HHS Reverses Rule on Losing Grandfathered Status

breaking health care reform newsThis is a breaking news announcement.  Regulators yesterday made an amendment to the “grandfather” rule:

The grandfather regulation includes a number of rules for determining when changes to a health plan cause the plan to lose its grandfathered status.  For example, plans could lose their grandfather status if they choose to make certain significant changes that reduce benefits or increase costs to consumers.  This amendment modifies one aspect of the original regulation.    

Previously, one of the ways an employer group health plan could lose its grandfather status was if the employer changed issuers – switching from one insurance company to another.  The original regulation only allowed self-funded plans to change third-party administrators without necessarily losing their grandfathered plan status.  Today’s amendment allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, so long as the structure of the coverage doesn’t violate one of the other rules for maintaining grandfathered plan status…

This is a big change and will help businesses that were looking for similar coverage at other carriers.  The bad news however, is that if you changed carriers after March 23, 2010 but prior to November 15, 2010 you still lose your grandfather status.  The rule is not retroactive.  It also only applies in the group health market and will not affect individual policies.  Any change in insurer for individual policies will result in the loss of grandfather status.


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