Under the healthcare reform law, individuals and employers/employees have the right to keep coverage they had as of March 23, 2010 and are exempt from many reforms. These individual and group health plans are considered "grandfathered plans". Collectively bargained plans that were reatified before the date of enactment are grandfathered until the date that the last collective bargaining agreement related to coverage ends.
Knowing when the law applies is important. So it's important to understand when a plan is "grandfathered".
Grandfathered plans: Plans that existed on or before March 23, 2010 the date the law took effect and that continue after that date are considered "grandfathered" plans. This means the plans may be exempt from some of the requirements of the healthcare reform law. However, certain requirements apply to all plans, whether they're grandfathered or not.
The following requirements apply to all plans:
- No lifetime benefit maximum limits
- Dependent coverage for adult children up to age 26
- No annual limits on certain types of benefits
- No pre-existing conditions exclusions for children under age 19
If certain changes in coverage are made after the law's effective date, the plan will likely not be a grandfathered plan. This means the plan must also include the following:
- 100% coverage for preventive care in network
- No prior authorization for emergency services or higher cost-sharing for out-of-network emergency services
- Coverage of routine patient costs for clinical trials of life-threatening diseases, starting in 2014
Keeping grandfathered status: According to interim final rules, there is some flexibility to modify a plan without losing grandfathered status. This includes:
- Changes to comply with federal or state laws
- Routine premium changes of a policy or plan to keep pace with medical inflation
- Adding new benefits and making modest adjustments to existing benefits
- Changes to voluntarily comply with the healthcare reform law
- Changes in third-party administrators
- Changes in premiums
Losing grandfathered status: The following changes to a plan will result in the loss of grandfathered status:
- Eliminating all (or substantially all) benefits to diagnose or treat a particular condition
- Increasing coinsurance by any amount above the level set on March 23, 2010
- Increasing fixed amount cost sharing (other than copays) more than the sum of medical inflation plus 15 percentage points from the level of March 23, 2010
- Increasing copays by an amount that exceeds the greater of 1) a total percentage (measured from March 23, 2010) that is more than the sum of medical inflation plus 15 percentage points, or 2) $5 multiplied by medical inflation, plus $5
- Reducing employer or employee organization contributions based on the cost of coverage or a formula by more than 5 percentage points below the contribution rate on March 23, 2010
- Reducing an overall annual dollar limit or adding a new overall annual dollar limit, compared with what was in effect on March 23, 2010
- Ensuring that consumers switch to a grandfathered plan that, compared with the current plan, has fewer benefits or higher cost sharing as a means of avoiding new consumer protections
- Buying and/or merging with another plan to avoid complying with the healthcare reform law.