Pension & Benefits News Vast majority of plans have lost grandfathered status, according to comments from ERIC and American Benefits Council
Monday, April 15, 2019

Vast majority of plans have lost grandfathered status, according to comments from ERIC and American Benefits Council

By Pension and Benefits Editorial Staff

The vast majority of employer-sponsored plans have lost grandfathered status, according to comments from both the ERISA Industry Committee (ERIC) and the American Benefits Council. The two organizations submitted comments to the Departments of the Treasury, Labor, and Health and Human Services (Departments) in response to a request for information (RFI) on grandfathered plans. The Departments issued the RFI to understand the issues related to grandfathered health plans, and to estimate the impact of any potential changes to the rules for retention of grandfathered status for group health plans and group health insurance coverage.

Grandfathered plans. Under Sec. 1251(a)(1) of the Patient Protection and Affordable Care Act (ACA), individuals may keep their individual and group health plans that were in effect upon enactment of health reform, and these “grandfathered” plans are exempt from many, but not all, of the individual and group market reforms that take effect in 2014 or earlier. According to 2015 final regulations, there are at least six types of changes will cause a plan to lose grandfathered status, such as the elimination of benefits, an increase in the percentage of cost-sharing, an increase of fixed-amount cost-sharing, and a decrease in the contribution rate by employers. If a plan loses grandfathered status, the status cannot be regained.

ERIC. ERIC’s comments were submitted by James Gelfand, senior vice president of health policy at ERIC, and concentrate mainly on the lack of large, self-insured plans that continue to maintain grandfathered status. He noted that the Departments’ 2015 guidance made it “extraordinarily difficult to maintain grandfathered plan status.”

He continued, “Employers were effectively tasked with the choice of maintaining their 2010 plan designs (free of certain ACA requirements) versus implementing new plan designs (subject to those ACA requirements) with greater promise to control costs and tailor benefits for changing workforces. Not surprisingly, flexibility won.”

“Unless the Departments are considering allowing plans to turn back the clock and re-establish grandfathered status in some fashion, and with significant new flexibility, then the toothpaste is already out of the tube, and unlikely to be squeezed back in,” concluded Gelfand, meaning that most plans have already lost grandfathered status and refining the requirements for existing grandfathered plans is “a bit too little and a bit too late.”

American Benefits Council. Kathryn Wilber, senior counsel for health policy at American Benefits Council, submitted comments for the Council, and like ERIC, note that the vast majority of Council members offer plans that do not have grandfathered status. However, with input from a few companies that reported offering a plan with grandfathered status, the Council offered a few suggestions to the Departments on grandfathered plans.

Wilber noted that there are many challenges for plans that wish to maintain grandfathered status, and that “the restriction on increases allowed for prescription drug copayments was most challenging, given that prescription drug inflation exceeds medical inflation.” In fact, most plans have relinquished grandfathered status because of “changes in employee cost-sharing,” and more specifically, deciding to move a health savings account (HSA)-qualified high-deductible health plan.

However, the plans that have maintained grandfathered status due so because of the reduced regulatory burden and savings in claims and administrative costs. “One employer indicated a savings of about 2 percent a year which was one-half its average annual medical trend,” said Wilber. “Grandfathered plan status was also preserved where the plans was subject to a collective bargained agreement or acquired in a merger or acquisition.”


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