Grandfathered Health Plans
Frequently Asked Questions and Additional Information
FAQ from PacificSource: Grandfathered Plans (updated November 19, 2010)
U.S. Department of Health and Human Services (HHS) interim final rules for grandfathered plans (issued June 14, 2010 and amended November 15, 2010)
Our Position
At PacificSource, our mission is simple: helping people get the healthcare they need. We support access to quality healthcare for all Americans and have worked for several years to support well-reasoned and effective healthcare reform. We have been carefully evaluating the provisions of the Affordable Care Act to fully understand its requirements, implications, and options. One aspect of the legislation that has generated some misconceptions is the concept of “grandfathered” plans.
Definition of grandfathered
A group or individual plan is “grandfathered” if it existed on or before March 23, 2010 (the day the law was passed) and can bypass some reform mandates. While this may sound like an attractive option, upon closer scrutiny we believe that grandfathered plans are not advantageous to employers or members. Here are some facts to consider:
Loss of flexibility
Grandfathered plans significantly restrict employers’ ability to maintain control over their costs, benefits, and contributions. Under the regulations, almost any plan design change (including changes to benefit levels, annual limits, and employer contributions toward premium) will cause the plan to lose its grandfathered status. In our experience, approximately 35 percent of small groups (49 or fewer employees) change plan design at least once every two years.
Many reform requirements will still apply
Very soon, everyone will have to implement significant changes to comply with federal reforms—even grandfathered plans. Changes that all group plans (grandfathered or not) will be required to implement include:
- Extension of dependent eligibility to age 26
- No lifetime limits on essential benefits
- Restricted annual limits on essential benefits
- No pre-existing condition exclusion periods for enrollees under age 19
- Prohibition on rescissions of coverage, except in the case of fraud or an intentional misrepresentation of material fact
In addition, many reforms nongrandfathered group health plan are required to include (internal claims review and external review process, access to pediatricians and provider who specialize in obstetrics or gynecology, and coverage for emergency services at in-network cost-sharing levels without preauthorization requirements) are items our fully-insured plans already cover today.
Record keeping requirements
To maintain grandfathered status, plans are required to maintain documentation of all plan materials in effect on March 23, 2010 and changes made after that date. Employers should consider the administrative burden associated with this requirement.
Preventive care
Right now, the key change for nongrandfathered plans is removal of cost sharing on preventive services, which can help promote a healthier workforce. We estimate the cost impact of this to range from 0.2% to 1.7%, depending on the overall benefit design. (The higher percentage will apply to plans with very high deductibles and/or no previous coverage for preventive care.)
If a group health plan loses its grandfathered status, one of the reforms the plan must adopt is to provide coverage without cost-sharing for specified preventive services. The HHS provides a complete list of recommended preventive care services on their Web site as guidance.
When groups will be moved to nongrandfathered plans
To provide members with the preventative care they need, while keeping employer options open and minimizing the administrative burden of health reform, we have decided the best course of action is to transition most of our customers to nongrandfathered plans.
For small groups and individual policies, we will only be offering nongrandfathered plans. In other words, these plans will be adjusted to comply with reform. Large groups will have the flexibility to keep their grandfathered plan, but fully-insured large groups will be automatically moved to a nongrandfathered plan unless they tell us otherwise.
Oregon
Small Groups: As groups renew on or after September 23, 2010
Individual Policies–Oregon: January 1, 2011 for both Elect and Portability policies
Large fully-insured groups – As groups renew on or after September 23, 2010 unless they have requested in writing at least 30 days in advance to keep their grandfathered plan as they renew
Idaho
Small Groups: As groups renew on or after September 23, 2010
Individual Policies: As policies renew starting with October 1, 2010 for Smart Health and BrightIdea policies
Large fully-insured groups – As groups renew on or after September 23, 2010 unless they have requested in writing at least 30 days in advance to keep their grandfathered plan as they renew