The Affordable Care Act (ACA) was enacted in 2010, subjecting health plans to additional coverage mandates (PHSA mandates) and exempting grandfathered plans from a handful of them. In order to benefit from the exemption, many employers maintained their grandfathered plan status despite the stringent requirements to do so.

Recognizing the challenges of remaining grandfathered, President Trump issued Executive Order 13765 in 2017 to prompt HHS, DOL, and the Department of the Treasury to better understand these issues and to determine how to assist such plans in preserving the grandfather status to the benefit of plan participants, employers and others. As a result, they released proposed rules in July 2020 and recently finalized the rules without substantive change.

The final rules give employers with grandfathered health plans more latitude in terms of increasing cost-sharing, applicable beginning on June 15, 2021.

  • 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 enrolled in that coverage remain eligible to contribute to a health savings account.
  • 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.

The rules apply to existing grandfathered group health plans only, i.e., the rules do not permit a non-grandfathered plan to become grandfathered. Employers with grandfathered plans should consider these new accommodations when evaluating plan changes, e.g., at renewal, for an effective date on or after June 15, 2021.

Our bulletin below contains additional information on the final rule and an overview on grandfathered plan status requirements.

Download Bulletin

If you have questions or need help, please contact one of our benefit consultants.