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Compliance Checklist for Determining Grandfathered Status

Tuesday, March 12, 2013
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The Affordable Care Act (ACA) contains many provisions that affect the health coverage you provide for your employees. The extent of the law’s effect depends, in part, on whether you maintain a “grandfathered” health plan. Insured and self-funded group health plans of all sizes may qualify for grandfathered status under ACA.Grandfathered plans are not subject to a number of ACA’s reforms. For example, grandfathered plans are not required to cover preventive care services without cost sharing and these plans are not subject to ACA’s cost-sharing limits on essential health benefits.A plan may maintain its grandfathered status for 2014 and beyond, when many of ACA’s major reforms become effective. A plan will lose its grandfathered status if significant changes are made that reduce plan benefits or increase plan costs for participants. Once a plan relinquishes its grandfathered status, it cannot be regained and the plan must comply with additional reforms under ACA.The Department of Labor (DOL) issued the following compliance checklist to assist plans and issuers determine their grandfathered status under ACA.

 

Yes

No

N/A

Question   1 – Did the plan exist with at least one individual enrolled on March 23, 2010?A   grandfathered group health plan must have been in existence with an enrolled   individual on March 23, 2010. Any plan that does not meet this requirement is   not in grandfathered status. 29 CFR 2590.715-1251(a)(1)(i).      
Question   2 – Has the plan continuously covered someone (not necessarily the same person)   since March 23, 2010?A   group health plan will not relinquish its grandfather status merely because   one or more (or all) individuals enrolled on March 23, 2010, cease to be   covered. However, a grandfathered health plan must continuously cover someone   (not necessarily the same person) since March 23, 2010, to maintain its   status. 29 CFR 2590.715-1251(a)(1)(i).If the answers to questions 1 and 2 are “yes,” complete questions   3-11. If the answer is “no” to either question   1 or 2, the group health plan cannot claim grandfather status.  

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Provided changes are made without exceeding the other       standards that cause a plan to relinquish grandfather status, changes       that generally will not cause plans to relinquish grandfather status       include changes to: premiums; comply with federal or state legal requirements;       voluntarily comply with provisions of the ACA; third party       administrators; network plan’s provider network; and a prescription drug       formulary.

        

     

Question   3 – Has the plan eliminated all or substantially all benefits to diagnose or   treat a particular condition?For   the purpose of determining grandfather status, the elimination of benefits   for any necessary element to diagnose or treat a condition is considered the   elimination of all or substantially all benefits to diagnose or treat a   particular condition. 29 CFR 2590.715-1251(g)(1)(i).
     
Question   4 – Has the plan increased a percentage cost-sharing requirement (such as an individual’s   coinsurance)?Any   increase measured from March 23, 2010, in a percentage cost-sharing   requirement causes a plan to relinquish grandfather status. 29 CFR   2590.715-1251(g)(1)(ii).      
Question   5 – Has the plan increased a fixed-amount cost-sharing requirement other than   a copayment (such as a deductible or out-of-pocket limit) such that the total   percentage increase measured from March 23, 2010 exceeds the maximum percentage   increase?The   maximum percentage increase is medical inflation, expressed as a percentage,   plus 15 percentage points. 29 CFR 2590.715-1251(g)(3)(ii). Medical   inflation is the increase since March 2010, in the overall medical care   component of the Consumer Price Index for All Urban Consumers (CPI-U)   (unadjusted) published by the Department of Labor using the 1982-1984 base of   100. 29 CFR 2590.715-1251(g)(3)(i).      
Question   6 – Has the plan increased a fixed-amount copayment such that the increase measured   from March 23, 2010 exceeds the greater of: the maximum percentage increase,   or an amount equal to $5 plus medical inflation?The   maximum percentage increase is medical inflation, expressed as a percentage,   plus 15 percentage points. 29 CFR 2590.715-1251(g)(3)(ii). Medical   inflation is the increase since March 2010 in the overall medical care   component of the Consumer Price Index for All Urban Consumers (CPI-U)   (unadjusted) published by the Department of Labor using the 1982-1984 base of   100. 29 CFR 2590.715-251(g)(3)(i).      
Question   7 – Has there been a decrease in the contribution rate by the employer (or employee   organization) towards the cost of any tier of coverage for any class of   similarly situated individuals by more than 5 percentage points below the   contribution rate for the coverage period that includes March 23, 2010?If   the contribution rate is based on a formula, was the decrease in the   contribution rate based on a formula by more than 5 percent below the   contribution rate for the coverage period that includes March 23, 2010? 29 CFR   2590.715-1251(g)(1)(v)(B).

