November 17, 2010

HRB 24 - Amendment to Grandfathered Health Plan Rules

Released November 17, 2010I Download as a PDF

November 17, 2010 --  Five months ago, the Departments of HHS, Labor, and Treasury (“Agencies”) issued interim final regulations relating to grandfathered health plans (see CBIZ Health Reform Bulletin, Grandfathered Health Plans Rules).  To be grandfathered, an insured or self-funded group health plan must have been in existence on March 23, 2010.

The regulations set forth guidance as to what events would, or would not, cause a plan to lose grandfathered status. Grandfathered health plans are permitted to make routine changes to their plan design without jeopardizing their status, such as:

  • Adding new dependents or employees at open enrollment or special enrollment events;
  • Making modest adjustments to existing benefits;
  • Voluntarily adopting new consumer protections under the new law, or
  • Making changes to comply with State or other Federal laws.

The Agencies have clarified that only the conditions listed in the regulations will cause loss of grandfathered status.  Among these conditions is, for a fully insured plan, the change from one insurer to another.  This week, the Agencies re-visited the premise that a change of insurer results in an automatic loss of grandfathered status.  According to the Amendment to the grandfathered health plan regulations, an insured plan can change insurers without loss of grandfathered status, as long as:

  1. No other change in the plan design would result in loss of grandfathered status; and
  2. The new insurer is provided documentation relating to the previous plan.  This can be in the form of a summary plan description, a certificate of coverage, or similar document.

The amendment applies to insurer changes occurring on or after November 15, 2010.  There is some indication that these grandfather health plan regulations may be further modified sometime in early 2011.  Whether the ‘change of insurer’ provision will be made retroactive at that time, is an open question.


About the Author:  Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc.  She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law.  Ms. McLeese is based in the CBIZ Leawood, Kansas office.


The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.


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