Regulatory Agencies Provide Only Limited Relief From Health Care Reform for Collectively Bargained Plans

29 June 2010 Publication

Legal News Alert: Employee Benefits

On June 14, 2010 the U.S. Departments of the Treasury, Labor, and Health and Human Services released interim final regulations providing guidance on the effective date of certain Patient Protection and Affordable Care Act (PPACA) provisions for collectively bargained plans. The PPACA provides that certain of its health insurance reform provisions shall not apply “… in the case of health insurance coverage maintained pursuant to one or more collective bargaining agreements …” “… until the date on which the last of the collective bargaining agreements relating to the coverage terminates … .” (PPACA Section 1251). Many in the employee benefits community thought that this statutory language signaled Congress’ intent to broadly exempt collectively bargained plans from the PPACA’s required changes during the terms of existing bargaining agreements. However, the newly issued interim final regulations surprisingly conclude that there is no broad-based PPACA exemption for collectively bargained plans.

Self-Insured Collectively Bargained Plans

Self-funded group health plans that are maintained pursuant to a collective bargaining agreement are not entitled to any special treatment under the PPACA. According to the new regulations, collectively bargained self-funded group health plans are fully subject to the new law at the same time and in the same manner as all self-funded group health plans.

Insured Collectively Bargained Plans

Insured group health plans that are maintained pursuant to a collective bargaining agreement that was in effect on March 23, 2010, will be treated as “grandfathered” plans under the PPACA at least until the collective bargaining agreement terminates. The new regulations provide that collectively bargained insured group health plans (as of March 23, 2010) will continue to be treated as grandfathered plans during the term of the collectively bargaining agreement that was in effect on March 23, 2010. This grandfathered status will continue even if changes (e.g., switching to a new carrier) that would ordinarily destroy grandfathered status are made to the collectively bargained insured group health plan. Once this underlying collective bargaining agreement (that was in effect on March 23, 2010) terminates, this special grandfathered status protection will end and the collectively bargained insured health plan will only be treated as a grandfathered plan if it has otherwise met the general PPACA grandfathered rules since March 23, 2010.

What Is a Grandfathered Plan?

A grandfathered health plan is a plan that provides coverage to at least one participant and was in existence on March 23, 2010. Grandfathered plans escape some PPACA requirements such as the mandate to provide first-dollar coverage for preventative health services, although they must comply with others such as the exclusion on lifetime limits and the provision of adult child coverage until age 26. In order to maintain grandfathered status, the regulations generally prohibit a plan from taking actions that would significantly increase the cost of current coverage for a participant and, in the case of insured plans, force the participant to switch carriers. For more information about grandfathered plans, see our alert entitled “Defining Grandfathered Plans and Maintaining Grandfathered Status Under Health Care Reform” at

Renegotiating Collectively Bargained Plans

While clearly acknowledging the unique circumstances under which these plans operate, and the intense discussions and negotiations they involve, the agencies issuing the new regulations have concluded that Congress did not give them the authority to broadly exempt collectively bargained health plans from PPACA requirements. Management and labor groups may now need to work through how to make required PPACA changes right in the middle, or even near the beginning, of a collectively bargaining agreement period.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues.

If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following individuals:

Katherine L. Aizawa
San Francisco, California

Christopher S. Berry
Madison, Wisconsin

Lloyd J. Dickinson
Milwaukee, Wisconsin

Gregg H. Dooge
Milwaukee, Wisconsin

Robert E. Goldstein
San Diego, California

Andrew D. Gregor
San Diego, California

Samuel F. Hoffman
San Diego, California

Harvey A. Kurtz
Milwaukee, Wisconsin

Belinda S. Morgan
Chicago, Illinois

Isaac J. Morris
Milwaukee, Wisconsin

Greg W. Renz
Milwaukee, Wisconsin

Leigh C. Riley
Milwaukee, Wisconsin

Michael H. Woolever
Chicago, Illinois

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