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If a group health plan modifies the tiers of coverage it had       on March 23, 2010 (for example, from self-only and family to a       multi-tiered structure of self-only, self-plus-one, self-plus-two, and       self-plus-three-or-more), the employer contribution for any new tier       would be tested by comparison to the contribution rate for the       corresponding tier on March 23, 2010. If the plan adds one or more new       coverage tiers without eliminating or modifying any previous tiers and       those new coverage tiers cover classes of individuals that were not       covered previously under the plan, the new tiers would not be analyzed       under the standards of paragraph (g)(1). See       DOL FAQs About the Affordable Care Act Implementation Part II, question 3       at http://www.dol.gov/ebsa/faqs/faq-aca2.html.In cases of a multiemployer plan that has either a       fixed-dollar employee contribution or no employee contribution towards       the cost of coverage, if the employer’s contribution rate changes,       provided any changes in the coverage terms would not otherwise cause the       plan to cease to be grandfathered and there continues to be no employee       contribution or no increase in the fixed-dollar employee contribution       towards the cost of coverage, the change of the employer’s contribution       rate will not, in and of itself, cause a plan that is otherwise a       grandfathered health plan to relinquish grandfather status. See       DOL FAQs About the Affordable Care Act Implementation Part I, question 4       at http://www.dol.gov/ebsa/faqs/faqacaa/html.

               

     

Question 8 – Has the plan added or decreased an overall annual   limit on benefits?A plan will relinquish its grandfathered status if it:
  •   Adds an overall annual limit on   the dollar value of all benefits when it did not previously impose an overall   annual limit (29 CFR 2590.715-1251(g)(1)(vi)(A));
  •   Previously imposed an overall   lifetime limit on the dollar value of benefits (but no overall annual limit)   and adopts an overall annual limit at a dollar value that is lower than the   dollar value of the lifetime limit on March 23, 2010 (29   CFR 2590.715-1251(g)(1)(vi)(B)); or
  •   Decreases the dollar value of   the overall annual limit that was in place on March 23, 2010 (29   CFR 2590.715-1251(g)(1)(vi)(C)).

If the answer to any of questions 3-8 was “yes,” the plan is NOT a   grandfathered plan.

     
Question   9 – Did the plan change issuers after March 23, 2010?If   the answer to question 9 is “yes”, if the group health plan changed issuers   after March 23, 2010, and the change in issuer was effective on or after Nov.   15, 2010, the plan will continue to be a grandfathered plan provided no other   changes that would relinquish grandfather status are made. 29 CFR   2590.715-1251(a)(1)(ii), as amended. Proceed to question 10.If a group health plan changed issuers after March 23, 2010, and   the change was effective prior to Nov. 15, 2010, the plan will have   relinquished grandfather status. The plan is not a grandfathered plan.

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The operative date is the effective date of the new       contract, not the date the new contract was entered into. Special rules       apply for collectively bargained plans. See       29 CFR 2590.715-1251(f) for collectively bargained plans.

      

     

Question   10 – Did the plan change from self-insured to fully insured after March 23, 2010?If   the group health plan was self-insured and changed to fully insured after   March 23, 2010, and the change was effective on or after Nov. 15, 2010, the   plan will continue to be a grandfathered plan provided no other changes are   made that would relinquish grandfather status. 29 CFR   2590.715-1251(a)(1)(ii), as amended. Proceed to question 11.If a group health plan was self-insured and changed to fully insured   after March 23, 2010, and the change was effective prior to Nov. 15, 2010,   the plan will have relinquished grandfather status. The plan is not a   grandfathered plan.
     
Question   11 – If the group health plan changed issuers (including a plan that was self-insured   and changed to fully insured) and has maintained grandfather status did the   plan provide documentation to the new issuer of the plan terms under the   prior health coverage sufficient to determine whether any other change was   made that would relinquish grandfather status?To   maintain status as a grandfathered health plan, the plan must provide to the   new issuer (and the new issuer must require) documentation of plan terms   (including benefits, cost sharing, employer contributions, and annual limits)   under the prior health coverage sufficient to determine whether any other   change is being made that would relinquish grandfathered status. 29 CFR   2590.715-1251(a)(3)(ii), as amended.For all plans that, based on questions 1 through 11, have not   relinquished grandfather status, complete questions 12-13.      
Question   12 – Does the plan include a statement that it believes it is a grandfathered   health plan in any plan materials provided to participants and beneficiaries   that describe the benefits provided under the plan?To   maintain status as a grandfathered group health plan, the plan must include a   statement, in any plan materials provided to a participant or beneficiary   describing the benefits under the plan, that the plan believes it is a   grandfathered health plan within the meaning of section 1251 of the   Affordable Care Act and must provide contact information for questions and   complaints. Model   language is available. 29 CFR 2590.715-1251(a)(2).      
Question   13 – Is the plan maintaining records documenting the terms of the plan in connection   with the coverage in effect on March 23, 2010, and are these records made available   upon request?To   maintain status as a grandfathered group health plan the plan must maintain   records documenting the terms of the plan in connection with the coverage   that was in effect on March 23, 2010, and any other documents necessary to   verify, explain, or clarify its status as a grandfathered health plan. These   records must be maintained for as long as the plan takes the position that it   is grandfathered, and must be available for examination upon request. 29 CFR   2590.715-1251(a)(3)(i)(A) & (i)(B), as amended.      

 MORE INFORMATIONPlease contact The Horton Group, Inc.  for any of the following additional checklists on ACA compliance:

Source: Department of Labor

Revised: 3.12.13

 

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.