► Reform alert

'Grandfathering' defined under health reform law

The federal Patient Protection and Affordable Care Act distinguishes between health plans that existed prior to March 23, 2010, the date the law was enacted, and those plans that came into existence after or have since changed their plan design.

Individual and group health plans in existence prior to March 23, 2010, may be eligible to be considered "grandfathered” plans. Health plans that have been materially modified after March 23, 2010, are referred to as "new" plans.

This distinction is important because grandfathered health plans are, in some cases, exempt from select reform requirements. However, grandfathered plans must comply with the majority of PPACA provisions, including many of the near-term benefit changes, such as:

• Extending dependent coverage up to age 26
• No pre-existing exclusions for children; and
• Limitations on rescissions

To ensure that the implementation process is as streamlined and efficient as possible, BCBSM and BCN will treat fully insured group plans and individual market plans as new plans, including all area/industry and ERS-rated business.

We strongly encourage self-insured groups to choose to be treated as a new plan, even if they’re eligible to be treated as a grandfathered plan. Be sure to share this leave-behind document with your self-insured groups to assist them in making the decision to be treated as a new health plan.

If self-insured groups choose to remain grandfathered, a certification letter is required stipulating that the group is actively tracking grandfathered status and holding the appropriate information in case of an audit. Contact your BCBSM sales representative to obtain a copy of the certification letter. The letters should be provided to your BCBSM sales contact no later than Sept. 15, 2010.

Although there are a select number of provisions* that grandfathered plans don’t need to comply with, most have little or no impact on rates or claims cost.

These provisions include:

* Questions about these provisions? See the timeline at bcbsm.com/healthreform.

To be considered a grandfathered plan, groups must meet several administrative requirements and may not significantly change benefits or employee and employer contribution levels from those in existence on March 23, 2010. These rules will make it difficult for groups to control their overall costs, and it’s unlikely that they will choose to maintain grandfathered status until 2014 when most of the potential value associated with grandfathering would be realized. In fact, a recent Hewitt Associates survey found that 90 percent of U.S. companies anticipate losing grandfathered status by 2014.

The U.S. Department of Health and Human Services recently released regulations that further define "grandfathered" and under what circumstances health plans can lose grandfathered status. For a summary of what impacts grandfathered status, see our Reform Alert or review the specific examples available in a HealthReform.gov Fact Sheet.

For more information, contact your managing or general agent.

The information in this document is based on BCBSM’s review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.