The Departments of Labor (DOL), Health and Human Services (HHS), and Treasury have issued a proposed rule for grandfathered group health plans under the Affordable Care Act (ACA). The proposed rule provides greater flexibility for plan sponsors to revise cost-sharing amounts for grandfathered plans without causing them to lose their grandfathered status.
Grandfathered plans are generally those that were in existence when the ACA was passed on March 23, 2010. These plans are not subject to certain requirements under the ACA, such as the requirement to cover all required preventive care without cost-sharing, which has generally enabled them to maintain lower cost structures. However, grandfathered status comes at the price of reduced flexibility in setting cost-sharing amounts, among other features. It requires constant vigilance to avoid inadvertently violating strict limitations and permanently losing grandfathered status. As a result, an increasing number of plan sponsors have relinquished their plan’s grandfathered status in the years following the passage of the ACA.
To ease the constraints on cost-sharing changes for grandfathered plans, the proposed rule specifies that a grandfathered high-deductible health plan (HDHP) may increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain the plan’s status as an HDHP without losing grandfathered status. This change would ensure that participants and beneficiaries enrolled in that coverage remain eligible to contribute to a health savings account, which is only compatible with an HDHP. Although the increase in the required minimum deductible for an HDHP has not yet outpaced the increase in fixed-amount cost-sharing permitted for a grandfathered plan, the departments found value in providing assurance to plan sponsors that such a conflict will not occur.
Additionally, the proposed rule would permit plan sponsors to use the “premium adjustment percentage” published annually by HHS as an alternative method for measuring permitted increases in fixed-amount cost-sharing for a grandfathered plan. Currently, the permitted increases are measured using only the “medical inflation” amount published annually by the DOL. The departments stated that the premium adjustment percentage might be a more appropriate measurement of changes in healthcare costs for the private sector because, unlike the medical inflation amount, it does not reflect changes in price for self-pay patients and Medicare.
The proposed rule would become effective beginning 30 days after the publication of the final rule. The departments are requesting public comments for the proposed rule by August 14, 2020.
