Reform Q & A: Grandfathered Plans

As federal health care reform was being debated, many Americans expressed the desire to keep the health plans they currently have. In order to address this concern, the ACA has provided for “grandfathered” plans.

 

While the law requires all health plans to provide certain new benefits to consumers, it allows plans that existed on March 23, 2010 (the ACA effective date), to make routine changes without losing grandfather status. Plans lose their grandfather status only if they choose to significantly cut benefits or increase out-of-pocket spending for consumers.

 

The Departments of Health & Human Services (HHS), Labor and Treasury have issued Interim Final Rules that specify how grandfathered status will be defined and maintained. When final rulings are issued, answers to these questions may change.

 

What is a “grandfathered” plan? 
A grandfathered health plan is an existing group health plan or health insurance coverage (including coverage from the individual health insurance market) in which an individual was enrolled on March 23, 2010. That means that as long as an individual was enrolled in a particular health insurance plan on March 23, 2010, that plan has grandfathered status.

 

What insurance reforms are imposed on grandfathered plans?
Grandfathered health plans are exempt from the vast majority of the new insurance reforms. However, grandfathered plans are subject to a handful of requirements with different effective dates.

 

All grandfathered plans, currently: Grandfathered plans in both the individual and group markets must currently comply with the following reforms:

  • Development of uniform explanation of coverage documents
  • Reporting of medical loss ratio and other financial information to the secretary of Health and Human Services, and offering of premium rebates to enrollees if the plan did not meet specified medical loss ratios
  • Prohibition on lifetime limits on essential health benefits
  • Prohibition on health plan rescissions
  • Requirement to extend dependent coverage to children until the individual is 26 years old. (Prior to 2014, a grandfathered group health plan is only required to extend coverage to dependents if the individual is not eligible for employment-based health benefits.)

 

All grandfathered plans, 2014: Grandfathered plans in both the individual and group markets must comply with the following reforms beginning on or after Jan. 1, 2014:

  • Prohibition on waiting periods greater than 90 days.
  • Group market grandfathered plans, currently: Grandfathered group health plans must currently comply with the following reforms:
  • Prohibition on annual limits on essential health benefits. Prior to 2014, certain restricted annual limits can be applied
  • Prohibition on coverage exclusions for pre-existing conditions for children under age 19.

 

Group market grandfathered plans, currently: Grandfathered group health plans must currently comply with the following reforms:

  • Prohibition on annual limits on essential health benefits. Prior to 2014, certain restricted annual limits can be applied
  • Prohibition on coverage exclusions for pre-existing conditions for children under age 19.

 

Group market grandfathered plans, 2014: Grandfathered group health plans will be required to comply with the following reforms for plan years beginning on or after Jan. 1, 2014:

  • Prohibition on coverage exclusions for pre-existing health conditions.

 

Next time: What types of changes can a plan make without losing grandfathered status?

 

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Susan Peters