On Friday, July 10, 2020, the U.S.  Departments of Labor, Health and Human Services (HHS), and Treasury (Departments) jointly issued a proposed rule that would allow grandfathered group health plans and providers to make certain changes to the treatment/calculation of fixed-amount cost-sharing requirements (e.g., copayments, deductibles, out-of-pocket maximums) without threatening loss of their grandfather status under the Patient Protection and Affordable Care Act (ACA). The proposed rule is linked here.  These changes were a long time in coming.  To understand the changes, a brief review of Grandfathered plans under the ACA is instructive.

Section 1251 of the  ACA provides that certain group health plans and health insurance coverage existing as of March 23, 2010, the date of enactment of the ACA, (referred to collectively in the statute as grandfathered health plans) are subject to only certain provisions of the ACA. The Departments share interpretive jurisdiction over this provision and jointly issued interim final regulations to implement its requirements in June 2010. In November 2015, the Departments issued final regulations that finalized the interim final regulations without substantial change. Among other things, those 2015 final regulations identified certain types of changes that, if made to a grandfathered plan or coverage, would result in a loss of grandfather status. These types of changes generally include increases in cost-sharing above certain thresholds, decreases in employer contributions, and elimination of substantially all benefits to diagnose or treat a condition. On February 25, 2019, the Departments issued a request for information regarding grandfathered group health plans and grandfathered group health insurance coverage to better understand the challenges that group health plans and group health insurance issuers face in avoiding a loss of grandfather status, and to determine whether there are opportunities for the Departments to assist such plans and issuers, consistent with the law, in preserving their grandfather status. Based on comments received from stakeholders in response to the 2019 request for information, the Departments have developed a proposed rule that would, if finalized, provide greater flexibility for grandfathered group health plans and issuers of grandfathered group health insurance coverage to make certain changes to cost-sharing requirements without causing a loss of grandfather status. Importantly, the  proposed rule would not affect requirements for grandfathered individual health insurance coverage to maintain its grandfather status.

Specifically, the proposed rule seeks to achieve greater flexibility in two ways:

  • Flexibility for High Deductible Health Plans (HDHP). The proposed rule permits grandfathered group health plans that qualify as HDHPs to make increases to fixed-amount cost-sharing requirements (which would otherwise cause a loss of grandfather status), provided that the changes are “necessary to comply with the minimum requirements” established for HDHPs under the Internal Revenue Code.
  • Alternative Inflation Adjustment for Fixed-Amount Cost-Sharing Increases. The proposed rule establishes an alternative method for inflation adjustment when calculating the maximum increase to fixed-amount cost-sharing requirements for grandfathered group health plans (i.e., the permitted increase would be determined by reference to either the most recently published premium adjustment percentage or a Consumer Price Index measure of medical inflation, whichever is greater).

Comments on the proposed rule are due to the Departments on or  before August 14, 2020. Grandfathered status has enabled many pre-ACA plans to continue to exist as a source of health benefits to a significant sector of the population, and the joint proposal by the Departments will facilitate their continued existence consistent with President Trump’s 2017 Executive Order #13765 mandating action to minimize the so-called “unwarranted economic and regulatory impact of the ACA.”

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