Recent Healthcare Guidance Issued

By Alice Eastman Helle
Since the enactment of the Patient Protection and Affordable Care Act in March, the various federal departments responsible for enforcing the Act have scrambled to issue guidance, while employers who sponsor group health plans have struggled to determine the effect of the new rules on their plans. The departments issued interim guidance for grandfathered plans in June, followed by preventative care guidance for nongrandfathered plans in July.

Guidance for nongrandfathered plans Plans subject to this rule must cover specified preventative services and must provide first-dollar coverage for those services. No cost-sharing (including copayment, coinsurance, deductible or annual limit) is permitted, as long as the preventative service is obtained from a network provider.

Covered preventative services include screenings for cancer, diabetes, high cholesterol and high blood pressure, routine vaccinations and well-child care. Tobacco cessation counseling must also be covered as a preventative service.

The requirement to provide preventative care without cost sharing applies to nongrandfathered plans, and is effective with plan years beginning after Sept. 23. Nongrandfathered plans include both existing plans that have lost grandfathered status and new plans.

Maintaining grandfathered status A grandfathered plan is a health plan that had any participants on March 23 this year. To maintain grandfathered status, one must include a statement in plan materials describing the benefits provided and stating that the plan is believed to be a grandfathered health plan; and provide plan contact information for questions and complaints. Conversely, to lose grandfather status, a company can reduce its benefits, increase a percentage cost-sharing requirement, increase fixed-amount cost-sharing requirements beyond specified limits, decrease employer contribution rate by more than 5 percent, and increase annual limits.

Future guidance Certain changes to a grandfathered plan will not result in loss of that status. These include amendments to comply with federal or state law mandates (such as mental health parity) and amendments to voluntarily comply with provisions of the act that are not mandatory for grandfathered plans. The departments have solicited comments on whether the following changes will result in loss of grandfathered status: changes to plan structure (such as switching from insured to self-insured); changes in provider networks; changes to prescription drug formularies; and any other substantial change to benefit design. Any future guidance that is more restrictive will apply only on a prospective basis.

Weighing costs, benefits The departments acknowledge that plan sponsors must weigh the costs and benefits of retaining or relinquishing grandfathered status. Benefits include grandfathered plans being exempt from many of the requirements of the act besides the preventative care rules discussed above, including new rules for claims and appeals and nondiscrimination rules for insured plans. Certain other requirements apply to grandfathered plans, but on a modified or delayed basis.

Costs include grandfathered plans being subject to many of the requirements of the act, including restrictions on pre-existing condition limitations, rescissions of coverage and coverage limits and a modified requirement to cover dependent children up to age 26. Maintaining grandfathered status necessarily restricts the extent to which employers may shift costs to employees and also limits the employer's ability to "shop" for more affordable coverage.

Intangible factors such as employee morale also enter into benefit decisions. The key is to make an informed decision rather than inadvertently losing grandfathered status due to a lack of information.

Alice Eastman Helle is an attorney with BrownWinick, a Des Moines, Iowa-based law firm, and practices primarily in the areas of pensions and employee benefits. Reach her at (515) 242-2407 or
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