Grandfathered Health Plans
What Is a Grandfathered Health Plan?
The Affordable Care Act created a new set of minimum requirements for health insurance plans. These minimum requirements are known as the Essential Health Benefits a plan must have in order to be sold in the United States. However, there were exemptions given to health plans that were in existence on or prior to March 23, 2010. Plans that have these exemptions on meeting the requirements of the Affordable Care Act are known as "grandfathered health plans."
Retiree health plans (i.e. plans whose membership are limited to retired employees of the sponsor with no active employees enrolled in the plan) are also exempt to the requirements of the Affordable Care Act. Dental plans, Medicare Supplement plans, and Long Term Care plans are also exempted from the requirements of the Affordable Care Act.
If My Plan Is Grandfathered, Are All Benefits Grandfathered?
Not necessarily. Determinations are made at the benefit level within a plan, not at the plan level. This means that some benefits within your health plan may be grandfathered while others may not and, as a consequence, meet the new standards of the Affordable Care Act. For example, even grandfathered health plans must comply with the following benefits regardless of their benefits at the time of grandfathering:
- Must not apply lifetime dollar limits to key health benefits
- Cannot cancel your coverage because of an honest mistake made on your insurance application
- Must provide dependent coverage to your children until age 26
Can I Stay In My Current Health Plan?
Many consumers are concerned that there current health plan may be discontinued. The first step in determining whether you can stay in your plan is to contact your insurer and ask if your plan is grandfathered. If it is grandfathered, ask if the insurer expects the plan to remain grandfathered in 2014.
How Long Will My Plan Stay Grandfathered?
There is no clear answer to that question. Since grandfathered status is determined by the plan’s adherence to government regulations, the plan’s grandfathered status can be lost due to noncompliance. There is no official limit to how long a plan may remain grandfathered. The chart to the right illustrates a decrease in employees covered by grandfathered health plans between 2011 and 2012.
How Can A Plan Lose Its Grandfathered Status?
A health plan can lose its grandfather status for a variety of reasons. For example, grandfathered status will be lost if the insurance company:
- Significantly increases beneficiary cost sharing (e.g. copayments, coinsurance, deductible) beyond the levels used by the plan on March 23, 2010
- Cannot add an annual limit on benefits or reduce an existing annual limit on benefits
- Eliminates substantially all benefits used in the diagnosis and treatment of a particular medical condition (e.g. muscular dystrophy)
- Forces consumers to switch to another grandfathered plan that has lower benefits than the existing grandfathered plan
- Merges with, or is bought by, another plan just so the plans can avoid the requirements of the Affordable Care Act
- Switches to a new insurer
- Decreases its contribution rate to the plan more than 5% below the sponsor’s contribution rate on March 23, 2010
What Happens If My Plan Loses “Grandfathered” Status?
Can I Enroll in a Grandfathered Health Plan?
New enrollment in a grandfathered group health plan is limited to family members of existing enrollees and new employees of the grandfathered plan’s sponsor. New enrollment in a grandfathered individual health plan is limited to family members of existing enrollees.