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This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group.

The Patient Protection and Affordable Care Act ("PPACA" or the "Act") is by far the most wide-reaching new law governing employee benefits since the Employee Retirement Income Security Act ("ERISA") was passed in 1974. During the legislative process that led to passage of the sweeping health care reform legislation, it was proposed that plans already in existence on the date of passage be "grandfathered," or exempted, from the Act’s requirements. The concept of "grandfathering" is included in the Act; however, grandfathered plans are only exempt from some of the Act’s requirements. This article briefly discusses the meaning and advantages of grandfathered status and the recent interim federal regulations governing the maintenance of grandfathered status.

What is a grandfathered plan under PPACA?
A grandfathered plan is a health plan that was in existence on the date PPACA was passed – March 23, 2010. Under recently issued interim federal regulations, a plan must have "continuously covered someone since March 23, 2010" in order to be grandfathered.

What are the benefits to an employer of having a grandfathered health plan?

  1. Grandfathered plans are exempt from some, but not all, of PPACA’s requirements. For example, grandfathered plans are exempt from:  the Act’s mandate for plans to offer certain free preventive health services;
  2. The extension of rules prohibiting discrimination in favor of highly compensated employees to insured plans;
  3. The establishment of an external review process for benefit claim appeals;
  4. The prohibition against pre-authorization requirements for OB/GYN and emergency services;
  5. New Department of Health and Human Services ("HHS") reporting requirements regarding plan efforts to improve participant health, safety and wellness;
  6. New HHS reporting requirements regarding claim payment policies, enrollment/disenrollment, claim denials and cost sharing; and
  7. Certain cost-sharing restrictions. In addition, grandfathered plans have delayed compliance deadlines for several of the Act’s requirements (e.g., restrictions on annual benefit limits). 

Is it possible to lose grandfathered plan status?

Although a health plan can avoid having to comply with a number of PPACA requirements by maintaining grandfathered status, that status can be lost.  On June 11, 2010, the Internal Revenue Service, HHS and the Department of Labor jointly issued "interim final rules" outlining the ways in which a grandfathered plan can lose its status.  These regulations are extremely restrictive and are likely to trigger significant "pushback" from the employer community.  It is entirely possible that the interim rules will be overhauled before being issued in final form.  However, for present purposes, the interim rules are the only formal guidance available on this point.Continue Reading The Advantages of Having “Grandfathered” Health Plan Status Under PPACA (And How to Lose That Status)

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group.

The Patient Protection and Affordable Care Act ("PPACA" or the "Act") (pdf), commonly referred to as the "health care reform law," is nearly 900 pages long and imposes a multitude of new requirements on employers and their group health plans. Yet, despite its length, the Act leaves many basic questions regarding its requirements unanswered. For example, employers that seek to comply with the Act’s requirement regarding the provision of unpaid breaks for mothers to express breast milk for children up to one year of age do not yet know how many breaks must be provided per day or how long the breaks must be. Similarly, group health plans that are "grandfathered," and therefore exempt from certain of the Act’s requirements, do not yet know what types of plan amendments jeopardize grandfathered status. Important questions like these will likely be addressed over the course of the next several months, and years, in federal regulations. In May 2010, federal agencies issued the first wave of "interim" regulations under the Act.

Interim Final Rules Relating to Dependent Coverage of Children to Age 26 The Act requires all group health plans, regardless of grandfathered status, to extend dependent coverage to children until they reach age 26. This requirement goes into effect for plan years beginning on or after September 23, 2010 (i.e. January 1, 2011 for calendar year plans). Grandfathered plans may exclude an employee’s child who is over the age of 19 if he has other employer-provided coverage available – other than through one of the child’s parents. However, this limited exclusion does not apply to non-grandfathered plans and the exclusion will be eliminated altogether in 2014.

