Final Rule Issued for Grandfathered Group Health Plan Flexibility

On December 11th, 2020, the U.S. Departments of Labor, Health and Human Services, and Treasury announced a joint final rule. The rule amends the requirements for grandfathered group health plans and grandfathered group health insurance coverage to preserve grandfather status. This final rule follows a long line of final rules that the Department of Labor has released in recent months.

Overview of the Final Rule

Under the Patient Protection and Affordable Care Act (ACA) certain group health plans and health insurance coverage are “grandfathered.” Those plans existed when the law went into effect and are subject to some, but not all, ACA requirements. For example, grandfathered plans and health insurance coverage cannot deny benefits based on preexisting conditions as dictated by the ACA. On January 20th, 2017, President Donald Trump signed an Executive Order directing departments to mitigate ACA fiscal burdens. According to the three issuing departments, this final rule achieves that directive. The rule also provides greater flexibility for grandfathered group health coverage.

• Firstly, the rule clarifies that grandfathered high deductible health plan (HDHP) group health coverage may increase fixed-amount cost-sharing requirements. This includes raising deductibles to any extent necessary to maintain its status as an HDHP without losing grandfather status. This change ensures that participants and beneficiaries enrolled in that coverage remain eligible to contribute to a health savings account.
• Secondly, the final rule provides an alternative method of measuring permitted increases in fixed-amount cost sharing. This new method allows plans and issuers to better account for changes in the costs of health coverage over time.

The final rule goes into effect on January 14th, 2021.  Subsequently, the regulations have an applicability date of June 15th, 2021.

Employer Takeaways

If employers offer grandfathered group health plans and grandfathered group health insurance coverage to employees, this rule may affect them.  In particular, the updates to HDHP health coverage could mean a rise in deductibles for those who are currently insured.  Employers should contact their group health plan or insurance providers to learn how this rule may change their current coverage.