Grandpaw-hood At Risk?

 “Please don’t leave us Grandpaw!!!”

Hey Grandpaw, I’m thinking of giving my children (your grandchildren) a few free gifts this year but I may decide later to take them back. But………. I’m worried the government will require you to disown us under penalty of sanctions!

SCENARIO:

Self-funded group is currently grandfathered and wishes to remain so forever due to religious beliefs. This year they decide they want to improve benefits specific to one hospital system they recently entered into a direct agreement with that is anticipated to produce significant plan savings. To drive steerage to that system they are considering waiving all patient responsibility (a free gift, an improved benefit). It is understood this will not affect their grandfather status.

However, next year they may determine that the savings are significantly offset by waiving patient responsibility and/or the hospital system non-renews the agreement, and they subsequently decide to remove that incentive (a reduction in benefit) in lieu of the benefit in place before the improvement was made in the prior year. However the resultant plan benefit (going back to the prior plan year benefit levels) does not represent a benefit reduction to the benefits that were in effect when the ACA became law.

QUESTION:

Will the group lose grandfather status?

ANSWERS RECEIVED TO DATE:

I do not believe they will lose grandfathered status by increasing benefits and then reverting back to what they were.  It’s my understanding that grandfathered status is measured cumulatively from 2010 to the present, not year to year.  Since the change that is being made is only going back to where you were at prior to the change, I think your status does remain intact.

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From my ERISA lawyer…. “I looked in our best secondary resource and they don’t discuss this situation, which tells me it’s not in the regulations or the preamble.”

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I looked and this is not addressed as far as I can tell without digging into it(involving my ERISA lawyer).   I can see your argument, but there is a risk.  It might be better to have it paid back as a flex credit for other benefits or some other reimbursement.

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How about tying it to a hybrid cash pay/HRA for the patient responsibility whereas the cash is paid directly to the facility thus alleviating the burden to the employee? This way, if your client decided not to do this, than you no longer pay the patient responsibility upfront.   Just a thought.

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Very interesting question. Without doing research(not that I would) I am taking a WAG, I’d say they are not Grandfathered any more. Would love to discuss this further.

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While I do not profess to be a plan benefit expert, I did take a moment to review the applicable provisions under the ACA regarding the above matter. I do not think the plan loses its grandfathered status because it is “increasing benefits” and any subsequent change would revert to the same level of benefits currently offered. Nevertheless, what I would do if I was in your spot is to secure an advisory opinion from the DOL prior to implementation of any change in benefits. We are all in uncharted waters right now and that might be the “insurance” the plan can buy at this moment in time.

Editor: Good advice, thanks. I wrote DOL an email about this a few moments ago (executivesecretariat@dol.gov). Let’s see if I get a response. If I do I will share it with you.

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