The Affordable Care Act is intended to build upon our current system of employer based health insurance coverage. It does try to provide incentives and penalties to encourage more employers to provide coverage and to keep employers from dropping coverage.
What are Grandfathered Plans?
Plans in existence on March 23, 2010 are “grandfathered,” meaning that employers can continue to provide their current health care coverage. To be considered grandfathered, a plan must continuously cover at least one person since March 23, 2010. Grandfathered plans will NOT need to meet all of the consumer protections in the law, such as:
- covering prevention services with no cost sharing
- ensuring that an employee can see a pediatrician or OBGYN.
- having guaranteed availability of coverage – This means that each health insurance issuer must accept every employer and individual in the State that applies for coverage, permitting annual and special open enrollment periods for those with qualifying lifetime events (i.e. birth, death, job changes of spouse etc.)
- having guaranteed renewability of coverage – This means that insurers cannot use health status, utilization of health services or any other related factor when deciding about renewals.
What are the requirements for grandfathered plans?
There are a few requirements that all plans must meet. All plans (grandfathered or not) must adhere to the following consumer protection requirements of the new law: no lifetime cap on benefits; no rescissions of coverage; extension of parents coverage to young adults (age 26); no coverage exclusion for children with pre-existing conditions and; no “restricted” annual limits.
What changes will be allowed for grandfathered plans?
Many employers may want to keep their grandfathered status in order to avoid some of the other requirements of the law. For that reason it is believed that most health insurance through large employers will not see major changes to their coverage. The following routine changes will be allowed.
- Keeping pace with medical inflation;
- Adding new benefits;
- Modest adjustments to existing benefits; and
- Voluntarily providing new consumer protections
What changes would cause an employer to lose its plan’s grandfathered status?
If employers changes health insurance companies they will lose their grandfathered status. Employers will need to document the specifics of their health insurance coverage on March 23, 2010. This will be the standard to make sure that any proposed changes do not significantly:
- raise co-insurance, co-payments or deductibles;
- cut benefits; or
- reduce employers’ contributions.
Are employers required to tell employees if the plan is a grandfathered plan?
Yes. Employers must include a statement in any plan materials describing the health coverage and stating the belief that the plan is a grandfathered plan and provide contact information for questions and complaints. The regulations on grandfathered plans issued on June 17 included sample language:
The following model language can be used to satisfy this disclosure requirement:
This [group health plan or health insurance issuer] believes this [plan or coverage] is a ‘‘grandfathered health plan’’ under the Patient Protection and Affordable Care Act (the Affordable Care Act). As permitted by the Affordable Care Act, a grandfathered health plan can preserve certain basic health coverage that was already in effect when that law was enacted. Being a grandfathered health plan means that your [plan or policy] may not include certain consumer protections of the Affordable Care Act that apply to other plans, for example, the requirement for the provision of preventive health services without any cost sharing. However, grandfathered health plans must comply with certain other consumer protections in the Affordable Care Act, for example, the elimination of lifetime limits on benefits. Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator at [insert contact information]. [For ERISA plans, insert: You may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1–866–444–3272 or www.dol.gov/ebsa/healthreform. This Web site has a table summarizing which protections do and do not apply to grandfathered health plans.] [For individual market policies and nonfederal governmental plans, insert: You may also contact the U.S. Department of Health and Human Services at www.healthreform.gov.]
Are there protections for the employers from significant premium increases from insurance issuers?
In general, regulating the private insurance market is a function of each state. The ACA provides $250 million in funding to states from 2010-2014 to assist states in reviewing and if appropriate under state law, approving premium increases for health insurance coverage. As the various insurance reforms are phased in over the next few years, coverage is expanded and the health exchanges are introduced, we will have a very different health insurance landscape. Health insurers will have to be more transparent about justifying their premiums increases. To ensure premium dollars are spent primarily on health care, the new law generally requires that at least 85% of all premium dollars collected by insurance companies for large employer plans are spent on health care services and health care quality improvement. For plans sold to individuals and small employers, at least 80% of the premium must be spent on benefits and quality improvement. If insurance companies do not meet these goals because their administrative costs or profits are too high, they must provide rebates to consumers.