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Special 'Grandfathered' Rules for Collectively Bargained Plans
 

By Susan M. Nash, Amy M. Gordon, Jamie A. Weyeneth and Elizabeth A. Savard, of McDermott Will & Emery LLP  6/18/2010
 

Long-awaited guidance defining what is a “grandfathered health plan” under health care reform was issued in the form of interim final rules by the U.S. departments of the Treasury, Labor, and Health and Human Services and published in the Federal Register on June 17, 2010. (For an overview of the regulations, see the HR News report "Rules Would Restrict Employer Changes to Health Care Plans.")

The regulations carve out a broader exemption from many of the new health care reform mandates and restrictions for insured health care plans subject to collective bargaining agreements, so long as these plans existed when the health care reform law was enacted. The regulatory provisions that relate to these union-negotiated plans are described below.

Insured health plan coverage maintained under one or more collective bargaining agreements between employee representatives and one or more employers—and ratified before the grandfather date (March 23, 2010)—is considered to be grandfathered at least until the date of termination (the “termination date”) of the final collective bargaining agreement relating to the coverage that was in effect on the grandfather date.

A coverage amendment made to conform to a requirement added by the health care reform law is not treated as a termination of the collective bargaining agreement.

Unlike the normal grandfathering rules that apply to other group health plans, changing the insurance issuer during the period of a collective bargaining agreement will not cause an insured union-negotiated health plan to lose its grandfathered status.

After the termination date, the coverage remains grandfathered until it loses that status under one of the triggering situations that apply to nonunion group health plans, as described in the regulations. The determination of grandfathered status will be made by considering changes to the terms of the coverage since the grandfather date. Therefore, changes made during the period of a collective bargaining agreement could cause the plan to lose grandfathered status immediately on the termination date.

There is no special grandfathering rule for self-insured collectively bargained plans. Therefore, a self-insured plan maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers is only a grandfathered health plan to the extent that it satisfies the requirements described above and does not make any changes that result in the loss of grandfathered health plan status.

The guidance clarifies that there is no delayed effective date for health care reform requirements that apply to collectively bargained plans. Grandfathered collectively bargained health plans are subject to the same requirements as other grandfathered health plans, so changes may be required to bring a collectively bargained health plan into compliance with health care reform in the middle of a collectively bargained agreement period.

Susan M. Nash, Amy M. Gordon, Jamie A. Weyeneth and Elizabeth A. Savard are all partners with the employee benefits and pensions practice group of global law firm McDermott Will & Emery LLP. This article is excerpted from a longer analysis of the interim final rules by the authors.

© 2010 McDermott will & Emery LLP. All Rights Reserved.

This article should not be construed as legal advice

Related Articles:

Rules Would Restrict Employer Changes to Health Care Plans, HR News, June 2010

Labor Issues Impacted by Health Care Reform, SHRM Online Benefits Discipline, May 2010

Health Care Reform: Regulation Effective Dates for Collectively Bargained Plans, SHRM HR Q&As, April 2010

Stephen Miller is an online editor/manager for SHRM.

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Health Care Reform web page

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