The grandfathered plan interim final regulations have been amended to allow insured group health plans to change insurance contracts or insurers without a loss of grandfather status. A group health plan (and any health insurance coverage offered in connection with the plan) will not cease to be grandfathered merely because the plan or its sponsor enters a new insurance contract or policy, under the amendment to the regulations issued last week.

Under the original regulation, a plan could lose its grandfather status if employers changed issuers (switching from one insurance company to another,) but self-funded plans could change third-party administrators without losing grandfathered status.

The new amendment “allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, so long as the structure of the coverage doesn’t violate one of the other rules for maintaining grandfathered plan status.”

Employers that offer the same level of coverage through a new issuer can remain grandfathered as long as the change does not result in significant cost increases, a reduction in benefits or other changes in the original rule. Documentation of the plan terms must be submitted to the new insurer under the prior health coverage to determine whether a change could cause a loss of grandfather status.

This amendment applies only to changes effective on or after Nov. 15, 2010 and does not apply retroactively. The rule also states this amendment affects insured group health plans, and a change of issuers in the individual market would still result in the loss of grandfathered status.

Click here to read the amendment.