Individual Insurance: Losing Grandfathered Status When Changing Carriers?

On November 15, 2010, the Departments of Labor, Health and Human Services, and the IRS jointly released an amendment to the interim regulations regarding grandfathered plans status. This amendment changed the rules regarding the effect of changing insurance companies on a plan's grandfathered status under the Patient Protection and Affordable Care Act (PPACA). Previously, if an employer group health plan changed issuers, it would lose its grandfathered status. Now, fully insured plans can change insurance carriers without affecting their grandfathered status, as long as the new coverage is effective on or after November 15, 2010. This amendment provides flexibility for employers to keep their grandfathered plan status while changing insurance companies or third-party administrators.

Grandfathered status applies to plans in effect on March 23, 2010

Grandfathered status is a designation for health insurance plans that were already in effect as of March 23, 2010, when the Affordable Care Act was signed into law. These plans are exempt from certain health care reform provisions, whereas non-grandfathered plans must comply with all health care reform mandates.

Grandfathered plans are not required to meet certain ACA requirements, such as coverage of preventive care without employee cost-sharing, limitations on out-of-pocket maximums, and essential health benefits. However, they cannot impose lifetime benefit limits on any essential health benefits they cover, must allow insureds to keep their children on the plan until age 26, and must abide by the ACA's medical loss ratio rules.

To maintain grandfathered status, plans must not have been substantially changed since the ACA was enacted, and there are limits on how much cost-sharing can increase and how benefits can change. Plans must also include a statement in benefit materials that they believe they are a grandfathered plan and maintain records documenting the plan terms needed to establish their grandfathered status.

On November 15, 2010, the Departments of Health and Human Services (HHS), Labor, and the Treasury amended the requirements for maintaining grandfathered status. Under this amendment, plans can retain their grandfathered status after changing carriers or moving from a self-insured to a fully insured plan, as long as they haven't made other changes that would cause them to lose this status. This amendment is not retroactive and only applies when the new carrier's coverage is effective on or after November 15, 2010.

It's important to note that grandfathered plans are not required to provide all of the benefits and consumer protections of the Affordable Care Act. For example, they might not cover preventive health services, might charge higher premiums based on health status or gender, and might exclude coverage for pre-existing conditions.

Plans may lose grandfathered status if they cut coverage or increase costs

Plans that were in effect on March 23, 2010, are granted grandfathered status and are exempt from certain healthcare reform provisions. However, plans may lose their grandfathered status if they make certain significant changes that reduce benefits or increase costs to consumers.

On June 17, 2010, the Departments of Health and Human Services, Labor, and the Treasury issued the "grandfather" regulation, which allowed plans to retain their "grandfathered" exemption from certain new requirements. This regulation was amended on November 15, 2010, to allow plans to change insurance carriers without losing their grandfathered status, as long as the new carrier's coverage is effective on or after November 15, 2010.

Plans that make significant changes, such as cutting benefits or increasing costs, will lose their grandfathered status. This includes:

• Significantly cutting or reducing benefits. For example, no longer covering care for people with specific illnesses or conditions.
• Raising co-insurance charges, which require patients to pay a fixed percentage of a charge (e.g., 20% of a hospital bill).
• Significantly raising co-payment charges, which are fixed-dollar amounts for doctor's visits and other services.
• Significantly raising deductibles, which are the amount patients pay out-of-pocket before insurance coverage kicks in.
• Significantly lowering employer contributions, which are the portion of premiums that employers typically pay and deduct from employee paychecks.
• Adding or tightening an annual limit on what the insurer pays.

It is important to note that premium changes are not considered when determining whether a plan has lost its grandfathered status.

If a plan loses its grandfathered status, consumers gain additional benefits and protections, including coverage of recommended preventive services and improved access to specialists like OB-GYNs and pediatricians.

Individual plans cannot newly enrol people after March 23, 2010

Individual health insurance plans that were purchased on or before March 23, 2010, are considered "grandfathered" plans. These plans were bought directly from insurance companies, agents, or brokers, rather than through the Marketplace. As such, they may not include certain rights and protections provided under the Affordable Care Act.

One of the key stipulations of these grandfathered plans is that they cannot enrol new people after March 23, 2010, and have that new enrolment considered a grandfathered policy. In other words, insurance companies can continue to offer these plans to people who were enrolled before that date, but anyone enrolling after that date will not be covered under the same terms.

This is an important distinction, as it means that anyone enrolling in one of these plans after March 23, 2010, will not have the same rights and protections as those who enrolled prior. This could include a lack of coverage for pre-existing conditions, higher premiums based on health status or gender, and the exclusion of preventive health services.

