Beware: Losing health plan grandfathered status is an administrative nightmare

Some interesting points on grandfathered status'  from HRMorning, by Jared Bilski

Employers that have managed to keep their grandfathered status until now may think they’re immune from the hassles of the ACA, but a recent DOL investigation is a good reminder that the feds are always watching for a slipup.  

Sierra Pacific Industries Health Plan was one of the few remaining grandfathered plans in existence, and they managed to keep that status for years after the ACA took effect.

But, according to a DOL investigation, the plan made some changes beginning on Jan. 1, 2013, that prevented the plan from keeping its grandfathered status and led to a relinquishing of that status in the feds’ eyes.

Those plan changes, as well as how the plan made determinations on employee health claims, violated both the ACA (specifically the provisions on preventive health services and internal claims and appeals rules) and ERISA, the DOL claimed.

‘Operating as though it were exempt’

As the DOL’s Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi said:

“The Affordable Care Act put into place standards and protections for workers covered by employee benefit plans. The Sierra Pacific plan was operating as though it was exempt from such requirements, when indeed, it was not. This settlement means that workers improperly denied health benefits will have their claims paid. Corrections made to plan procedures will also mean that all future claims are processed and paid properly.”

No premium or deductible bumps

The end result of the feds’ investigation: A lot of administrative work and changes for Sierra Pacific.

As part of the settlement, plan fiduciaries agreed to comply with the ACA requirements for non-grandfathered plans moving forward, specifically the rules for internal claims and appeals and coverage of preventive health services.

Plus, for the 2017 plan year, the company will have to forgo any increases to participant premiums, annual out-of-pocket limits, annual deductible and coinsurance percentages in effect for the 2016 plan year.

On top of all that, the company agreed to:

  • Revise plan documents and internal procedures.
  • Re-adjudicate past claims for preventive services, out-of-network emergency services, claims affected by an annual limit and pay claims in compliance with the ACA and ERISA.
  • Submit to an independent review organization claims were eligible for external review.
  • Pay claims that had been left on hold for a long time.
  • Comply with timelines for deciding claims as provided in the department’s claim regulation.

See the original article Here.


Bilski, J. (2016 October 14). Beware: losing health plan grandfathered status is an administrative nightmare. [Web blog post]. Retrieved from address

How to Avoid Penalties Under the Affordable Care Act

Original Post from

By: Lisa Nagele-Piazza

2016 is expected to be the most expensive year for businesses complying with the Affordable Care Act (ACA), said David Lindgren, senior manager of compliance and public affairs for Flexible Benefit Service Corporation, a benefit administrator headquartered in Rosemont, Ill.

It’s the first year for dealing with ACA reporting, which many employers will have to complete by the end of June, Lindgren said during a concurrent session at the Society for Human Resource Management 2016 Annual Conference & Exposition.

There are more than 30,000 pages of guidance about the law, but Lindgren said the ACA is fairly easy to comprehend. “Of course, many people would disagree with me,” he noted.

“It’s not necessarily easy to comply with the ACA, and it’s not financially inexpensive, but most of the rules aren’t overly complicated,” he said.

The federal agencies that regulate the ACA have said they intend to monitor all businesses for compliance. This may not be realistic, but employers should keep in mind that more auditing can be expected.

Lindgren identified 30 penalties associated with noncompliance and provided insight on how to avoid them.

Employers can choose to pay the penalties for noncompliance, but steep fines are often attached, he said. For example, market reform violations carry a penalty of $100 per participant per day, up to $500,000 for each violation.

Employees Must Receive Notices

Some noteworthy penalties to avoid are those associated with the failure to provide required notices to plan participants, including a written notice of patient protections.

Lindgren said sometimes employers aren’t clear about who has been designated to provide this notice. “A lot of times the insurance company thinks the employer provided it and the employer thinks the insurance company did,” he said. “So it’s important to double check who is in fact giving the notice.”

Participants must also be provided with a summary of benefits and coverage in a standardized format. Lindgren likened this format to a nutrition label on a can of soup.

A participant should be able to easily compare the benefits to other plans, such as a spouse’s plan, just as the nutrition facts for two cans of soup can be easily compared.

There is a standardized template for the summary of benefits and coverage on the Department of Labor website.

The requirement to provide a summary of benefits and coverage applies to medical plans, but not to dental or vision plans.

The summary should be distributed at the time of open enrollment and special enrollments related to qualifying events, as well as at the request of participants and when a material modification has been made to the plan.

