When the Affordable Care Act was passed in 2010, it allowed certain plans that were already in existence to be considered grandfathered. These plans are exempt from many of the changes that are required under the Act. Determining if any employee plans are grandfathered is highly important given the pending January 2016 deadline to provide health insurance coverage for businesses with 50–99 employees.
What Qualifies as a Grandfathered Plan?
Under the provisions of the ACA, a plan is considered grandfathered if it existed on or before March 23, 2010, and continuously covered at least one employee since that time, according to the U.S. Department of Health & Human Services. This date coincides with the date that the Patient Protection and Affordable Care Act was signed into law. If your current health insurance plan was enacted prior to this date, the following consumer protections do not apply to your coverage:
- Free preventive care coverage.
- Guaranteed right to appeal a coverage decision to deny a claim.
- Protections for a consumer’s (employee’s) choice of health care providers and access to emergency care.
- Accountability regarding any rate reviews that result in excessive premium increases.
This means that if you want to keep offering your employees the same plan that you have offered since before March 23, 2010, you do not need to worry if it does not fulfill the requirements above, as newer plans must.
Do Grandfathered Plans Need to Comply With ACA Mandates?
Even if your plan is considered grandfathered, it must still provide the following consumer protections, according to the Affordable Care Act:
- A prohibition against the application of an annual or lifetime dollar limit toward key health benefits that are deemed essential.
- A prohibition against the cancellation of coverage solely on the basis that an honest mistake was made on the insurance application.
- Guarantee of dependent coverage for the adult children of an employee until age 26.
If you increase benefits to comply with new regulations but do not increase costs to employees, you can maintain your grandfathered status.
Losing Your Grandfathered Status Under the ACA
Your grandfathered status can help you maintain consistent coverage for employees at a price that they’re used to. You are also allowed to move to a comparable plan from a different carrier if it allows you to keep costs and benefits consistent. On June 17, 2010 and November 17, 2010, the Departments of Health and Human Services, Labor and the Treasury issued regulations on what will cause a plan to lose its grandfathered status. The overarching change is that your plan will lose its grandfather status if you enter into a new policy that reduces benefits or increases the cost of coverage to your employees. Once your grandfathered status is lost, your plan will need to comply with all ACA mandates or you can face an Employer Shared Responsibility payment.
It is best to stay informed of the provisions of the Act as they relate to grandfathered plans and keep them in mind as you consider your plan choices. There always exists a potential for changes in the future to the grandfather regulations that may affect your plan’s status.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
Donald Parker has more than 20 years of experience in the insurance and financial services industry with several Fortune 500 companies. He holds a life, accident and health insurance license in Virginia. He has been FINRA Series 7, 24, 63 and 65 registered and specializes in the areas of long-term care, senior needs, retirement and employee benefit planning.