On May 10, 2010, the Internal Revenue Service, Department of Labor and Department of Health and Human Services jointly issued "interim final regulations (pdf)" governing the extension of dependent coverage. The regulations expressly prohibit group health plans from denying or restricting coverage to dependents under the age of 26 on the basis of residency, student status, employment status or financial dependency. The regulations also clarify that the extension of coverage does not apply to the grandchild of an employee.

Although plans may charge an employee more for coverage as the number of his or her covered dependents increase, the regulations prohibits plans from varying the terms of dependent coverage based on age (unless the dependent is 26 or older). In other words, a plan may not charge more to cover a 25-year old dependent than it does a 5-year old. Similarly, older dependents cannot be offered fewer plan options than younger dependents.

Under the regulations, dependents under the age of 26 who previously lost coverage or who were denied coverage due to their age must be given an opportunity to enroll in the plan. The enrollment opportunity must begin no later that the plan’s first plan year beginning on or after September 23, 2010 and must last at least thirty days. In addition, a written notice of this opportunity must be provided to the dependent or to the employee-parent. It may be included as part of other enrollment materials; however, the notice must be prominent.

Interim Final Rules Relating to PPACA’s Early Retirement Reinsurance Program The Act also created a temporary reinsurance program for employer health plans (insured and self-funded) that provide coverage for eligible early retirees between the ages of 55 and 64.Continue Reading Federal Agencies Issue First Wave of Health Care Reform Regulations

On February 18, 2010, the Equal Employment Opportunity Commission (EEOC) published a Notice of Proposed Rulemaking (NPRM) addressing the meaning of the “reasonable factors other than age” defense under the Age Discrimination in Employment Act (ADEA). The ADEA prohibits employers from discriminating against employees or job applicants based upon their age, but protects only those employees or applicants who are 40 years or older. In addition, the ADEA provides employers with statutory defenses, which include provisions for a “bona fide occupational qualification" defense and a “reasonable factors other than age” defense.

The “reasonable factors other than age” (RFOA) defense precludes liability for actions otherwise prohibited under the ADEA so long as the employment decision is based upon reasonable factors other than age. The EEOC’s NPRM takes into consideration two relatively recent United States Supreme Court cases, Smith v. City of Jackson and Meacham v. Knolls Atomic Power Laboratories, which each evaluated disparate impact claims under the ADEA. Disparate impact claims involve the allegation that an employer’s practice, although neutral on its face, has a discriminatory impact on a protected class – under the ADEA, workers aged 40 years or more. 

Specifically, and with the Supreme Court’s Smith and Meacham holdings in mind, the EEOC proposes to revise the federal regulations to illustrate that under the RFOA defense, the evaluation of an employer’s practice “turns on the facts and circumstances of each particular situation and whether the employer acted prudently in light of those facts.” Thus, the EEOC’s proposed approach attempts to balance employers’ rights to make reasonable business decisions with the ADEA’s goal of protecting older workers from facially neutral employment practices that disparately impact their employment. In addition, the proposed amendments provide guidance as to the factors that will be considered in evaluating an employer’s facially neutral practice under the ADEA.Continue Reading EEOC Issues Proposed Regulations Defining Employers’ Affirmative Defense Under ADEA

The ADA Amendments Act re-wrote the definition of disability so that it will likely include obesity-related health conditions and perhaps obesity itself as a protected disability. Before the ADA Amendments, being overweight and even obese was not generally considered a "disability". For example in EEOC v. Watkins Motor Lines, Inc., a court determined that …

The ADAAA was effective January 1, 2009 requiring employers to focus their approach to disability accommodation. The Job Accommodation Network (JAN) of the Office of Disability Employment Policy recently published a compliance resource identifying four Practical Tips which can be expanded upon as follows:

Review Job Descriptions, Qualification Standards and Accommodation Procedures

Developing job descriptions is…

Human Resource Professionals face a demanding legal compliance year in 2009. The following five items should be added to your “To Do” list for the first quarter of ’09:

ADA Amendments Act Compliance (effective 1/1/2009):  The amendments greatly expand the definition of disability refocusing compliance on determining whether the employee is “qualified” and evaluating reasonable…