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

WASHINGTON, DC – The U.S. Departments of Labor, Health and Human Services, and Treasury today announced a final rule that amends 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 grandfathered group health plans and health insurance coverage that existed as of the law’s enactment are subject to some of the ACA’s requirements, such as the prohibition on preexisting condition exclusions, but are exempt from certain other requirements.

On January 20, 2017, the President signed an Executive Order directing the Departments to mitigate fiscal burdens of the ACA. Consistent with this direction, this final rule provides greater flexibility for grandfathered group health coverage. First, the rule clarifies 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 its status as an HDHP without losing grandfather status. This change ensures that participants and beneficiaries enrolled in that coverage remain eligible to contribute to a health savings account. Second, the final rule provides an alternative method of measuring permitted increases in fixed-amount cost sharing that allows plans and issuers to better account for changes in the costs of health coverage over time. 

“This final rule promotes choice and competition in health coverage,” said U.S. Secretary of Labor Eugene Scalia. “The flexibility the final rule provides allows employers to continue to provide American workers with the health coverage that they prefer during this critical time.”

“Every American deserves access to affordable options for financing their healthcare, and throughout his time in office, President Trump has protected these options and expanded them,” said U.S. Secretary of Health and Human Services Alex Azar. “This final rule helps provide Americans with access to affordable insurance from employers and unions by ensuring flexibility to adjust these plans in changing circumstances.”

“Ensuring consumer choice and affordability in healthcare continues to be a priority for President Trump,” said Secretary of Treasury Steven T. Mnuchin. “This final rule provides American employers with the regulatory clarity and flexibility to safeguard employee access to quality, affordable healthcare.”

“Today’s final rule equips many employers with an important tool to respond to rising healthcare costs,” said Acting Assistant Secretary for the Department of Labor’s Employee Benefits Security Administration (EBSA) Jeanne Klinefelter Wilson. “Employers are now better positioned to continue to offer affordable healthcare options that best meet their employees’ needs.”

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.