The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued new guidance in the form of frequently asked questions (FAQs) regarding the Affordable Care Act’s implementation. Specifically, this set of FAQs, which is the fourth to date, addresses three questions pertaining to grandfathered health plans.

According to the guidance, to comply with regulations requiring grandfathered group health plans to disclose to participants or beneficiaries the belief that it is a grandfathered plan or risk losing its “grandfathered” status, must include the model disclosure language (doc) provided in the regulations or a similar statement whenever it issues a summary of plan benefits. Such summaries are usually provided upon initial eligibility to receive benefits under the plan, during an open enrollment period, or upon other opportunities to enroll in, renew, or change coverage. The agency notes that a plan or issuer is not required to send the disclosure notice with every communication, such as an explanation of benefits (EOB), with participants or beneficiaries, although it “encourages” plan sponsors and issuers to identify other communications in which disclosures would be appropriate.

In response to a second question, the agency explained that an insurance policy existing on March 23, 2010 that permits a policy holder to opt for a reduced premium in exchange for higher cost sharing would still be eligible for grandfathered status, even though the increase in cost sharing would exceed the limits permitted by the grandfather rule, and the policy would apply after March 23, 2010. As stated in the FAQs, so long as the policy holder had that option available to him or her on March 23 under the insurance policy, that option could be exercised after that date without impacting the plan’s grandfathered status.

Finally, the FAQs describe a scenario in which an employer has maintained a plan since before the Affordable Care Act took effect that reimburses expenses, up to a specified lifetime dollar limit, for special treatment and therapy for eligible employees’ children with physical, mental, or developmental disabilities. This plan is separate from the employer’s primary medical plan or plans, which do not cover such treatments or therapy. Employees are not required to participate in the employer’s primary plan or plans in order to participant in this separate benefits plan. The FAQs explain that it is a reasonable good faith interpretation under the Affordable Care Act for a plan sponsor to take the position that such a plan would not violate the Affordable Care Act’s lifetime dollar limit prohibition for “essential health benefits.” The agency notes, however, that the regulations defining “essential health benefits” may differ from reasonable interpretations used before the regulations are issued.

This entry was written by Ilyse Schuman.

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