More on grandfathering of individual purchase policies

Following up on yesterday’s post wondering what proportion of cancelled individual purchase policies were eligible for grandfathering…here is the federal register Maintenance of Grandfather Status of old Paragraph (g) of 26 CFR 54.9815-1251T, 29 CFR 2590.715-1251, and 45 CFR 147.140 (aka the weeds):

Questions have arisen regarding the extent to which changes can be made to a plan or health insurance coverage and still have the plan or coverage considered the same as that in existence on March 23, 2010, so as to maintain status as a grandfathered health plan. Some have suggested that any change would cause a plan or health insurance coverage to be considered different and thus cease to be a grandfathered health plan….

It turns out it has to be a substantial change in a policy in force on March 23, 2010 to make it not grandfatherable….

The first of those rules (in paragraph (g)(1)(i)) constrains the extent to which the scope of benefits can be reduced. It provides that the elimination of all or substantially all benefits to diagnose or treat a particular condition causes a plan or health insurance coverage to cease to be a grandfathered health plan. If, for example, a plan eliminates all benefits for cystic fibrosis, the plan ceases to be a grandfathered health plan (even though this condition may affect relatively few individuals covered under the plan).

So, substantially changing a benefit that even would affect very few people would lose grandfather status….further

Moreover, for purposes of paragraph (g)(1)(i), 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. An example in these interim final regulations illustrates that if a plan provides benefits for a particular mental health condition, the treatment for which is a combination of counseling and prescription drugs, and subsequently eliminates benefits for counseling, the plan is treated as having eliminated all or substantially all benefits for that mental health condition.

Similarly, there are limits of cost sharing changes that could be undertaken while maintaining grandfathered plan status

A second set of rules (in paragraphs (g)(1)(ii) through (g)(1)(iv)) limits the extent to which plans and issuers can increase the fixed-amount and the percentage cost-sharing requirements that are imposed with respect to individuals for covered items and services. Plans and issuers can choose to make larger increases to fixed-amount or percentage cost-sharing requirements than permissible under these interim final regulations, but at that point the individual’s plan or health insurance coverage would cease to be grandfathered health plan coverage.

Further, a plan that imposed an annual or lifetime limit, but that did not have one on March 23, 2010 would also lose grandfather status, though some that had such policies in place at that time could be grandfathered if they did not run afoul of the items above.

Trivial changes would not end grandfather status, but reducing the benefits, increasing the cost share, and imposing annual and/or lifetime benefits that did not exist on March 23, 2010–even for narrow groups of people–would remove grandfather status….there is also some leeway provided for plans that changed between March 23, 2010 and June 14, 2010, when the regulations were released. Practical examples of things grandfathered plans don’t have to do include free preventive care, guarantee appeal rights, or imply access rights to a broad set of providers.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

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