U.S. Departments of Labor, Health and Human Services, and the Treasury Issue Proposed Rule to Increase Flexibility for Grandfathered Group Health Plans

WASHINGON, DC – The U.S. Departments of Labor, Health and Human Services, and the Treasury today issued a proposed rule to amend the requirements for grandfathered group health plans and grandfathered group health insurance coverage to preserve their grandfather status.

The Patient Protection and Affordable Care Act (ACA) provides that certain group health plans and health insurance coverage that existed as of the law’s enactment are treated as grandfathered health plans. Grandfathered group health plans are subject to some of the ACA’s requirements, such as the prohibition on preexisting condition exclusions, but are exempt from many others.

On Jan. 20, 2017, the President signed an Executive Order directing the Departments to minimize the unwarranted economic and regulatory burdens of the ACA. Consistent with this direction, the Departments issued a request for information on Feb. 25, 2019 to gather input from the public to determine whether there are opportunities to assist plans and issuers, consistent with the law, in preserving grandfather status in ways that would benefit employers, plan participants, and beneficiaries and other stakeholders.

“The President has consistently fought for greater choice and expanded access to affordable healthcare for American workers,” said U.S. Secretary of Labor Eugene Scalia. “The rule proposed today would provide greater flexibility for employers to provide American workers with the health coverage they prefer.”

“This proposed rule reaffirms the President’s commitment to protecting American consumers from rising health care costs while promoting flexibility and competition in the marketplace,” said Treasury Secretary Steven T. Mnuchin. “This would benefit workers and employers by ensuring they can continue to take advantage of these plans that best meet their needs and circumstances.”

“Providing Americans with access to affordable ways to finance their care is a key priority for President Trump,” said U.S. Secretary of Health and Human Services Alex Azar. “This proposal will help Americans maintain access to affordable insurance options from their employers or unions, by ensuring there is flexibility to adjust these plans to meet changing circumstances.”

“The fact that a significant number of grandfathered group health plans remain indicates that some employers have found value in preserving grandfather status,” said Acting Assistant Secretary for the Employee Benefits Security Administration (EBSA) Jeanne Klinefelter Wilson. “Today’s proposed rule is an important step towards enabling these plans to continue offering affordable coverage while also enhancing their ability to respond to rising healthcare costs.”

“While the ACA was passed with the promise of more affordable premiums, it is now abundantly clear that the very structure of the law, with all of its costly regulations, led to higher and higher insurance premiums,” said Centers for Medicare & Medicaid Services Administrator Seema Verma. “This proposed rule follows through on the President’s strong commitment to deliver more affordable health coverage options, which is particularly important today as employers – especially small ones – struggle to maintain coverage for their employees in the midst of the COVID-19 pandemic.”

Based on the feedback received in response to the Feb. 25, 2019, request for information, the Departments are issuing a proposed rule that would provide greater flexibility for grandfathered group health coverage in two ways. First, the proposed rule would clarify that grandfathered group health coverage that is a high-deductible health plan (HDHP) may increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain their status as an HDHP without losing grandfather status. This change would ensure that participants and beneficiaries enrolled in that coverage remain eligible to contribute to a health savings account. Second, the proposed rule provides an alternative method of measuring permitted increases in fixed-amount cost sharing that would allow plans and issuers to better account for changes in the costs of health coverage over time. The Departments are issuing the proposed rules with a request for public comment by Aug. 14, 2020.

EBSA’s mission is to assure the security of the retirement, health and other workplace related benefits of America’s workers and their families. EBSA accomplishes this by developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries and service providers; and vigorously enforcing the law.

The mission of the Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.