The opinions expressed in this presentation are those of the speaker. The International Foundationdisclaims responsibility for views expressed and statements made by the program speakers.

Roundtable: Open Forum on Grandfathered Plans Revisited

Pamela H. NissenAttorneyLeonard, O’Brien, Spencer, Gale & Sayre, Ltd.Minneapolis, Minnesota

Peter M. Rosene, Esq.ShareholderLeonard, O’Brien, Spencer, Gale & Sayre, Ltd.Minneapolis, Minnesota

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What Is Grandfathered Status?

• The Patient Protection and Affordable Care Act of 2010 (the “ACA”) imposed many new requirements on group health plans (“plans”).

• Recognizing that some were satisfied with their current plans and applying the ACA to all plans would prevent those people from keeping their plans, the ACA’s drafters included a rule exempting plans in existence when the ACA was passed from some of the ACA’s more onerous requirements.

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What Is Grandfathered Status?

– 100% coverage of preventive care

– Coverage of all essential health benefits

– Limitations on out-of-pocket maximums

– Limitations on deductibles– Expanded claims and appeal

requirements– Right to choose a primary care

provider – OB/GYN access without a

referral

– Coverage for out-of-network emergency services

– Clinical trial coverage– Reporting to HHS on quality of

care (not yet effective)– Modified community rating

(insured small group plans only)– Guaranteed issue and renewal

(insured plans only)– Nondiscrimination rules (insured

plans only)

• Grandfathered plans are not required to meet the following ACA requirements:

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What Is Grandfathered Status?

– 90-day limit on waiting periods – Summary of benefits and

coverage– Prohibition on rescissions except

for fraud, misrepresentation, or non-payment

– Prohibition on lifetime dollar limits on essential health benefits

– Prohibition on annual dollar limits on essential health benefits

– Dependent child coverage to age 26

– Prohibition on pre-existing condition limitations

– Wellness program rules– Minimum medical loss ratios

(insured plans only)– Employer shared responsibility

tax– Reporting to IRS on coverage – PCORI fee– Transitional reinsurance fee– Cadillac tax (beginning in 2020)

• Grandfathered plans are required to meet (or are significantly affected by) the following ACA provisions:

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How Many Plans Are Grandfathered?

Percentage of Covered Workers Enrolled in Plans Grandfathered Under the Affordable Care Act (ACA), by Firm Size, 2011-2015

(accessed on September 30, 2016)

63%54%*

49%

35%* 34%53%

46%

30%*22%* 22%

56%48%*

36%*

26%* 25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2011 2012 2013 2014 2015

All Small Firms (3-199 Workers)All Large Firms (200 or More Workers)All Firms

* Estimate is statistically different from estimate for the previous year shown (p<.05). SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2011-2015. (http://kff.org/report-section/ehbs-2015-section-thirteen-grandfathered-health-plans/) (Accessed 9/30/16)

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What Keeps a Plan Grandfathered?

• So long as a plan is not amended in a way that causes it to lose its grandfathered status, the plan will remain grandfathered

• Grandfathered status is determined separately for each benefit package within a plan

• If a plan has more than one benefit package (e.g., the plan offers two deductible options) a benefit package may retain grandfathered status despite the loss of grandfathered status for a separate benefit package

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What Keeps a Plan Grandfathered?

• There are six changes (measured from March 23, 2010) to a plan that will cause the plan to become non-grandfathered:– Elimination of all or substantially all benefits to diagnose or treat a

particular condition.– Increase in a percentage cost-sharing requirement (e.g., raising an

individual’s coinsurance requirement from 20% to 25%).– Increase in a deductible or out-of-pocket maximum by an amount that

exceeds medical inflation plus 15 percentage points.– Increase in a copayment by an amount that exceeds medical inflation

plus 15 percentage points (or, if greater, $5 plus medical inflation).– Decrease in an employer’s contribution rate towards the cost of

coverage by more than 5 percentage points.– Imposition of annual limits on the dollar value of all benefits below

specified amounts

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What if Your Plan Loses Grandfathered Status?

