Health Care Reform: New Grandfathering Rules and 1099 Reporting

On November 15, the Treasury Department, Department of Health and Human Services, and the Department of Labor issued an amendment revising the interim final "grandfather" rules released in June. The revised rules will allow group plans to change carriers without losing their grandfathered status.
Also on November 15, Senate Finance Chairman Max Baucus (D-MT) introduced legislation that would repeal recently-expanded reporting requirements. The Small Business Paperwork Relief Act (not yet numbered) would repeal a key revenue raiser used in the Patient Protection and Affordable Care Act (PPACA) and the Small Business Jobs Act which requires businesses and landlords to file Form 1099 reports to the Internal Revenue Service for any business expenses in excess of $600.
Grandfathered Rules -
In June, the three agencies issued the "grandfather" interim final rules that severely limited changes that can be made to plans that existed before enactment of the PPACA in order to be exempt from many of the law's new requirements.
Previously, one of the ways an employer group health plan could lose its grandfather status was if the employer changed insurance companies. The amendment now allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, provided the structure of the coverage doesn't violate one of the other rules for maintaining grandfathered plan status. See Benefit Partners blog on our website for the details on Grandfathered Plans.
The amendment affects only insured group health plans. A change of issuers in the individual market would still result in the loss of grandfathered status.
1099 Reporting –
The PPACA includes a provision that expands the 1099 reporting requirement to all businesses for business expenses in excess of $600. The Small Business Jobs Act bill signed into law on September 27 increases penalties for failure to file Form 1099 reports with the IRS and adds individuals receiving rental income from real estate to the expanded Form 1099 reporting requirements.
Efforts to repeal or modify the expanded 1099 reporting requirement began in late July by both parties in both chambers. These previous legislative initiatives failed primarily due to the lack of consensus on how to pay for the repeal. The Form 1099 requirement would have raised $17 billion for the health care bill and $2.5 billion over 10 years for the small business bill. New offsets will be sought to pay for the repeal.