Though the term ‘grandfathered’ is commonly used when discussing group health insurance under the Affordable Care Act (ACA), many people don’t know what it means. ‘Grandfathered’ is used to describe group health plans that are exempt from many of the ACA’s provisions. These exemptions were included in the ACA so groups that were happy with their health plans could keep them.
To be eligible for grandfathered status, a group health plan must have been in existence on March 23, 2010, which is the day the ACA became law. Plans starting after this date do not qualify for grandfathered status. Additionally, plans that have made significant changes since March 23, 2010 may lose their grandfathered status. For example, increased cost-sharing requirements, such as copayments and deductibles, decreased employer contributions, elimination of benefits, and changes in annual limits may cause a plan to lose its grandfathered status.
Grandfathered group health plans are exempt from many of the ACA’s provisions. For example, the following provisions do NOT apply to grandfathered plans.
- Fair health insurance premiums: Under the ACA, health insurers may not charge discriminatory premium rates.
- Guaranteed availability of coverage: Under the ACA, insurers must generally accept every employer group in the State that applies for coverage, though they can limit enrollment to annual open and special enrollment periods.
- Guaranteed renewability of coverage: The ACA generally requires guaranteed renewability of coverage regardless of health status, utilization of health services, or any other related factor.
- Comprehensive health insurance coverage: The ACA generally requires that insurers include coverage for defined essential benefits, provide a specified actuarial value, and comply with limitations on allowable cost sharing.
- Coverage of preventive health: Under the ACA, group health plans must cover certain preventive services, immunizations, and screenings, without any cost sharing.
- Prohibition on discrimination in favor of highly-compensated individuals: The ACA prohibits fully-insured group health plans from discriminating in favor of highly compensated individuals with respect to eligibility and benefits.
- Patient protections: The ACA generally requires group health plans to permit an individual to select a participating primary care provider, to provide direct access to obstetrical or gynecological care without a referral.
Grandfathered group plans are not exempt from every provision of the ACA. There are a number of provisions that DO apply to grandfathered plans, such as:
- Prohibition of preexisting condition exclusion or other discrimination based on health status: Under the ACA, group health plans may not impose a preexisting condition exclusion or discriminate based on health status.
- Prohibition on excessive waiting periods: The ACA prohibits any waiting periods that exceed 90 days.
- No lifetime or annual limits: The ACA generally prohibits group health plans from establishing lifetime limits and annual limits on the dollar value of benefits.
- Extension of dependent coverage: Under the ACA, group health plans that provide dependent coverage are generally required to make such coverage available to children until age 26.
- Prohibition on rescissions: Group health plans may not rescind health coverage except in the case of fraud or intentional misrepresentation.
The number of grandfathered group health plans is steadily decreasing. A 2013 study by the Kaiser Family Foundation found that 36 percent of those getting health coverage from an employer are enrolled in a grandfathered health plan, which is down from 48 percent in 2012 and 56 percent in 2011. The study also found that the number of employers offering grandfathered plans and the number of employees enrolling in them is also decreasing. This trend is expected to continue and more plans are expected to lose grandfathered status over time.
Very specific regulations govern grandfathered group health plans, so establishing and maintaining grandfathered status can be a complicated process. For example, grandfathered plans must disclose their status to participants and beneficiaries and must maintain any documents that are necessary to verify, explain or clarify a plan’s grandfathered status. Given the significance of the ACA’s grandfather exemptions, it’s important to seek guidance from reputable and experienced experts.
At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the ACA or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.
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