DOL Challenging Grandfathered Status

[mal]

A self-funded plan is under audit from DOL. The investigator alleges the plan lost grandfathered status a decade ago when switching networks. The rationale is that the schedule of benefits under the old network arrangement offered an incentive for participants to seek care from certain high-quality providers. In other words, the copayment for office visits for certain specialty physicians has always been $30, but under the old network agreement, participants benefitted from a $15 copayment when using certain highly-qualified providers. This program was proprietary and designed to ensure participants were receiving the highest level of care for certain conditions. The incentive program stopped when a network change was made and participants could no longer benefit from a lower copay when using the specialty network. The DOL argues this was a change in cost-sharing that cost the plan its grandfathered status. However, the plan had no access to the specialty program when the network change was made. Any input is appreciated. 

[acm_acm]

It's been a while since I dealt with a GF plan, but I seem to remember there is an allowance for increasing co-pays and deductible amounts (but not co-insurance %s).  It's tied to inflation with an anchor pretty far back in the past now.  That might help, but I'm not sure whether the change in the network itself is an issue or not.

[Peter Gulia]

I have not advised anyone about whether a health plan is grandfathered, and I don’t know the three agencies’ rule (attached below).

If the employer is confident that the correct interpretation of the statute supports the employer’s position and the employer has the aptitude, resources, and patience to litigate, a Federal court no longer is bound by precedent to defer to the Labor department’s interpretations, even those made in an Administrative Procedure Act rule. But recognize that courts often voluntarily defer to an executive agency’s interpretations. That has often been so for questions in employee-benefits law.

This is not advice to anyone.

grandfather group health plans 2020-27498.pdf