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Proposed Rule Would Relax Limits on Some Grandfathered Plans

Jul 15, 2020 Decorative image

On July 10, 2020, the U.S. Department of Labor (DOL), the Department of Health and Human Services (HHS) and the Department of the Treasury (the Departments) issued a proposed rule that would provide greater flexibility for grandfathered group health plans to make changes to certain cost-sharing requirements without losing grandfather status.

At the same time, the Departments issued FAQs regarding the proposed rule. The proposed rule would not allow non-grandfathered plans to become grandfathered or to regain grandfather status, and also would not impact grandfathered individual health coverage.

What is a Grandfathered Plan?

A grandfathered plan is a group health plan that existed on March 23, 2010—the date the Affordable Care Act (ACA) was enacted—and has not had certain prohibited changes made to it, as specified by the ACA. If a plan is grandfathered, it is exempt from certain ACA requirements.

The Proposed Rule

The proposed rule would amend current rules to allow some grandfathered group health plans to make certain cost-sharing changes without causing a loss of grandfather status, as follows:

  • First, it would allow grandfathered group health plans that are high-deductible health plans (HDHPs) to make changes to certain fixed-amount cost-sharing requirements without causing a loss of grandfather status. These changes would be allowed only to the extent necessary for compliance with the minimum cost-sharing requirements for HDHPs.
  • Second, it would provide an alternative method of determining the “maximum percentage increase,” based on the premium adjustment percentage instead of the Consumer Price Index.

According to the Departments, the proposals would enable these grandfathered plans to continue offering affordable coverage while also enhancing their ability to respond to rising healthcare costs. The proposals would also ensure that the plans are able to comply with minimum cost-sharing requirements for HDHPs so that enrollees remain eligible to contribute to health savings accounts (HSAs).

The additional flexibility provided under the proposed rule will only be available for changes made after such time as a final rule is issued.

Reach out to your Hylant representative for further information.

The above information does not constitute advice. Always contact your employee benefits broker or trusted adviser for insurance-related questions.