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Grandfathered Health Plans

Grandfathered Plans Can Avoid Health Reform Mandates

The Affordable Care Act allows a group health plan that was created or an individual health insurance policy that was purchased on or before March 23, 2010. Grandfathered plans are exempted from many changes required under the Affordable Care Act. Plans or policies may lose their “grandfathered” status if they make certain significant changes that reduce benefits or increase costs to consumers. A health plan must disclose in its plan materials whether it considers itself to be a grandfathered plan and must also advise consumers how to contact the U.S. Department of Labor or the U.S. Department of Health and Human Services with questions. (Note: If you are in a group health plan, the date you joined may not reflect the date the plan was created. New employees and new family members may be added to grandfathered group plans after March 23, 2010).

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Grandfathered plans will be allowed to avoid the following mandates:

  • • fair health insurance premiums
  • • guaranteed availability
  • • guaranteed renewability
  • • nondiscrimination based on health status factor
  • • comprehensive health insurance coverage
  • • coverage for clinical trials
  • • coverage of preventive health services
  • • transparency in coverage
  • • nondiscrimination for insured plans
  • • quality of care reporting
  • • new internal claims and appeals processes and external review requirements
  • • patient protections

Grandfathered plans will be required to comply with the following mandates:

  • • Prohibition on pre-existing condition exclusions for children under age 19
  • • Total prohibition on pre-existing conditions exclusions beginning in 2014
  • • Restrictions on excessive waiting periods
  • • Elimination of lifetime maximum limits on essential health benefits
  • • Restrictions of annual maximum limits on essential health benefits
  • • Prohibition on retroactive coverage rescissions
  • • Dependent coverage age extension
  • • Four-page summary of benefits
  • • Medical loss ratio requirements

Restricted Actions

The regulations describe several restricted actions that, if taken by a grandfathered health plan, will cause the plan to lose its grandfathered status. The plan would then be required to comply with all provisions of healthcare reform. All of the following are restricted actions for grandfathered health plans:

  • • The elimination of all, or substantially all, benefits to diagnose or treat a particular condition
  • • Increases to percentage cost sharing (ex: increases in coinsurance for employees)
  • • Certain increases in fixed-amount cost sharing
  • • Decreasing employer contributions
  • • Changes to annual or lifetime limits when the plan did not impose an overall limit on March 23, 2010

Permissible Actions

While grandfathered plans are limited in their actions due to the regulations, they still can take several permissible actions, as clarified by the Department of Health and Human Services. The following are permissible actions that grandfathered plans may take with no consequences to their grandfathered status:

  • • Entering into a new insurance contract or changing insurers,
  • • Changing stop-loss coverage,
  • • Eliminating coverage for a segment of the workforce, and
  • • Adding benefit packages or options.

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