Frequently Asked QuestionsGrandfathered health plans
1. What does it mean for a plan to be grandfathered?
2. What plans are not grandfathered?
3. What would cause a health plan to lose grandfathered status?
4. What changes will not cause a health plan to lose grandfathered status?
5. What provisions are grandfathered plans exempt from in the new law?
6. What provisions of the Patient Protection and Affordable Care Act apply to all plans, even those that are grandfathered?
7. As an employee, how will I know if my plan is grandfathered?
8. Does a premium increase change a plan’s grandfathering 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 coverage, fully insured or self-funded, including collectively bargained plans, in which an individual was enrolled on March 23, 2010, when the health care reform bill was signed. Grandfathered plans are exempt from some provisions of health care reform.
- Grandfathering applies separately to each benefit package. For example, if an employer offers 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.
- Generally, all collectively bargained plans must comply with the same health care reform provisions applicable to other grandfathered plans. The major exception is that insured plans governed by a collective bargaining agreement ratified prior to March 23, 2010 can make changes to their benefits and/or cost sharing and not immediately lose grandfathering. The loss of grandfathering is, instead, postponed until the end of the current collective bargaining agreement. For example, a collectively bargained, insured plan can increase co-insurance and remain grandfathered until the end of the collective bargaining agreement. By way of contrast, however, self-insured plans governed by a collective bargaining agreement ratified prior to March 23, 2010 that increase co-insurance will immediately lose grandfathering.
2. 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.
- Insured group plans that changed carrier, policy, certificate or contract between September 23, 2010 and November 16, 2010.
3. What would cause a health plan to lose grandfathered status?
The following actions would result in loss of grandfathered status:
- Change in insurance carrier, policy, certificate or contact, if the change occurred between September 23, 2010 and November 16, 2010 as long as the benefits provided by the new carrier continue to satisfy grandfathering requirements;
- Elimination of all benefits to diagnose or treat a particular condition;
- Any increase in coinsurance;
- Increase in deductibles or copayments subject to the cost-adjustment test established by the reform law;
- A decrease in employer contribution of more than 5 percent.
4. What changes will not cause a health plan to lose grandfathered status?
The following changes will not result in a loss of grandfathered status:
- An insured plan can retain its grandfather status if it changes its carrier, as long as the benefits provided by the new carrier continue to satisfy grandfathering requirements, and the change of carriers did not occur between September 23 and November 16, 2010.
- Changes to premium (as long as there is not a more than 5 percent reduction in the percentage of the employer contribution);
- Changes to increase benefits, or voluntarily comply with provisions of federal and state law as long as changes comply with the applicable grandfathering restrictions;
- Changes to a provider network (please note that the federal government has indicated there may be future restrictions here);
- Generally, changes to a prescription drug formulary unless the changes eliminate a benefit (please note that the federal government has indicated there may be future restrictions here);
- Generally, changes to accommodate mergers and acquisitions;
- Changes 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.
5. What provisions are grandfathered plans exempt from in the new law?
- No cost-sharing requirements for preventive care;
- Nondiscrimination testing of insured plans;
- Establishing a pediatrician as a PCP (IBC already complies with this provision);
- No referrals for OB/GYN services (IBC already complies with this provision);
- Internal appeals and an external review procedure (IBC already complies with this provision);
- Emergency services without preauthorization treated as in-network benefits (IBC already complies with this provision).
6. What provisions of the Patient Protection and Affordable Care Act apply to all plans, even those that are grandfathered?
The law requires all plans regardless of their grandfathered status to comply with the following provisions beginning on or after September 23, 2010:
- No lifetime or annual dollar limits on coverage of essential benefits for all plans;
- No rescissions of coverage except in cases of fraud or intentional misrepresentation of material facts;
- Extension of parents’ coverage to young adults under 26 years old;
- No coverage exclusions for children under 19 with pre-existing conditions.
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 changes are not taken into account when determining whether or not a plan is grandfathered.
9. What are the benefits of grandfathering to an employer?
- Grandfathering would enable an employer to avoid the cost of adding preventive benefits to their plans, which are estimated to increase premiums by a half of a percent.
- Grandfathering lets employers keep what is called a “discriminatory insured plan.” For example, a discriminatory plan would be a richer plan design for the owner of organization or for highly paid employees than the plan(s) available for other employees.
- Through grandfathering, an employer can avoid the new appeals process requirements in the reform law. IBC already complies with this provision for certain plans.
- Grandfathering also allows employers to avoid some of the new Health and Human Services Reporting requirements.
10. What if my insurance plan changed between September 23, 2010 and November 16, 2010?
- An amendment to the grandfathering regulations which became effective on November 17, 2010 allows changes in insurance carrier, policy, certificate and contract for group plans without a loss of grandfathered status as long as the benefits provided by the new carrier continue to satisfy grandfathering requirements. However, if your plan changed carriers between September 23, 2010 and November 16, your plan can not be grandfathered.
