Final Rule Provides Flexibility to Grandfathered Health Plans

Author: Robert S. Teachout, XpertHR Legal Editor

December 15, 2020

Group health plans that are grandfathered under the Affordable Care Act (ACA) will find it easier to preserve their grandfather status under a final rule published today.

The rule changes, issued jointly by three federal agencies, were necessary to comply with an Executive Order requiring federal agencies to minimize the economic and regulatory burdens of the ACA by waiving, granting exemptions from or deferring or delaying implementations of provisions of the law.

Grandfathered group health plans are subject to only some of the ACA's requirements but do not have to comply with others, such as the requirement to offer recommended preventive care with no cost sharing. A plan can lose its grandfathered status if it eliminates or substantially reduces benefits or significantly increases out-of-pocket expenses.

The final rule will:

  • Permit grandfathered group health coverage that is a high-deductible health plan (HDHP) to increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain the plan's status as an HDHP without losing its grandfather status; and
  • Provide an alternative method of measuring permitted increases in fixed-amount cost sharing.

The changes ensure that participants and beneficiaries enrolled in affected plans will remain eligible to contribute to a health savings account, and will allow plans and issuers to better account for health coverage costs changes over time.

The agencies say that the final rule provide regulatory clarity and promotes choice and competition in health care coverage. "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," said Secretary of Health and Human Services Alex Azar.