Rules Lay Out Exemptions to Health Care Reform Law

Final interim rules detail situations in which group health care plans will be exempt, or grandfathered, from complying with certain requirements of the new health care reform law.

While the law bans certain plan features, such as exclusions for pre-existing medical conditions and lifetime dollar limits for all health care plans, other requirements such as full coverage of preventive services do not apply to grandfathered plans.

In addition, the requirement that employers extend coverage to employees’ adult children up to age 26 does not apply to grandfathered plans until January 1, 2014, in situations where the adult child is eligible for coverage from his or her own employer.

The rules, released Monday, June 14, by the Internal Revenue Service and the departments of Labor and Health and Human Services lay out changes that current plans can make and still keep their grandfathered status.

For example, a grandfathered plan would lose its status if it eliminated coverage of a specific condition, even if the condition affects few individuals. The interim final rules cite cystic fibrosis as an example.

In addition, plans cannot boost co-insurance requirements and retain their grandfathered status.

However, grandfathered plans can boost deductibles and out-of-pocket limits, but only up to a certain percentage. The maximum percentage is defined as the increase in medical care component of the Consumer Price Index since March 23, plus 15 percentage points.

Take the case of a medical plan with a $1,000 family deductible. If medical care inflation rose by 5 percent from March 23 through the end of the year, the employer could raise the deductible by $200 for 2011 and the plan could retain its grandfathered status for 2011.

In the case of co-payments, a plan could retain its grandfathered status if it increased co-payments up to $5 or a percentage equal to medical inflation plus 15 percentage points, whichever is greater.

In addition, employers cannot decrease the percentage of the premium they paid as of March 23 by more than five percentage points and retain their exempt status. Except for plans set by collective bargaining agreements, switching from one insurer to another would result in a plan losing its grandfathered status, though changing plan administrators would not.

The rules also state that retiree-only health care plans are automatically exempt from health care reform requirements.

In addition, the three federal agencies are asking for public comment on whether a plan should lose grandfathered status if the sponsor moves from purchasing coverage to self-insuring health risks.   

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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