What Everyone Should Know about the ACA and Grandfathering Provisions

 

While the Patient Protection and Affordable Care Act requires certain benefits be made available by health plans, there are some grandfather provisions that protect employer-sponsored plans. If these plans were made before March 23, 2010, sponsors will not have to make significant changes. Due to this provision, there are many Americans who are covered by large employers who will not see major changes after the new law takes effect.

What is a Grandfathered Plan?
A grandfathered plan is one that has existed since the date mentioned in the last paragraph, and it must have at least one person who is covered at all times. In addition to this, it cannot be changed except as permitted. These types of plans are not exempt from all health reform rules, but they are exempt from many of them as long as they maintain their grandfather status. Insured group plans, self-insured group plans and individual coverage may be grandfathered. These plans may also allow workers to enroll their family members. Although new employees may be able to join the plans, there are restrictions that apply to employers transferring plans without endangering their grandfather status.

How to Determine if a Plan is Grandfathered
As mentioned before, a plan must qualify by its active date. If some individuals cease to be covered after the active date, that does not automatically take away a plan’s grandfather status. However, one or more people must continuously be covered. Plans that change from self insured to fully insured can keep their grandfather status. Plans that eliminate all or most of the benefits to treat and diagnose certain conditions do not qualify. If a plan increases the percentage cost sharing, it will not qualify. Plans that increase cost-sharing amounts that are otherwise fixed other than copay amounts to make the total percentage increase will not qualify. If a plan increases a copay amount that is otherwise fixed, it might not qualify. This is true if it exceeds the greater of an amount equal to inflation plus $5 or the maximum percentage increase. If the employer’s contribution rate decreased toward any tier of coverage for any class of individuals at a rate of more than five percentage points below the contribution rate, it will not qualify.

If a group plan changes from self insured to fully insured, it must properly notify all members to keep its grandfather status. In addition to this, any plan claiming grandfather status must include a statement that it believes it is grandfathered, and this must be distributed to plan participants. The plan must maintain records showing the terms and connections with coverage effective after the cutoff date. These records must be available to participants upon request. Some plans that switched companies after the effective date may still qualify for grandfathering. Self-insured plans can change third-party administrators without losing their status, and they can also change stop-loss coverage without losing status. Some enhancements and additions can be made to a grandfather plan also.

New hires, family members and some enrollees can be added to health plans without them losing their status. However, only family members of people who were enrolled at the time of the effective date qualify for this provision. If employees are not enrolled in a grandfathered plan, they may move into it during the open enrollment period. In addition to this, employees can transfer from one grandfathered plan to another. To learn more about grandfather status for plans, how to keep it or for further information about applicable dates, call ACBI at 203-259-7580 or visit our website by clicking here.

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