coverage has ended or were not eligible for coverage because, under the terms of the plan, dependent coverage ended before attainment of age 26 (this would include students who lost eligibility when they graduated from college) are now entitled to elect coverage during the thirty (30) day period following the required notice of this expanded coverage. Model language for the required notice is at: http://www.dol.gov/ebsa/dependentsmodelnotice.doc
- Participant rights to choose a primary care physician (when one is required under the plan) and obtain obstetrical or gynecological care without prior approval are granted under the Health Care Reform legislation. Participants must be notified of these rights in the summary plan description and other similar descriptions of benefits. The model notice is available at:
The deadline for the Department of Labor notices is the first day of the first plan year beginning on or after September 23, 2010.
Recomendations: Plan sponsors and HR staff need to give consideration now to Health Care Reform notices that may have to be distributed to participants in advance of the first plan year after September 23, 2010. Employers also need to consider the advantages and disadvantages of grandfathered status for their group health plans (those with self-funded plans will have greater flexibility because no insurance carrier will be involved in determining plan deductibles, co-pays, and coinsurance provisions). In either case, changes responsive to the Health Care Reform legislation will need to be implemented by most plans before the next plan year.