SECOND OPINIONS

How Are Collectively Bargained Plans Treated Under PPACA’s Grandfather Rules?

By PS | August 03, 2010

August 3, 2010 (PLANSPONSOR.com) –  The Patient Protection and Affordable Care Act (PPACA) provides generally that grandfathered plans are exempt from some -- but not all -- of the new rules.    

On June 14, 2010, the Department of Health and Human Services, the Department of Labor, and the Internal Revenue Service released their highly-anticipated "Interim Final Rule for Group Health Plans and Health Insurance Coverage Relating to Status as a Grandfathered Plan under the Patient Protection and Affordable Care Act" (the "Rule").  The Rule was published in the Federal Register on June 17, 2010 (see What Does the Interim Final Rule Mean for Grandfathered Plans?).   

This week we deal with that guidance on whether – and how - collectively bargained plans are subject to special grandfathering rules.     

Does the Rule delay the effective date of the PPACA reforms for collectively bargained plans? 

No.  Many observers had read the statutory language in PPACA to provide a delayed effective date for collectively bargained plans -- or at least insurance coverage maintained pursuant to a collective bargaining agreement or "CBA" -- with respect to the health insurance market reforms in PPACA.  The Rule, however, makes clear that this language does not delay the effective date of these provisions for collectively bargained plans.   

Does the Rule provide any special grandfathering rules for collectively bargained plans? 

Yes.  For health insurance coverage maintained pursuant to a CBA that was ratified prior to March 23, 2010, the Rule provides that the coverage is deemed to be grandfathered until the date on which the last of the CBAs in effect prior to March 23, 2010 terminates.  Then, any other applicable grandfather rules – most notably, the limits on changes that can be made to the coverage in effect on March 23, 2010, without the plan or policy losing grandfathered status -- will apply.   

The Rule provides an example under which a plan maintains insured coverage pursuant to a CBA in effect prior to March 23, 2010, which does not expire until December 31, 2011.  The plan switches its insurance policy from Insurer W to Insurer Y effective on January 1, 2011.  The plan remains grandfathered, despite the switch in insurers, because it is still under a CBA ratified prior to March 23, 2010. 

Does this special rule for collectively bargained plans apply to self-funded plans? 

No.  The Rule provides that the special rule applies only to insured plans maintained pursuant to a CBA (not self-funded, collectively bargained plans). 

After the last CBA relating to the coverage that was in effect on March 23, 2010 terminates, how is the grandfathered status of the plan determined? 

The determination of grandfathered status after the last of the CBAs relating to the coverage that was in effect on March 23, 2010 terminates is based on a comparison of the terms of the coverage on the date of termination with the terms of the coverage that were in effect on March 23, 2010.   At that point, one must determine whether changes to benefits, cost-sharing, annual or lifetime limits, or employer contribution rates have occurred since March 23, 2010 that will result in loss of grandfathered status (e.g., elimination of all or substantially all benefits to diagnose or treat a particular condition; increasing the coinsurance percentage by any amount above the level at which it was set on March 23, 2010). 

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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html    

Contributors:  

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.  

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.  

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.