It is worth noting that these plans can lose their grandfathered status if they make significant changes that reduce benefits or increase costs for plan holders. Therefore, it is important for individuals to carefully review the terms of these plans and understand their rights and protections before enrolling.

Employers must inform employees of their health plan's status

Employers play a crucial role in providing health insurance coverage to their employees, and it is essential that they inform their employees about the status of their health plans. This is particularly important when it comes to "grandfathered" health plans, which refer to plans that were in existence on or before March 23, 2010, and have not changed substantially. These plans are exempt from certain healthcare reform provisions, but they may not include all the rights and protections provided under the Affordable Care Act (ACA).

• Understanding Grandfathered Plans: Employers should first understand the nature of grandfathered plans. These are health insurance plans that were purchased or established before March 23, 2010, and have not undergone significant changes. Grandfathered plans are exempt from certain requirements of the ACA, but they may not offer all the rights and protections provided by the Act.
• Informed Employees: Employers must inform their employees about the status of their health plans, including whether they are grandfathered plans or not. This information allows employees to understand their coverage and make informed decisions about their healthcare options.
• Changes in Carriers: As of November 15, 2010, employers can change insurance carriers without affecting the grandfathered status of their plans. However, this change only applies if no other changes are made that would cause the plan to lose its grandfathered status. Employers must provide documentation of previous coverage to the new carrier to maintain this status.
• Notification Requirements: Employers are required to notify their employees if they have a grandfathered plan. This notification ensures that employees are aware of the specifics of their health coverage and any limitations that may exist due to the plan's grandfathered status.
• Employee Rights: Employees have specific rights regarding health coverage under the ACA. For example, employees working over 30 hours per week are generally eligible for employer-provided health insurance, and employers cannot exclude employees based on pre-existing conditions or health status. Employers must ensure that they are providing health plans that comply with these employee rights.
• Compliance with ACA: Employers with 50 or more full-time employees (or full-time equivalents) are mandated by the ACA to offer affordable health insurance coverage to their full-time employees and their dependents. This is known as the "employer mandate." Failure to comply with this mandate may result in substantial penalties.
• Reporting Requirements: Employers subject to the employer mandate must report information about their health coverage offerings to the IRS and their employees. This includes providing specific forms and documentation to ensure transparency and compliance with ACA requirements.
• Potential Penalties: Employers who do not comply with the ACA's employer mandate may face penalties. These penalties may apply if they fail to offer health insurance to at least 95% of their full-time employees, if the coverage is not considered affordable, or if employees receive premium tax credits for purchasing insurance on the Health Insurance Marketplace.
• State-Specific Regulations: It is important to note that state-specific considerations and regulations regarding ACA compliance can vary. Employers must be aware of and adhere to both federal and state-level ACA regulations to ensure full compliance with the law. Consulting with legal experts and insurance professionals is advisable to navigate these complexities.

In summary, employers play a vital role in providing health insurance coverage to their employees and are obligated to inform their employees about the status of their health plans. This is especially important for grandfathered plans, which have specific requirements and exemptions. By providing clear and transparent information, employers can help their employees make informed decisions about their healthcare options and ensure compliance with applicable laws and regulations.

Grandfathered plans are exempt from some healthcare reform provisions

On June 17, 2010, the Departments of Health and Human Services, Labor, and the Treasury (the Departments) issued the "grandfather" regulation, which addressed how health plans could retain a "grandfathered" exemption from certain new requirements. This regulation was designed to help Americans keep their current plans if they were happy with them, while also providing them with the added benefits of the new law.

The "grandfather" regulation includes a number of rules for determining when changes to a health plan cause it to lose its grandfathered status. For example, plans could lose their grandfathered status if they make certain significant changes that reduce benefits or increase costs to consumers.

Grandfathered plans are exempt from some provisions in the Act, but not all. Exemptions include appeals, preventive care at no cost share, certain patient protections, Essential Health Benefit requirements, rate restrictions/adjusted community rating, guaranteed issue and renewability, and out-of-pocket requirements.

Grandfathered plans are not exempt from revenue raisers, covering adult children up to the age of 26, exclusion of pre-existing conditions, nondiscrimination regulations, and reporting requirements, among other requirements.

The Departments recently amended the requirements for maintaining grandfathered status under healthcare reform. Effective November 15, 2010, you can retain your plan's grandfathered status after changing carriers or moving from a self-insured to a fully insured plan, as long as you haven't made other changes that would cause the plan to lose its grandfathered status. This amendment does not apply retroactively and only affects insured group health plans.

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