By Allen Smith
10/14/2010
The U.S. departments of Health and Human Services, Labor and Treasury on Oct. 12, 2010, released frequently asked questions (FAQ) about the Patient Protection and Affordable Care Act (PPACA) and grandfathered health plans, dental and vision benefits, and rescissions, among other topics.
Grandfathered Plans
The departments clarified that for a plan that is continuing the same policy, there are only six changes that would cause a cessation of grandfathered status under the interim final regulations:
Elimination of all or substantially all benefits to diagnose or treat a particular condition.
Increase in a percentage cost-sharing requirement.
Increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points.
Increase in a co-payment 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 toward the cost of coverage by more than 5 percentage points.
Imposition of annual limits on the dollar value of all benefits below specified amounts.
The departments also noted that the grandfather analysis applies on a benefits-package-by-benefits-
Group health plans may continue to provide incentives for wellness by providing premium discounts or additional benefits to reward healthy behaviors by participants or beneficiaries. But penalties such as cost-sharing surcharges may result in the loss of grandfather status, the departments added.
Dental and Vision Benefits
The departments noted that if dental or vision benefits are considered "excepted benefits" under the Health Insurance Portability and Accountability Act, then the PPACA's market reforms do not apply to the dental or vision benefits. If a plan provides dental or vision benefits under a separate election by a participant and the plan charges even a nominal employee contribution toward the coverage, the dental or vision benefits would constitute excepted benefits, the DOL explained.
Rescissions
The departments noted that the PPACA generally provides that plans and issuers must not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact.
But the departments said that some employers' HR departments may reconcile lists of eligible individuals with their plan by data feed only once per month. If a plan covers only active employees and an employee pays no premiums for coverage after termination of employment, the departments do not consider the retroactive elimination of coverage back to the date of termination due to delay in administrative recordkeeping to be a rescission. Timothy Stanton, an attorney with Ogletree Deakins in Chicago, said the FAQ is helpful because "this has been a knotty issue for clients with decentralized workforces, where there can sometimes be delays in getting terminations processed."
In addition, if a plan does not cover ex-spouses and the plan is not notified of a divorce and the full COBRA premium is not paid by the employee or ex-spouse for coverage, the departments do not consider a plan's termination of coverage retroactive to the divorce to be a rescission.
Allen Smith, J.D., is SHRM's manager of workplace law content.
Related Articles:
Nine Out of 10 Big Companies Anticipate Losing Grandfather Status, SHRM Online Benefits Discipline, August 2010
SHRM Seeks Changes to Grandfathered Status Rule, SHRM Online Legal Issues, August 2010
