A grandfathered plan is an individual health insurance plan purchased on or before March 23, 2010. These plans were sold by the insurance companies, agents, or brokers, and were not sold through the marketplace. These plans are exempted from many consumer protections essential under the Affordable Care Act. The Grandfathered status applies to both the individual health plan and group health plans purchased before the enactment of the ACA. The grandfathered status for the group plans depends on the date of creation and not on the date on which the employee joins the plan. Health plans may lose grandfathered status if significant changes are made in the plans that reduce benefits or increase costs to consumers.
Individuals with grandfathered plans are allowed to include their dependents to their plans, and employers with grandfathered plans can include new employees to their plan. However, these plans are not available for purchase since 2010, unless an employer with a grandfathered plan purchases a similar plan issued by a different carrier. Grandfathered plans despite not complying with the ACA’s regulations are still considered to offer minimum essential coverage. Since grandfathered plans have minimum essential coverage so individuals having these plans are allowed to enroll in an ACA-complaint plan in the individual market. A large employer providing grandfathered plan is believed to be in compliance with the employer mandate as long as the coverage provides minimum value and is affordable for the employees.
Retaining Grandfathered Status
To retain Grandfathered status, a health plan cannot make significant changes resulting in a reduction in benefits or an increase in cost-sharing for enrollees. While considering the cost of the enrollee, an increase in the premium price is not taken into consideration. However, to retain the grandfathered status employers cannot decrease the percentage of their share of the premiums by more than 5% points. If the employer drops their share of the premiums down that 5% points, the plan would lose its grandfathered status. Besides these, the plan will also lose its grandfathered status, if the plan cuts benefits, increases the percentage of coinsurance, increases copays or deductibles beyond an allowable amount, or impose a lower limit to the total amount of the plan.
The federal regulations have clarified about the aspects that would not cause a health plan to lose its grandfathered status, Plans are allowed to include benefits, increase premiums, slightly increase cost-sharing, and employers can purchase coverage from a different insurance company while retaining their grandfathered plan status. However, this only applies to the new plan that doesn’t result in a decrease in benefits or a significant cost-sharing increase for enrollees.
Though ACA regulations are not applicable to grandfathered plans and thus these plans are not required to cover the following benefits:
- Preventive care for free
- Essential health benefits
- Guarantee a member’s right to appeal a coverage or claims decision
- To increase the premium price, the grandfathered plans have to comply with the ACA’s rate review
- Cover pre-existing conditions in the individual market
Grandfathered Plans Coverage
Though grandfathered plans are not required to cover essential health benefits, and they cannot imply lifetime benefit caps on essential health benefits. Grandfathered plans need to fulfill the following:
- Not arbitrarily cancel coverage
- Dependents are allowed to remain on the plan until age 26.
- Enrollees are provided with a summary of coverage and benefits.
- It cannot imply lifetime benefit caps on any essential health benefits.
Do Grandfathered Plans need to be Effective?
Though grandfathered plans are allowed to remain indefinitely effective, there is nothing that says these are required to do so. Employers and individuals can switch to ACA-compliant coverage, and insurers can choose to terminate Grandfathered plans. Grandfathered plans become less attractive to insurers over time, especially in the individual market where new enrollees were unable to join grandfathered plans since 2010.
When the Grandfathered Plan is Terminated
If Grandfathered plan is terminated by the employer or their health insurer, enrollees should rest assured that they have an option to enroll in a new plan. If an employer terminates a grandfathered plan, then they replace it with a new plan.