Grandfathered health plan rules Early retiree reinsurance prog

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1 Grandfathered plans The Patient Protection and Affordable Care Act s (PPACA) grandfather provision allows group plans that existed on March 23, 2010, to make some changes while maintaining their. Other changes, such as significantly cutting benefits or increasing cost sharing, may affect that. As a small or large group employer, you may have the option to keep for your plans or to take advantage of the additional flexibility and potential savings non- plans may offer. * The following is a list of some of the changes that would affect your plan s if they were effective after March 23, 2010 (unless the special rule for collectively bargained insured plans applies). Plan changes and Grandfathered plans are exempt from these mandates Additional rules 1

2 Plan changes and Grandfathered health plan rules Changes after March 23, 2010 Benefit changes Add the national preventive care services package Increase coinsurance Increase a deductible by more than 15% (plus medical inflation) Increase an out-of-pocket maximum by more than 15% (plus medical inflation) Increase a copayment by more than $5 (adjusted for medical inflation) or 15% (plus medical inflation), whichever is greater Add or change an overall annual dollar limit on all benefits by: Adding a limit to a plan that on March 23, 2010, did not have an overall lifetime or annual dollar limit on all benefits Reducing the dollar amount of the limit Adding a limit that s lower than the overall lifetime dollar limit on all benefits that was in place on March 23, 2010 Your plan can keep its Your plan forfeits its Eliminate all, or substantially all, coverage for diagnosis or treatment of a specific condition Add benefits Premiums Change premiums 2

3 Changes after March 23, 2010 Employer contribution changes Decrease the employer contribution rate: For contributions based on the cost of coverage the contribution s percent of the cost of coverage decreases by more than 5 percentage points below what the percentage was on March 23, 2010, for any tier of coverage (e.g., self-only or family) For contributions based on a formula (such as hours worked) the contribution s percent of the cost of coverage decreases by more than 5 percent below what it was on March 23, 2010, for any tier of coverage Change carrier or third-party administrator Fully insured plan Change insurance carrier (effective after March 23, 2010 and before November 15, 2010) Fully insured plan Change insurance carrier (effective November 15, 2010 and after) Self-funded plan Change third-party administrator Enrollment Add subscribers, such as new employees or employees who change coverage at open enrollment (subject to the anti-abuse rules) Add dependents Your plan can keep its Your plan forfeits its 3

4 Grandfathered plans are exempt from these mandates Effective 2011 Preventive services No discrimination in favor of highly compensated individuals Choice of primary care providers Emergency services Access to gynecologist or obstetrician Appeals process Financial data reports filed with the Department of Health and Human Services (HHS) and state insurance departments Effective 2012 Quality-of-care reports filed with HHS Effective 2014 Rating limitations, guaranteed issue and renewal of coverage rules, and essential benefits requirements (for certain insured plans) Cost sharing and deductible limits Clinical trials No discrimination based on health Additional rules Disclosure rules and documentation requirements Grandfathered plans must disclose the plan s in member plan materials that describe the benefits provided under the plan. The disclosure must include a statement that the group health plan or insurer believes that the plan is under PPACA, and it must include contact information. Your group must also maintain records, and make them available when requested, that document the terms of the plan in connection with the coverage that was in effect on March 23, 2010, and any other information necessary to verify that the plan is. 4

5 Plan changes effective after March 23, 2010 Some groups may have made plan changes that were effective after March 23, Those changes won t cause the plan to forfeit its if they were made pursuant to one of the following: A legal contract entered into on or before March 23, 2010 A filing with a state insurance department made on or before March 23, 2010 A written amendment to a plan that was adopted on or before March 23, 2010 Revoking or modifying plan changes made after March 23, 2010 Your plans will also maintain if you revoke or modify changes that were made after March 23, 2010, but before June 14, 2010, and if the plan, as modified, would meet the requirements to be. To maintain the plan s, you have to revoke or modify the changes effective as of the first day of the first plan year beginning on or after September 23, Changes are considered to have been made before June 14, 2010, if they were: Effective before June 14, 2010 Made pursuant to a legally binding contract entered into before June 14, 2010 Made pursuant to a filing with the state insurance department before June 14, 2010 Made pursuant to a written amendment to a plan that was adopted before June 14, 2010 Rules for collectively bargained insured plans If insurance coverage is maintained pursuant to a collective bargaining agreement (CBA) that was ratified before March 23, 2010, the coverage is at least until the date on which the last of those CBAs relating to the coverage terminates. At that time, the coverage may still be if it meets all other grandfathering requirements. Grandfathered coverage maintained pursuant to a CBA is subject to all federal health care reform requirements that apply to all other plans. A coverage amendment will not be treated as a termination of the CBA if it s made pursuant to a CBA related to the coverage and if it amends the coverage solely to 5

6 conform with any health care reform mandates. (The special rules for collectively bargained insured plans don t apply to self-funded plans.) Rules for nondiscrimination in favor of highly compensated individuals (fully insured plans) Fully insured group plans must comply with nondiscrimination rules and annual testing requirements that previously applied only to self-funded plans. Under these rules: Small and large group non- plans must comply Fully insured plans are exempt Self-funded group plans remain subject to nondiscrimination rules whether or not they re The following conditions could cause non- fully insured plans to fail a nondiscrimination test: Different waiting periods for different classes of employees Different contribution amounts for different classes of employees Different carve-outs and benefit options for management that are not available for other employees Your group is responsible for applying the nondiscrimination test requirements and paying the penalties that result from discriminating in favor of highly compensated individuals. Anti-abuse rules A plan will forfeit if either of the following occurs: A company enters into a merger, acquisition, or similar business restructuring in order to cover new people under the coverage Employees are transferred into the coverage (the transferee plan) from coverage where employees were covered on March 23, 2010 (the transferor plan), and both of the following are true: o o The transferee plan is treated as if it were an amendment of the transferor plan There was no valid employment-based reason (other than changing the terms or cost of coverage) to transfer the employees into the transferee plan 6

7 Early retiree reinsurance prog For more information HHS and other federal agencies may release further guidance on the grandfathering provision, and we ll keep you informed as it becomes available. If you have questions, please contact your broker or Kaiser Permanente account manager. * Each employer group determines whether or not they want their plans to maintain. If a plan loses that, additional heath care reform requirements will apply. Visit the Department of Health and Human Services website for more information. Changes that modestly exceed what is allowed in the regulations may or may not cause a plan to lose its if those changes were made before June 14, The information in this flyer was accurate at the time of production. However, some of the information may have changed. For the most current information, please contact your Kaiser Permanente representative. Business Marketing Communications December