Federal Agencies Issue Interim Final Rules for Grandfathered Health Plans

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The U.S. Departments of Treasury, Labor, and Health and Human Services have issued interim final rules for group health plans and health insurance coverage on grandfathered health plan status under the Patient Protection and Affordable Care Act. These eagerly anticipated rules provide important guidance for employers as they make decisions about their health plans and benefits for their upcoming plan years.

Under the Act, health plans in which employees and individuals were enrolled on March 23, 2010 are exempt from certain of the Act's patient protection and insurance reform requirements if they retain their status as grandfathered health plans. Questions have loomed about what changes, if any, an employer could make to its plans without the plans losing that status. Acknowledging that employers and insurers have to make changes to keep pace with increases in health care costs, the rules allow plans to make "reasonable changes routinely made" to benefits and to add certain individuals without losing their grandfathered status. However, health plans that significantly cut benefits, increase out-of-pocket costs for employees, or try to circumvent the rules will lose their grandfathered status and be subject to the full scope of the Act's mandates.

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