The Patient Protection and Affordable Care Act ("PPACA" or the "Act") is by far the most wide-reaching new law governing employee benefits since the Employee Retirement Income Security Act ("ERISA") was passed in 1974. During the legislative process that led to passage of the sweeping health care reform legislation, it was proposed that plans already in existence on the date of passage be "grandfathered," or exempted, from the Act's requirements. The concept of "grandfathering" is included in the Act; however, grandfathered plans are only exempt from some of the Act's requirements. This article briefly discusses the meaning and advantages of grandfathered status and the recent interim federal regulations governing the maintenance of grandfathered status.
What is a grandfathered plan under PPACA? A grandfathered plan is a health plan that was in existence on the date PPACA was passed – March 23, 2010. Under recently issued interim federal regulations, a plan must have "continuously covered someone since March 23, 2010" in order to be grandfathered.
What are the benefits to an employer of having a grandfathered health plan?
1. Grandfathered plans are exempt from some, but not all, of PPACA's requirements. For example, grandfathered plans are exempt from: the Act's mandate for plans to offer certain free preventive health services;
2. The extension of rules prohibiting discrimination in favor of highly compensated employees to insured plans;
3. The establishment of an external review process for benefit claim appeals;
4. The prohibition against pre-authorization requirements for OB/GYN and emergency services;
5. New Department of Health and Human Services ("HHS") reporting requirements regarding plan efforts to improve participant health, safety and wellness;
6. New HHS reporting requirements regarding claim payment policies, enrollment/disenrollment, claim denials and cost sharing; and
7. Certain cost-sharing restrictions. In addition, grandfathered plans have delayed compliance deadlines for several of the Act's requirements (e.g., restrictions on annual benefit limits).
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