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New Year, New Rules – But Don’t Forget About the Old Ones

By: Kelly E. Dempsey, Esq.

The self-funded health plan industry continues to evolve every year based on new rules, guidance, and medical advancements; however, the Department of Labor (DOL) doesn’t overlook old rules either. In case you missed it, there was a case in mid-2022 that seeks to remind us that the DOL is still considering all Affordable Care Act (ACA) rules when they review complaints and perform audits. In Walsh v. Board of Trustees of Local 272 Welfare Fund and Local 272 Welfare Fund, 22-cv-592 (S.D.N.Y August 2, 2022), the DOL filed suit against a Taft-Hartley welfare plan and its trustees for alleged violations of certain amendments that the ACA made to ERISA, including the maintenance of grandfathered status.

It’s always been my personal opinion that the regulation writers, government entities, and various departments assumed that health plans would be unable to maintain grandfathered status much past 2014 based on the way the rules were written and exceptions for grandfathered plans effectively ending in 2014. I believe their thought process is that grandfathered status would end within a few years after 2010 because the plans would need to make adjustments for financial solvency and in response to the ever-changing insurance market and employee population demands.

There are many plans that continue to present themselves as grandfathered as we start 2023 and I would challenge those plans to do some self-reflection (and a large amount of math) to confirm grandfathered status has been maintained. The
Walsh case is an important example of why it’s important to review grandfathered status and confirm it has been maintained over the last 12 years. In Walsh, it was found that the plan had made changes to member out-of-pocket obligations over the course of time that caused a loss in grandfathered status and had effectively held itself out to be grandfathered for an additional 8 years in error. The plan and the DOL negotiated and reached an agreement. The plan agreed to several plan changes, to notify participants of the non-compliance, reprocess claims incurred since 2019 for participants that took action based on the notice letters, and to report to the DOL every six months for two years regarding the number of participants that sought relief under the settlement.

For those plans that still purport to be grandfathered, it’s important to be able to provide documentation that grandfathered status is maintained over the last 12 years. If you’re uncertain what changes cause a loss in grandfathered status, Phia can certainly assist with an overview of the rules. It’s also important to remember that the DOL is actively reviewing participant complaints and performing audits of all different types. One type of audit can always lead to a bigger audit – we’ve seen it happen – so make sure to continuously review your plans for compliance, including compliance with all those old rules that are still in effect.