Federal Agencies Issue Proposed Rule for Health Plan Flexibility

On July 10^th, 2020, the U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury released a joint proposed rule to amend the requirements for grandfathered group health plans and grandfathered group health insurance coverage in order to preserve their grandfather status. Under the Patient Protection and Affordable Care Act (ACA), certain group health plans and health insurance coverage that existed at the time of the law’s enactment received a designation as “grandfathered health plans.” Grandfathered group health plans are only subject to some of the ACA’s requirements, such as the prohibition on preexisting condition exclusions. They remain, however, exempt from many other stipulations.

Removing Affordable Care Act Provisions

This proposed rule begins the process of removing portions of the current ACA’s framework. On January 20th, 2017, President Donald J. Trump signed an Executive Order directing the DOL, HHS, and Treasury to minimize what he views as the unwarranted economic and regulatory burdens of the ACA. Consistent with this direction, the three Departments issued a request for information in February 2019 to gather input from the public to determine whether there are opportunities to assist plans and issuers, consistent with the law, in preserving grandfather status in ways that would benefit employers, plan participants, beneficiaries, and other stakeholders.

Proposed Clarifications and Alternatives

Based on the feedback received, the proposed rule provides greater flexibility for grandfathered group health coverage in two ways:

• First, the proposed rule clarifies that grandfathered group health coverage classified as a high-deductible health plan (HDHP) may increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain their status as an HDHP without losing grandfather status. This change would ensure that participants and beneficiaries enrolled in that coverage remain eligible to contribute to a health savings account.
• Second, the proposed rule provides an alternative method of measuring permitted increases in fixed-amount cost sharing that would allow plans and issuers to better account for changes in the costs of health coverage over time.

In order to be considered, public comments need to be received by August 14^th, 2020.