Frequently Asked QuestionsGrandfathered health plans

1. What does it mean for a plan to be grandfathered?

2. How does grandfathering work if I offer my employees several benefit options?

3. What plans are not grandfathered?

4. What would cause a health plan to lose grandfathered status?

5. What changes will not cause a health plan to lose grandfathered status?

6. What provisions are grandfathered plans exempt from in the new law?

7. As an employee, how will I know if my plan is grandfathered?

8. Does a premium increase change a plan’s grandfathered status?

9. What are the benefits of grandfathering to an employer?

1. What does it mean for a plan to be grandfathered?

Grandfathered plans are individual or employer-sponsored plans and collectively bargained plans that were in effect on March 23, 2010, when the health care reform bill was signed. Grandfathered plans are exempt from some provisions of health care reform.

2. How does grandfathering work if I offer my employees several benefit options?

Grandfathering applies separately to each benefit package. For example, if you offer a health plan with three benefit options — options A, B, and C — and changes are made to option C that would cause option C to lose its grandfather status, options A and B will continue to be eligible for grandfather status.

3. What plans are not grandfathered?
New policies sold to individuals after March 23, 2010 are not grandfathered plans even if the products were offered in the individual market before March 23, 2010. The individual and group market provisions of the health care reform law do not apply to retiree-only, non-federal employer-sponsored plans or to excepted benefits such as dental-only and vision-only plans.

4. What would cause a health plan to lose grandfathered status?

Plans that qualified for grandfathered status can lose that designation if the employer makes any of the following changes to the plan:
  • Elimination of all benefits to diagnose or treat a particular condition.
  • Any increase in coinsurance
  • Increases in deductibles or copayment fees that exceed the cost-adjustment test established by the law
  • A decrease in the employer contribution of more than 5 percent

5. What changes will not cause a health plan to lose grandfathered status? ?

Plans will not lose grandfathered status in the following situations:

  • An insured plan changes carriers, as long as the benefits provided by the new carrier continue to satisfy grandfathering requirements.
  • Premiums change. Plans will not lose grandfathered status as long the employer contribution is not reduced by more than 5 percent.
  • Changes to increase benefits or voluntarily comply with provisions of federal and state law as long as the changes comply with the applicable grandfathering restrictions.
  • Changes to a provider network. The federal government has indicated that there may be future restrictions about changing plan provider networks.
  • General changes to a prescription drug formulary unless the changes eliminate a benefit. There may be future restrictions about what changes are allowed for grandfathered plans.
  • Most changes that accommodate mergers and acquisitions.
  • Changes in a self-insured plan’s third party administrator as long as the benefits continue to satisfy grandfathering.
  • Enrolling new hires, newly eligible employees, and family members.

6. What provisions are grandfathered plans exempt from in the new law?
Grandfathers plans are exempt from some — but not all — provisions of the health care law. They do not have to comply the following provisions:

  • Elimination of cost-sharing fees for preventive care
  • Nondiscrimination testing of insured plans
  • Establishing a pediatrician as a PCP (IBC plans already comply with this provision)
  • No referrals for OB/GYN services (IBC plans already comply with this provision)
  • Enhancing internal appeals and external review procedures (IBC plans already comply with this provision)
  • A requirement to provide emergency services without preauthorization and to treat them as in-network benefits (IBC already complies with this provision)

7. As an employee, how will I know if my plan is grandfathered?
The federal government requires employers or insurers to provide notice of their decision to remain a grandfathered plan to their employees or members. People who buy individual insurance should ask their insurer if their plan is grandfathered.

8. Does a premium increase change a plan’s grandfathering status?
Premium increases do not affect a plan’s grandfathered status.

9. What are the benefits of grandfathering to an employer?

Employers who receive and maintain grandfathered status can:
  • Avoid the cost of adding preventive benefits to their plans, which are estimated to increase premiums by a half of a percent.
  • Keep what is called a “discriminatory insured plan.” For example, a discriminatory plan is one that offers a richer plan design for the owner of an organization or for highly paid employees than is available for other employees.
  • Avoid the new appeals process requirements. IBC plans already comply with this provision for certain plans.
  • Avoid some of the new Health and Human Services reporting requirements.