About Grandfathered Benefit Plans
Many Americans are happy with their existing health insurance and do not want their coverage to change. That is why the Affordable Care Act (ACA) has regulations for “grandfathered” benefit plans. If you are enrolled in a grandfathered plan, you are not required to change plans and your plan is not required to comply with certain ACA provisions.
At a Glance
What is a grandfathered plan?
Grandfathered benefit plans are exempt from certain ACA provisions. A benefit plan is considered “grandfathered” if it was in effect on March 23, 2010.
Click on the following for more information:
- Health Insurance Terminology
- Rules Governing the Grandfathered Status
- How to Determine if Your Plan is Grandfathered
- ACA Provisions and Grandfathered Plans
- Additional Resources
Health Insurance Terminology
Before discussing the details of the grandfathered status, it will help you to understand some health insurance terminology.
Plan –There are two types of plans:
- Group plans are sold to employers and organizations.
- Individual plans are sold to individuals such as self-employed business people.
Benefit Package - These exist within a plan. For example, a group plan through your employer may allow you to purchase an HMO benefit package, rather than a PPO benefit package.
Open Enrollment – Each plan has an annual open enrollment period. Generally speaking, this is the only time you are able to change benefit packages or add dependents. Certain exceptions, such as divorce or job loss, trigger “special enrollment.”
Rules for Grandfathered Plans
ACA regulations prevent health plans from using the grandfather rule to avoid providing important consumer protections by:
- Promoting transparency by requiring a plan to disclose to consumers every time it distributes materials whether the plan believes that it is a grandfathered plan and therefore is not subject to some of the additional consumer protections of the Affordable Care Act. This allows consumers to understand the benefits of staying in a grandfathered plan or switching to a new plan. The plan must also provide contact information for enrollees to have their questions and complaints addressed.
- Revoking a plan’s grandfathered status if it forces consumers to switch to another grandfathered plan that, compared to the current plan, has less benefits or higher cost sharing as a means of avoiding new consumer protections.
- Revoking a plan’s grandfathered status if it is bought by or merges with another plan simply to avoid complying with the law.[i]
Additionally, the following changes to the benefit package subsequent to March 23, 2010 result in a loss of grandfathered status:
- Entering into a new insurance contract
- Eliminating all or substantially all of the benefits to diagnose or treat a particular condition
- Increasing a plan participant’s percentage cost-sharing requirement such as co-insurance, by any amount
- Increasing a plan participant’s percentage fixed-cost cost-sharing requirement other than co-payments such as deductibles by more than 15 percentage points plus a medical inflation percentage
- Increasing a participant’s co-payment requirement by the greater of (i) $5 increased by medical inflation or (ii) the Maximum Percentage Increase
- Decreasing the plan sponsor’s contribution rate by more than 5 percentage points
- Adding a new overall annual or lifetime limit on the dollar value of benefits
- Reducing the overall annual limit on the dollar value of benefits
- Transferring a new group of employees into a grandfathered benefit package without a bona fide employment-based reason for the transfer[ii]
Is Your Plan Grandfathered?
While a grandfathered plan is a plan that existed on March 23, 2010 and has remained unchanged, each benefit package offered in a plan is considered separately. As a result, the loss of grandfathered status for one benefit package will not affect the grandfathered status of the other packages.[iii]
Your plan sponsor is required to notify you of benefit packages that are “grandfathered” in any plan communication. The notice’s purpose is to allow you to make more informed choices during open enrollment. Contact your plan administrator to determine if your plan is grandfathered.
[i] HealthCare.gov (2010, June 14). Keeping the health plan you have: the affordable care act and “grandfathered” health plans. Retrieved from http://www.healthcare.gov/news/factsheets/keeping_the_health_plan_you_have_grandfathered.html
[ii] Foley & Lardner LLP, . (2010, June 29). Defining grandfathered plans and maintaining grandfathered status under health care reform. Retrieved from http://www.foley.com/publications/pub_detail.aspx?pubid=7250
[iii] Foley & Lardner LLP, . (2010, June 29). Defining grandfathered plans and maintaining grandfathered status under health care reform. Retrieved from http://www.foley.com/publications/pub_detail.aspx?pubid=7250