One of the major selling points of the Affordable Care Act was the idea that if an employer or individual was happy with their current health plan or coverage, they could keep it. Not necessarily. Under the ACA, employer plans and insurance coverage that was in place on March 23, 2010 was excused from many of the health care reform mandates, so-called grandfathering. However, upon closer inspection, there are many circumstances under the ACA where an employer or individual cannot simply keep their current health plan and changes must be made to the plan or policy to comply with a broad range of mandates under the ACA. Keeping your current health plan intact is, in reality, no easy task. 

In the individual market, many current policies that are not grandfathered do not cover the package of essential health benefits mandated by the ACA which includes: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

If an individual is not covered under the same policy as in effect on March 23, 2010 or an employer has made certain changes to the design of its plan since March 23, 2010, the plan or policy will no longer be grandfathered. Non-grandfathered health plans are required to comply with a whole host of ACA requirements (some of which also apply to grandfathered health plans and policies) that make coverage more expensive, such as elimination of pre-existing condition exclusions, caps on out-of-pocket maximums, elimination of lifetime and annual limits on essential health benefits, coverage of preventive care and other essential health benefits and coverage of dependent children to age 26.      

Under the ACA, the following types of changes trigger the loss of grandfathered status: 

  • Changing a medical plan option to eliminate all or substantially all benefits to diagnose or treat a particular condition or to eliminate benefits for any necessary element to diagnose or treat a condition.  
  • Increasing any percentage cost-sharing requirement (e.g., coinsurance). 
  • Increasing a fixed-amount cost-sharing requirement, other than a copayment (e.g., a deductible or out-of-pocket limit), if the total percentage increase in the cost-sharing requirement exceeds medical inflation (measured from date of enactment) plus 15%. 
  • Increasing a fixed-amount copayment, if the total increase in the copayment exceeds the greater of: $5 increased by medical inflation (measured from date of enactment), or a total percentage that is more than the sum of medical inflation (measured from date of enactment) plus 15%. 
  • Decreasing the employer contribution rate toward the cost of any tier of coverage for any class of similarly situated individuals by more than 5%. 
  • Decreasing or imposing a new annual limit on the dollar value of benefits.  

Once a plan or policy loses its grandfathered status, it cannot get it back. Many individuals may, in fact, be better off with this new and improved coverage, and certain individuals may also now qualify for federal premium credits and subsidies on the exchanges. However, for those employers and individuals who liked the coverage they had, loss of grandfathered status is an unwelcome feature of health care reform that is here to stay. 
Susan Nash is a partner in the Employee Benefits practice of McDermott Will & Emery LLP.  She can be reached at snash@mwe.com.

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