DOL Proposes More Flexibility for Increases in Copayments, Deductibles, and Out-of-Pocket Limits for Grandfathered Group Health Plans
The Department of Health and Human Resources (HHS), the Department of the Treasury, and the Department of Labor (DOL) (collectively, “the Departments) issued a notice of proposed rulemaking on July 15, 2020, that would provide greater flexibility for grandfathered health plans. The DOL also issued Frequently Asked Questions about the Notice of Proposed Rulemaking.
Comments Due Date: The DOL is requesting comments (which will be shared with the other departments) by no later than 5 p.m. on August 14, 2020. Comments should refer to file code RIN 1210-AB89 and may be sent:
- Electronically to: http://www.regulations.gov.
- By regular mail to: Office of Health Plan Standards and Compliance Assistance, Employee Benefits Security Administration, US Department of Labor, Attention: RIN 1210-AB89, 200 Constitution Avenue NW, Room N-5653, Washington, DC 20210.
- By express or overnight mail to: Office of Health Plan Standards and Compliance Assistance, Employee Benefits Security Administration, US Department of Labor, Attention: RIN 1210-AB89, 200 Constitution Avenue NW, Room N-5653, Washington, DC 20210.
The Affordable Care Act (ACA) provides that grandfathered health plans are subject to only certain provisions of the ACA for as long as they maintain their grandfathered status. Once grandfathered status is lost, there is no opportunity to cure the loss of grandfathered status.
On February 25, 2019, the Departments issued a request for information regarding grandfathered group health plans and grandfathered group health insurance coverage (2019 RFI)1. Based on comments received in response to the 2019 RFI, the Departments issued this notice of proposed rulemaking that affects the maximum that fixed dollar cost sharing amounts (generally deductibles, copayments, and out-of-pocket maximums) can increase without triggering the loss of grandfathered status.
Under current regulations, the maximum increase in a fixed-amount cost-sharing amount from what was in place on March 23, 2010, is the increase since March 2010 in the medical care component of the Consumer Price Index for All Urban Consumers (CPI-U) plus 15 percentage points. Copayments are also permitted to increase by an amount equal to $5 increased by medical inflation (that is, $5 times medical inflation, plus $5).
Proposed Changes to Grandfathered Plans Regulations:
The proposed regulation would amend the regulations defining grandfathered plans to provide:
- Revised Definition of Maximum Percentage Increase: The proposed regulations permit grandfathered plans to use the portion of the premium adjustment percentage that reflects the relative change between 2013 and the calendar year prior to the effective date of the increase plus 15 percentage points in lieu of medical CPI plus 15 percentage points. HHS will publish the annual premium adjustment percentage in the annual HHS notice of benefits and payment parameters, as this is the same adjustment that HHS uses to calculate increases in the Maximum Out-of-Pocket amount allowed for non-grandfathered plans.
CHEIRON OBSERVATION: The cumulative increase in medical CPI is close to the premium adjustment percentage 2020, so as of today there is not much relief. However, the premium adjustment percentage has been rising faster, as it is the cumulative change since 2013 (rather than 2010 for medical CPI). Should that continue, this change would allow for higher increases in cost sharing in future years.
- Special rule for grandfathered high deductible health plans: The proposed regulations add a new special rule that allow an HSA-eligible grandfathered group health plan or group health insurance coverage to increase its fixed cost-sharing amounts to the greater of the amount needed to maintain HSA eligibility or the maximum percentage described in the prior paragraph.
Cheiron consultants can assist you with maintaining grandfathered plan status.
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.
1 See the Cheiron Health Alert of March 8, 2019.