Although there is no penalty attached for noncompliance, employers must also provide written notice about the health insurance marketplace to new hires within 14 days of their start date.

This applies even for organizations that don’t offer benefits and even to those employees who aren’t eligible for benefits, Lindgren said.

There are some exceptions. For example, if an employer isn’t subject to the Fair Labor Standards Act, then it doesn’t have to provide the marketplace notice.

Exceptions for Grandfathered Plans

Grandfathered plans aren’t subject to some of the requirements under the ACA. This includes plans purchased on or before March 23, 2010, that haven’t made certain material changes.

Lindgren noted that employers with grandfathered plans must provide written notice to participants notifying them that it is a grandfathered plan and describing what that means for participants.

If participants aren’t provided this information, the plan will lose its grandfathered status, Lindgren said.

HR Takes the Lead

Benefits compliance isn’t just a human resources issue anymore, but HR often takes the lead in compliance efforts, according to Lindgren.

However, other departments, such as finance, legal and information technology, are increasingly getting more involved.

Sneaky ways your health plan could lose grandfathered status

Original post by Jared Bilski on

Employers that have managed to hang on to their grandfathered health plans for this long will want to pay close attention to the feds’ final regs on the subject.

The trifecta of federal agencies (DOL, HHS and IRS) just released the final rules on grandfathered plan status under the ACA — as well as pre-existing conditions, exclusions, lifetime and annual limits, rescissions, claims and appeals, and dependent coverage.

Despite the length of these final rules (104 pages), there aren’t any wholesale changes that are likely to cause employers to overhaul their current compliance strategy. However, there are some important clarifications and tweaks.

Here are some key highlights of the final regs:

One plan’s status change doesn’t change all benefits packages. While a plan’s grandfathered status is lost immediately when a prohibited plan change is made (even mid-year), that status loss applies separately to each different benefits package offered. In other words, the loss of grandfathered status for a PPO plan won’t impact the status of an HDHP option.

Multi-employer plan exemption. Under the final regs, new employers can join a multi-employer plan for the express purpose of taking advantage of the plan’s grandfathered status without violating anti-abuse rules.

Treatment option changes that eliminate substantially all benefits. Another move that can cost firms a grandfathered status: Eliminating the coverage of anything that’s needed to diagnose or treat a particular condition. The agencies see this as eliminating substantially all benefits for that condition.

Here’s an example: When the treatment of a mental condition requires both drugs and counseling, and the plan eliminates the counseling option, it will lose its grandfathered status in the process.

Generic alternatives. Employers can move brand-name drugs to a higher cost-sharing tier when a generic alternative becomes available without losing its grandfathered status.

A premium reimbursement option for small employers. Under the ACA, stand-alone HRAs — as well as FSAs not offered through a Section 125 plan — are still illegal, and employers can be hit with steep penalties for non-compliance.

However, firms with fewer than 20 employees — those exempt from having to offer coverage to Medicare-eligible employees — can now integrate premium reimbursement plans with Medicare Part B or D if they offer group health coverage to workers who aren’t Medicare eligible.

Dependent coverage and geographic areas. Under the health reform law, plans are required to extend coverage to dependents up to the age of 26 if they offer healthcare coverage to employees. However, certain HMO plans had required plan participants to live within a stated geographic area, a rule that caused some dependents to lose coverage when they went away to college. Under the final rules, if a plan eliminates the coverage of a dependent under the age of 26 because that dependent no longer lives within the plan’s stated geographic area, the plan will lose its grandfathered status.

One caveat: Plans may still impose residence, financial dependence or similar coverage requirements on dependents other than children (e.g., grandchildren).

Emergency Service billing. According to the feds, plans have been abusing out-of-network providers, a practice that has ultimately resulted in excess balance billing of patients. So in an effort to curb this abuse, the final rules require plans to pay out-of-network emergency services at least the greatest of:

  • the median amount paid to network providers
  • the product of the formula that the plan generally uses for out-of-network services (e.g., Usual, Customary and Reasonable or UCR), or
  • the Medicare payment amount.

External appeals’ fees. With one exception, plans can no longer condition external reviews on the payment of a filing fee. The exception: If the plan is located in a state that expressly permits nominal filing fees — those consistent with the 2004 NAIC model. In these cases, plans may charge a fee of up to $25 per appeal — with a $75 annual per-claimant limit — if the plan also refunds fees paid for successful appeals and waives fees that would cause a financial hardship on the claimant.