Boardman Law Firm

New Health Care Reform Regulations on "Grandfathered Plans"

By Cindy Van Bogaert
June 22, 2010

Here is your latest Employee Benefits Update from Cindy Van Bogaert, Partner and Chair of the Employee Benefits Practice Group at Boardman Law Firm LLP. This Employee Benefits Update provides information about how Health Care Reform guidance on so-called "Grandfathered Plan" status affects employer plans.

Health Care Reform (the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act) allows Grandfathered Plans to skip some of the new requirements. In other words, if an employer can maintain Grandfathered Plan status, the employer may avoid some of the costs and required design changes associated with certain new mandates. For a Government Fact Sheet: http://www.healthreform.gov/newsroom/keeping_the_health_plan_you_have.html.

The government issued new regulations that explain what qualifies as a Grandfathered Plan and what an employer must do to protect its Grandfathered Plan status. Here are a few highlights:

• What is a Grandfathered Plan? It generally is a plan that continuously covered at least one person (not necessarily the same person) since March 23, 2010. To keep Grandfathered Plan status, documentation proving grandfathered status and a disclosure statement are required. The regulations provide model disclosure language: http://www.dol.gov/federalregister/HtmlDisplay.aspx?DocId=23967&AgencyId=8&DocumentType=2
• Can an employer lose Grandfathered Plan status? Yes, for example, entering into a new insurance policy, certificate, or contract of insurance generally will cause a plan to lose Grandfathered Plan status, elimination of some benefits, some increases in co-insurance, some reductions in employer contributions toward coverage, and some changes in overall limits. The regulations provide details on what types of changes will cause loss of Grandfathered Plan status.
• The regulations also include important information for employers regarding retiree only plans, collectively bargained plans, and "excepted benefits" like dental or vision only plans and some health flexible spending accounts.

What should employers do?

1. Employers should identify and document the existence of plans in place on March 23, 2010. Employers must keep records to verify Grandfathered Plan status. (This is a good time for employers to check and verify compliance with the Employee Retirement Income Security Act of 1974 ("ERISA") documentation requirements.)
2. Employers wishing to keep Grandfathered Plan protection should set up any needed disclosures.
3. Many changes can cause loss of Grandfathered Plan status. Employers negotiating changes to health plans or employment arrangements should review changes with counsel to avoid inadvertent loss of Grandfathered Plan protection.

Please contact me if I can be of assistance. If you want to get the lastest regarding the Grandfathered Plan rules and other new Health Care Reform developments that affect employer group health plans, including the effects on retiree-only, one-person, and "excepted benefits," consider our July 28 seminar.

Upcoming seminars:

• "HIPAA Privacy: Tougher Rules; Tougher Enforcement," at the Society for Human Resource Management (SHRM) Annual Conference & Exposition in San Diego, CA on June 28, 2010. For information and to register: http://www.shrm.org/CONFERENCES/annual/Pages/default.aspx.
• "Health Care Reform" Seminar in Madison, WI on July 28, 2010. For information, click here.
• "Tougher HIPAA Privacy and Security Rules: Learn the New Compliance Requirements," telephone seminar through HRWebAdvisor on August 12, 2010. For information: http://www.hrwebadvisor.com/schedule/detail/tougher-hipaa-privacy-and-security-rules.
• "HIPAA Privacy Training" two seminars, one for the basics and one for new developments, both on October 26, 2010. If you work with employer health benefits, you should consider these training seminars to meet your legal obligations. For information: click here.
• "Fundamentals of Employee Benefit Plans," for the American Law Institute-American Bar Association, in Philadelphia, PA on April 6-8, 2011.

This update is not legal advice. Individuals should seek advice based on their particular circumstances from their own counsel.

If you have any questions or need assistance, please contact Cindy Van Bogaert at (608) 283-7543 or Email.

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