Reversing course, the IRS has amended interim final rules the agency issued earlier this year to allow certain changes in coverage without loss of “grandfathered status” under the Patient Protection and Affordable Care Act (PPACA). All group health plans may switch insurance companies and preserve their grandfathered status, as long as the structure of the coverage does not violate one of the other rules for maintaining grandfathered plan status.
A health plan in existence on March 23, 2010 (the date of enactment of the PPACA) is deemed grandfathered and thereby generally exempt from many of the requirements in the PPACA. The IRS and the other agencies issued interim final rules in June 2010, under which a group health plan relinquishes grandfather status if it changes issuers or policies.
The IRS and the other agencies have now revised construction of the statutory term “group health plan” to apply the grandfather provisions uniformly to both self-insured and insured group health plans. A group health plan does not cease to be grandfathered health plan coverage merely because the plan (or its sponsor) enters into a new policy, certificate, or contract of insurance after March 23, 2010. Additionally, a plan may retain its grandfather status if it changes its carrier, so long as it has not made any other changes that would revoke its status.
Some employers buy coverage from insurance companies; others self-insure, meaning that they pay claims themselves but usually hire a third-party administrator to handle the paperwork. Before this amendment, self-insured plans could change the company hired to handle the paperwork without losing grandfathered status as long as the benefits and costs of the plan stayed the same, while an employer that just changed insurance companies while maintaining the same benefits under their plan could not do so.
Under this amendment, all employers have the flexibility to keep their grandfathered plan but change insurance company or third-party administrator, the Department of Health and Human Services has explained on its web site.