On November 17, 2010, the US Departments of Treasury, Labor and Health and Human Services (the "Departments") issued an important amendment to the interim regulations originally issued in June regarding "grandfathered" status under the Patient Protection and Affordable Care Act (the "Affordable Care Act").
The June regulations list several ways in which a group health plan can lose its "grandfathered" status, including the provision that an insured plan would lose its "grandfathered" status if it enters into a new policy, certificate or contract of insurance (for example, if the insurance carrier changes).
By maintaining grandfathered status, a health plan is either not subject to, or has a deferred effective date for, certain changes required under the Affordable Care Act.
In response to comments received on the June regulations, the Departments have now removed this provision for any insured group health plan entering into a new agreement that becomes effective on or after November 15, 2010. Consequently, an insured group health plan may enter into a new contract of insurance and maintain its "grandfathered" status, provided the new contract does not result in cost increases, benefit reductions or any other change described in the regulations. (Please click here to see our September 28, 2010 client alert regarding all the ways in which grandfathered status can be lost.)
Please note any new group health plan agreements must actually become effective on or after November 15, 2010 regardless of the date on which the plan enters into a new agreement. For example, if a plan entered into an agreement with a new insurance company on August 1, 2010 with an effective date of January 1, 2011, the amendment will apply and the plan will not automatically lose its "grandfathered" status due to the fact it entered into a new agreement. However, if a plan entered into a new agreement on August 1, 2010 with an effective date of November 1, 2010, the plan will lose its "grandfathered" status.
Nukk-Freeman & Cerra is available to discuss this change to the "grandfathered" plan regulations and help you determine whether it applies to your particular group health plan. In addition, we are available to discuss any other aspect of the Affordable Care Act, including other provisions of the "grandfathered" plan regulations. Please feel free to contact Liza Hecht (lhecht@nfclegal.com), Christine Gottesman (cgottesman@nfclegal.com) or the Nukk-Freeman & Cerra attorney with whom you work to discuss this important compliance matter, or if you have any questions regarding the Affordable Care Act.
Any tax advice included in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency.
