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PPACA: Grandfathers Can Shop Around

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An employer can change group health plan carriers without facing the full force of the Affordable Care Act.

Federal agencies have announced that interpretation today and implemented it by adding an amendment to interim final rules that affect when group health plans and individual health insurance arrangements can keep “grandfathered status” under the Patient Protection and Affordable Care Act (PPACA), a component of the Affordable Care Act package.

The grandfathered plan rules can exempt a plan or policy issuer from many Affordable GrandfatherCare Act requirements, such as a new preventive benefits package mandate and a minimum medical loss ratio requirement.

The agencies – the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA) and the Office of Consumer Information and Insurance Oversight OCIIO) – released grandfathered status interim final regulations in June.

The agencies said in June that a group plan ought to lose grandfathered status if the sponsor changes issuers or policies.

Many commenters wrote to object to that provision, officials

say in a preamble to the new amendment.

Some commenters noted that an insured employer would lose grandfathered status if it changed carriers, but a self-insured plan would not lose grandfathered status if it changed plan administrators, officials say.

Commenters said the golden ager handcuffs rule also could cause problems if a carrier stopped selling the employer’s policy, or if a carrier had administrative reasons to reissue an employer’s policy.

“Finally,” officials say, “commenters expressed concern that the provision terminating grandfather status upon any change in issuer gives issuers undue and unfair leverage in negotiating the price of coverage renewals with the sponsors of grandfathered health plans, and that this interferes with the health care cost containment that tends to result from price competition.”

To keep grandfathered status after switching carriers or policies, an employer must show the new carrier that the new plan will be similar enough to the old plan to qualify for grandfathered status, officials say.

The federal agencies intend to publish the amendment Wednesday in the Federal Register. Comments on the change will be due 30 days after the official publication date.

But, if an individual changes carriers and buys a similar policy, the new policy will still lose grandfathered status, officials say.


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