• If an amendment to a plan causes the plan to lose grandfathered status, the plan becomes non-grandfathered on the effective date of the amendment

• A plan must comply with the ACA requirements applicable to non-grandfathered plans on the date it becomes non-grandfathered

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What if Your Plan Loses Grandfathered Status?

• Becoming non-grandfathered is usually a significant undertaking

• A plan will generally need to provide a greater level of coverage (e.g., 100% coverage of preventive care) and adhere to stricter and more expensive claims and appeal rules (e.g., contracting with independent review organizations for independent review of appeals)

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What if Your Plan Loses Grandfathered Status?

• Trustees should thoroughly consider the costs of going non-grandfathered before taking that step

• Keep in mind that some of the costs of being non-grandfathered may not yet be evident

• For instance, 100% preventive care coverage initially appeared cost-neutral, but HHS has continually expanded the list of items and services defined as preventive care—raising the costs of this requirement

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What Happens if You Lose Your Grandfathered Status?

• Sierra Pacific Settlement– Information available:

https://www.dol.gov/newsroom/releases/ebsa/ebsa20160926• Grandfather status was lost as of January 1, 2013• Re-adjudicate claims for preventive services, out-of-network

emergency services, claims affected by an annual limit• Forego for the 2017 plan year any increases in participant

premiums, OOP, annual deductibles and coinsurance percentages

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Questions Presented Relating to Plan Benefit Changes

• What if you want to change out-of-network co-insurance?– Many plans are seeing very expensive out-of-network

substance abuse facilities cropping up in the warm Southern states and luring members' dependents through ad campaigns

• Can you exclude select facilities/providers?• Can you change accreditation requirements?

• What happens if you change co-payment obligations on a vision benefit?

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Questions Presented Relating to Plan Benefit Changes

• If something comes up that was not specifically excluded under your plan (i.e., genetic testing, transgender surgery, or infertility treatments for dependent children) and if you have never paid a claim for that treatment or procedure, can you exclude it and call it a plan clarification?

• What changes can you consider to address or avoid the excess (Cadillac) tax, if it doesn't go away, and still maintain grandfathered status?

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Questions Presented Relating to Plan Benefit Changes

• Can we change PPO providers without losing status?

• Does implementing a wellness program create issues relating to a loss of grandfather status?– Can you add incentives or disincentives to a wellness

program?

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Questions Presented Relating to Plan Benefit Changes

• Can you manage prescription drugs in a grandfathered plan?– Quantity limits– Prior authorization

• Can you narrow your PPO network?• Can you exclude all dependent coverage or

charge a co-insurance for dependent coverage?

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62nd Annual Employee Benefits ConferenceNovember 13-16, 2016Orlando, Florida

Session #H52

Roundtable: Open Forum on Grandfathered Plans Revisited

• Grandfathered plans– What will it cost you to lose grandfather

status– Every plan change needs to be carefully

reviewed– Need to be creative about controlling

costs without reducing benefits– Consider phasing in non-grandfather

status

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2017 Educational ProgramsHealth and Welfare

63rd Annual Employee Benefits Conference October 22-25, 2017 Las Vegas, Nevadawww.ifebp.org/usannual

Certificate SeriesFebruary 27-March 4, 2017 Lake Buena Vista (Orlando), FloridaJuly 24-29, 2017 Denver, Coloradowww.ifebp.org/certificateseries

Health Care Management ConferenceMay 1-3, 2017 New Orleans, Louisianawww.ifebp.org/healthcare

Certificate of Achievement in Public Plan Policy (CAPPP®)Part I and Part II, June 13-16, 2017 San Jose, CaliforniaPart II Only, October 21-22, 2017 Las Vegas, Nevadawww.ifebp.org/cappp

Related ReadingVisit one of the on-site Bookstore locations or see www.ifebp.org/bookstore for more books.

Self-Funding Health Benefit PlansItem #7563www.ifebp.org/SelfFunding

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