Patient Protection and Affordable Care Act
- 1 Grandfathered Status
- 2 Young Adult Coverage
- 3 Lifetime Limits
- 4 Early Retiree Reinsurance Program
- 5 Physician Designation and Obstetrical/Gynecological Care Rights
- 6 Small Employer Health Care Tax Credit
- 7 Retiree Plans
- 8 Effective in 2010
- 9 Guidance
Various requirements of PPACA do not apply to grandfathered plans; for example, the requirement that preventive health services be covered without any cost sharing (which otherwise becomes generally applicable for plan years, or in the individual market, policy years, beginning on or after September 23, 2010).
However, grandfathered health plans must comply with a subset of the Affordable Care Act’s health reform provisions. Thus, for example, grandfathered health plans must comply with the prohibition on rescissions of coverage except in the case of fraud or intentional misrepresentation and the elimination of lifetime limits (both of which apply for plan years, or in the individual market, policy years, beginning on or after September 23, 2010).
See the Interim Final Rules for a chart on the application of various PPACA provisions to grandfathered plans.
A group health plan or group or individual health insurance coverage is a grandfathered health plan with respect to individuals enrolled on March 23, 2010. The interim final regulations provide that a group health plan does not cease to be grandfathered health plan coverage merely because one or more (or even all) individuals enrolled on March 23, 2010 cease to be covered, provided that the plan or group health insurance coverage has continuously covered someone since March 23, 2010 (not necessarily the same person, but at all times at least one person). The determination under the rules of these interim final regulations is made separately with respect to each benefit package made available under a group health plan.
Adding New Employees
A group health plan that provided coverage on March 23, 2010 generally is also a grandfathered health plan with respect to new employees (whether newly hired or newly enrolled) and their families who enroll in the grandfathered health plan after March 23, 2010.
To prevent abuse, the interim final regulations provide that if the principal purpose of a merger, acquisition, or similar business restructuring is to cover new individuals under a grandfathered health plan, the plan ceases to be a grandfathered health plan.
Loss of Grandfathered Status
The elimination of all or substantially all benefits to diagnose or treat a particular condition causes a plan or health insurance coverage to cease to be a grandfathered health plan.
Another set of rules limits the extent to which plans and issuers can increase the fixed-amount and the percentage cost-sharing requirements that are imposed with respect to individuals for covered items and services. In addition, the regulations limit the ability of an employer to decrease its contribution rate for coverage under a group health plan by more than 5 percent.
Finally, there are also constraints on the imposition of a new or modified annual limit by a plan.
To maintain status as a grandfathered health plan, a plan or health insurance coverage must include a statement, in any plan materials provided to a participant or beneficiary describing the benefits provided under the plan or health insurance coverage, that the plan or coverage believes it is a grandfathered health plan within the meaning of section 1251 of the Patient Protection and Affordable Care Act and must provide contact information for questions and complaints.
Young Adult Coverage
Section 2714 of the PHS Act, as added by the Affordable Care Act (and amended by the Reconciliation Act), provides that a plan or issuer that makes available dependent coverage of children must make such coverage available for children until attainment of 26 years of age.
Definition of Dependent
The interim final regulations clarify that, with respect to children who have not attained age 26, a plan or issuer may not define dependent for purposes of eligibility for dependent coverage of children other than in terms of the relationship between the child and the participant.
Examples of factors that cannot be used for defining dependent for purposes of eligibility (or continued eligibility) include:
- financial dependency on the participant,
- residency with the participant,
- student status,
- eligibility for other coverage.
The interim final regulations provide that the terms of the plan or policy for dependent coverage cannot vary based on the age of a child, except for children age 26 or older. In particular, any surcharges for children under the age of 26 must be uniform.
This rule applies immediately to all plans in the individual market and to new (non-grandfathered) employer plans. It also applies to existing (grandfathered) employer plans unless the adult child has another offer of employer-based coverage (such as through his or her job). Beginning in 2014, children up to age 26 can stay on their parent’s employer plan even if they have another offer of coverage through an employer.
Notice and Special Enrollment Period
The interim final regulations extending dependent coverage to age 26 provide transitional relief for a child who was not covered under a group health plan or health insurance coverage because dependent coverage of children ended before the attainment of age 26.
The regulations require a plan or issuer to give such a child an opportunity to enroll that continues for at least 30 days (including written notice of the opportunity to enroll). This enrollment opportunity (including the written notice) must be provided not later than the first day of the first plan year beginning on or after September 23, 2010. The notice may be included with other enrollment materials that a plan distributes, provided the statement is prominent. Enrollment must be effective as of the first day of the first plan year beginning on or after September 23, 2010.
