By Leah S. Poniatowski, J.D.
HHS coordinated with Labor, Treasury to tweak existing rules following executive order.
HHS, the Department of the Treasury, and the Department of Labor proposed two amendments to the regulations governing "grandfather" health plans and insurance coverage in order to help those plans retain their status in response to a recently issued executive order (Proposed rule, 85 FR 42782, July 15, 2020).
Background. Section 1251 of the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (collectively, the ACA), allows for certain group health plans and health insurance coverage in existence when the ACA was enacted on March 23, 2010 to be subject only to certain provisions of the legislation. These plans can retain their grandfathered status by adhering to a set of rules that were issued in 2015 by the Departments (80 FR 72192, Nov. 18, 2015).
Two of the rules provided that the status would be lost if: (1) there was "[a]ny increase in a fixed-amount cost-sharing requirement (other than a copayment) (such as a deductible or out-of-pocket maximum) that exceeds certain thresholds; or (2) "[a] decrease in contribution rate by an employer or employee organization toward the cost of coverage by more than five percentage points below the contribution rate for the coverage period that includes March 23, 2010." Moreover, the 2015 rules provided different thresholds that would trigger loss of the status dependent on medical inflation, which was defined by the Department of Labor.
2017 Executive Order. In January 2017, Executive Order 13765, entitled “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal" was issued, with the objective to reduce "unwarranted economic and regulatory burdens of the [ACA]" (82 FR 8351, January 24, 2017). Thereafter, the Departments submitted a formal "request for information" (RFI) in 2019, and after considering the feedback from stakeholders, the Departments proposed two amendments to the 2015 rules in order to provide more flexibility for these plans to change cost-sharing requirements without losing their grandfather status. Specifically, the proposed rule would impact certain high-deductible health plans and how "maximum percentage increase" is defined.
High deductible plans. In order to resolve the conflict between the 2015 rule on limiting cost-sharing requirements and the Internal Revenue Code (the Code) requirement that high-deductible health plans meet certain requirements, the Departments proposed adding a new paragraph to the rules allowing an increase to a fixed-amount cost-sharing requirement to the extent it is necessary to maintain its qualification under the Code without losing the grandfather status.
Amended definition. The Departments explained that the existing measure for medical inflation is appropriate but that there may be more accurate measures to represent the increase in underlying costs for these protected plans. In addition to seeking comments vis-a-vis alternative measures, the Departments proposed an amended definition of "maximum percentage increase" to provide an alternative standard that considers the premium adjustment percentage, in lieu of medical inflation, for healthcare cost changes over time.
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