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September 16, 2010
Can you keep the health insurance plan you have?
Making sense of “grandfathered” and “non-grandfathered” plans
As a member of one of our health insurance plans, you may be wondering if the insurance plan you currently have is a “grandfathered” plan or not. You may even be wondering what the term “grandfathered” means. Or, if it matters. Let us help you understand it better.
The passage of the Patient Protection and Affordable Care Act (PPACA) on March 23, 2010, changed the way health insurance works. Let’s take a look at how the law may affect you as parts of it begin to take effect.
What is a grandfathered plan?
A grandfathered health insurance plan is a plan that was in place on or before March 23, 2010. Simple enough.
But what if you joined a company on June 1, 2010, and the company had an insurance plan that was in place as of March 23, 2010 (this plan had not been changed, you simply joined that plan)? Are you then part of a grandfathered plan? Yes.
What is a non-grandfathered plan?
A non-grandfathered plan is a new plan that your employer purchased that went into effect after March 23, 2010. A non-grandfathered plan also may be a plan that was changed in some way (even if this plan was in place prior to March 23, 2010) that caused the plan to lose its grandfathered status.
Changes that apply to all plans
There are some changes that apply to all plans. It doesn’t matter whether they are grandfathered or not. Plans must:
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Cover the dependents of policyholders until they are age 26.
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Provide coverage for children under age 19 regardless of health status and must cover any pre-existing conditions for these children.
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Offer health services defined as “essential” under the law with no lifetime dollar limits. In 2014, annual dollar limits will be eliminated for all health plans. (The federal government has not yet defined which services are essential.)
Is there a cost?
Non-grandfathered health plans must provide coverage for a specific group of preventive (wellness) services to health plan members at no cost to the member; however, this enhanced coverage does have a cost. Some industry consultants have said that adding preventive services to health plans with no cost sharing (such as copayments) could add as much as 3 to 4 percent to the cost of health insurance coverage if the current plan did not cover these services already.
If you have a grandfathered individual or family plan, should you keep it?
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PPACA-mandated benefits are expected to drive rates up for non-grandfathered health plans.
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The situation is fluid and uncertain.
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The best approach is to be cautious.
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In order to maintain your grandfathered status, you must keep the plan you have with a very few limited exceptions.
If you have a grandfathered fully insured plan through an employer (small business or large corporation), what will happen?
The following will not cause your employer to lose grandfathered status:
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Changes made to comply with state and federal laws as well as PPACA.
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Allowing current or new employees to add dependents.
The following will cause your employer to lose grandfathered status:
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Eliminating benefits or treatments for certain types of conditions.
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Increasing employees’ coinsurance by any amount.
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Increasing employees’ contributions by more than 5 percent.
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Other decreases in benefits with a very few limited exceptions.
Although the final rules have not been determined as to what might cause a plan to lose its grandfathered status, we do know that if an employer makes changes in benefits or shifts costs to the employees the plan is likely to lose its grandfathered status.
One last thought
It’s important to remember that if you like your health insurance plan the way it is, you should keep it unless you feel you would benefit by making changes. Be cautious. Remember, after you lose your grandfathered status, you can’t get it back.
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