- Interim Final Rules for Dependent Coverage of Children to Age 26 (effective Sept. 23, 2010)
Lifetime limits on essential benefits are prohibited for plan years beginning on or after Sept. 23, 2010.
Notice and Special Enrollment
Plans and issuers are required to give written notice that the lifetime limit on the dollar value of all benefits no longer applies and that an individual, if covered, is once again eligible for benefits under the plan. Additionally, if the individual is not enrolled in the plan or health insurance coverage, or if an enrolled individual is eligible for but not enrolled in any benefit package under the plan or health insurance coverage, then the plan or issuer must also give such an individual an opportunity to enroll that continues for at least 30 days (including written notice of the opportunity to enroll). The notices and enrollment opportunity must be provided beginning not later than the first day of the first plan year beginning on or after September 23, 2010. For individuals who enroll under this opportunity, coverage must take effect not later than the first day of the first plan year beginning on or after September 23, 2010.
These notices may be provided to an employee on behalf of the employee’s dependent. In addition, the notices may be included with other enrollment materials that a plan distributes to employees, provided the statement is prominent. For either notice, if a notice satisfying the requirements is provided to an individual, the obligation to provide the notice with respect to that individual is satisfied for both the plan and the issuer.
Early Retiree Reinsurance Program
The Early Retiree Reinsurance Program is a temporary program to make it easier for employers to provide coverage to early retirees. It will terminate on January 1, 2014.
Qualifying Retirees and Benefits
Employers that are accepted into the program will receive reinsurance reimbursement for medical claims for retirees age 55 and older who are not eligible for Medicare, and their spouses, surviving spouses, and dependents.
Health benefits that qualify for relief include medical, surgical, hospital, prescription drug, and other benefits that may be specified by the Secretary of Health and Human Services, as well as coverage for mental health services.
Amount of Subsidy
The amount of the reimbursement to the employer plan is up to 80% of claims costs for health benefits between $15,000 and $90,000. Claims incurred between the start of the plan year and June 1st are credited towards toward the $15,000 threshold for reimbursement. However, only medical expenses incurred after June 1, 2010 are eligible for reimbursement under this program.
For example: If an individual incurs costs of $30,000 between the start of the plan year and June 1, and $40,000 after that date. The amount which may be reimbursed is $40,000 – the costs above the $15,000 threshold that occur after June 1.
If a plan incurs $90,000 or more in expenses before June 1, it is treated as having met the $15,000 threshold and is eligible for reimbursement for costs incurred after June 1.
These limits apply and claims are filed for individual’s costs. Firms cannot add two or more individuals together to attain the threshold.
Both self-funded and insured plans can apply, including plans sponsored by private entities, state and local governments, nonprofits, religious entities, unions, and other employers.
- Early Retiree Reinsurance Program Interim Final Rules (effective June 1, 2010)
Physician Designation and Obstetrical/Gynecological Care Rights
Individuals enrolled in a group health plan (except grandfathered plans) or health insurance coverage have the right to:
- choose a primary care provider or a pediatrician when a plan or issuer requires designation of a primary care physician; and
- obtain obstetrical or gynecological care without prior authorization.
The interim final regulations require plans and issuers to provide notice to participants of the above rights. The notice must be provided whenever the plan or issuer provides a participant with a summary plan description or other similar description of benefits under the plan or health insurance coverage. This notice must be provided no later than the first day of the first plan year beginning on or after September 23, 2010.
See PPACA Model Notice.
Small Employer Health Care Tax Credit
Code Section 45R offers a tax credit to certain small employers that provide health insurance coverage to their employees. It is effective for taxable years beginning in 2010. Both taxable employers and employers that are organizations described in section 501(c) that are exempt from tax under section 501(a) (tax-exempt employers) may be eligible for the section 45R credit.
See also Small Business Health Care Tax Credit.
Most PPACA provisions do not apply to retiree-only plans. See the preamble to the Interim Final Rules on grandfathered plans.
Effective in 2010
- Elimination of preexisting condition exclusions for children.
- Parents may cover children until age 26.
- Code Section 105(h) applies to new group health plans, including fully insured plans.
- Plans, including self-funded plans, must offer no-cost preventive care.
- Small Business Health Care Tax Credit
- Temporary program offsets premiums costs for retirees age 55 to 64.
- Severe limits on rescission.
- No lifetime caps on coverage.
- High-risk pool is temporarily established.
- Medicare Part D coverage gap ("donut hole") begins to phase out.
- Early Retiree Reinsurance Program Interim Final Rules
- Interim Final Rules for Dependent Coverage of Children to Age 26 (effective Sept. 23, 2010)
- Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections (effective August 27, 2010)
- Grandfathered Plan Interim Final Rules (effective June 14, 2010)
- Notice 2010-44 (tax credit for small employers)