Among other things, the FAQs address issues relating to grandfather status, dependent coverage of children, the new internal and external review requirements, lifetime limits on essential benefits, the exception for retiree-only plans, and out-of-network emergency care. Over the next several weeks, we will summarize some of the key issues addressed in the recent FAQs.
Decrease in Employer Contribution Rate. Several FAQs relate to the loss of grandfather status based upon a decrease in employer contributions of more than 5 percent. The Interim Final Rules on grandfathered status generally provide that a group health plan or health insurance coverage will cease to be a grandfathered health plan if the employer decreases its contribution rate toward the cost of any tier of coverage by more than 5 percentage points below the contribution rate on March 23, 2010. Insurers commented to the Agencies that they do not always have the information needed to know whether (or when) an employer changes its contribution rate.
In the FAQs, the Agencies provide that, until the issuance of final regulations, the Agencies will not treat a grandfathered, insured group health plan as losing grandfather status based on a change in the employer contribution rate if (1)upon renewal of the insurance coverage, the insurer requires the plan sponsor to make a representation regarding its contribution rate for the plan year covered by the renewal, as well as its contribution rate on March 23, 2010 if the insurer does not already have it (so that the insurer can make its own comparison); and (2) the insurer’s policies, certificates, or contracts of insurance disclose – in a prominent and effective manner – that plan sponsors are required to notify the insurer if the contribution rate changes at any point during the plan year.
For policies renewed prior to January 1, 2011, the FAQ states that insurers should take the above steps no later than January 1, 2011. The FAQ also states that the insured plan will lose grandfathered status based upon a decrease in the employer’s contribution rate as of the earlier of: (1) the first date on which the insurer knows that there has been at least a 5-percentage-point reduction; or (2) the first date on which the plan no longer qualifies for grandfathered status for other reasons, without regard to the 5-percentage-point reduction.
Multiemployer Plans. The FAQs also provide that multiemployer plans face similar issues and that the same relief will apply if multiemployer plans and contributing employers follow steps similar to those with respect to insured plans. Additionally, the Agencies note that some multiemployer plans have either a fixed-dollar employee contribution or no employee contribution towards the cost of coverage. In such cases, a change in a contributing employer's contribution rate will not, in and of itself, cause a plan that is otherwise grandfathered to lose such status, provided that there is no increase in the employee contribution toward coverage and any changes in the coverage terms would not otherwise cause the plan to cease to be grandfathered.
Change in Insurer. A FAQ states that the Agencies "anticipate that they will shortly address the circumstances under which grandfathered group health plans may change [insurance] carriers without relinquishing their status as grandfathered health plans." This guidance is potentially significant in that it suggests that there may be at least some circumstances where a change in policies or carriers may not, in and of themselves, impact grandfather status. The FAQs also states that final regulations on the various IFRs are expected to be published beginning next year (2011).
Dependent Coverage of Children
Another FAQ provides generally that plans mayimpose conditions for continued coverage of children not described in Internal Revenue Code section 152(f)(1) – for example, grandchildren and nieces/nephews. The Interim Final regulation on the dependent child coverage requirement provides that a plan or issuer may not define dependent for purposes of eligibility for dependent coverage of children other than in terms of a relationship between a child and the participant, but does not provide a definition of "child" for this purpose. The FAQ provides generally that a plan sponsor may limit the circumstances under which coverage is provided to a dependent who is not a son, daughter, stepson, stepdaughter, adopted child, or foster child. Accordingly, for any individual outside of these categories, plans can continue to impose additional eligibility criteria, such as claiming a child on a federal tax return.
Got a health-care reform question? You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions
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
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.