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Grandfathered Health Plans
Section 1251 of the Affordable Care Act provides that grandfathered health plans are not subject
to certain provisions of the Code, ERISA, and the PHS Act, as added by the Affordable Care
Act, for as long as they maintain their status as grandfathered health plans.
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For example,
grandfathered health plans are subject neither to the requirement to cover certain preventive
services without cost sharing under section 2713 of the PHS Act, nor to the annual limitation on
cost sharing set forth under section 2707(b) of the PHS Act. If a plan or coverage were to lose its
grandfathered status, it would be required to comply with both provisions, in addition to several
other requirements.
Q11: Are grandfathered health plans generally subject to the requirements under the
CAA?
Yes. The CAA does not include an exception for grandfathered health plans that is comparable to
section 1251 of the Affordable Care Act. Furthermore, section 102(d)(2) of division BB of the
CAA amended section 1251(a) of the Affordable Care Act to clarify that the new and recodified
patient protection provisions of division BB of the CAA, including those related to choice of
health care professional, apply to grandfathered health plans.
Reporting on Pha
rmacy Benefits and Drug Costs
Code section 9825, ERISA section 725, and PHS Act section 2799A-10, as added by section 204
of division BB of the CAA, include certain reporting requirements for plans and issuers. These
reporting requirements primarily relate to prescription drug expenditures, requiring that plans
and issuers submit relevant information to the Departments. This information includes general
information regarding the plan or coverage, such as the beginning and end dates of the plan year,
the number of participants, beneficiaries, or enrollees, as applicable, and each state in which the
plan or coverage is offered. Plans and issuers must also report the 50 most frequently dispensed
brand prescription drugs, and the total number of paid claims for each such drug; the 50 most
costly prescription drugs by total annual spending, and the annual amount spent by the plan or
coverage for each such drug; and the 50 prescription drugs with the greatest increase in plan
expenditures over the plan year preceding the plan year that is the subject of the report, and, for
each such drug, the change in amounts expended by the plan or coverage in each such plan year.
Additionally, plans and issuers must report, among other things, total spending by the plan or
coverage broken down by the type of costs, including hospital costs and provider and clinical
service costs, for primary care and specialty care separately; spending on prescription drugs by
the plan or coverage as well as by participants, beneficiaries, and enrollees, as applicable; and the
average monthly premiums paid by participants, beneficiaries, and enrollees and paid by
employers on behalf of participants, beneficiaries, and enrollees, as applicable. Plans and issuers
must report the impact on premiums of rebates, fees, and any other remuneration paid by drug
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For a list of the market reform provisions applicable to grandfathered health plans under title XXVII of the PHS
Act that the Affordable Care Act added or amended and that were incorporated into the Code and ERISA, visit
https://www.dol.gov/sites/default/files/ebsa/laws-an
d-regulations/laws/affordable-care-act/for-employers-and-
advisers/grandfathered-health-plans-provisions-summary-chart.pdf.