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    Grandfathered Health Plans Now on Life Support

    The Affordable Care Act (ACA) allowed certain health plans to remain intact following implementation of the Act on March 2010 provided they have not had specific plan changes made since that time. Since these plans existed before the Act was signed into law, they are not required to comply with some of the ACA provisions. However, if certain changes were made to the plans at any time between 2010 and now, the plans would have to immediately comply with additional ACA requirements.

    Since 2010, fewer and fewer employers have maintained plans which qualify for the “grandfathered” status and have transitioned to ACA-compliant plans. Some have moved out of necessity (cost), while others have moved due to the needs of their employees. Regardless of the motive or the current status of their plan, “grandfathering” has been a topic of much confusion for the last seven years.

    Grandfathered health plans are exempt from a number of ACA requirements. These include:

    Coverage for Preventive Health Services

    This requirement states that insurance policies must cover certain preventive health services with no cost-sharing requirement after September 23, 2010. Additional preventive services were required after August 1, 2012.

    Patient Protections

    For plan years after September 23, 2010, the ACA requires that enrollees must be allowed their choice of a primary care provider who participates in their network. Group and individual health plans must also not impose preauthorization requirements or increased cost-sharing for emergency services. Finally, group or individual health plans that provide OB/GYN care may not require preauthorization or referral for that care.

    Nondiscrimination Rules for Fully Insured Plans

    Fully insured plans must comply with Internal Revenue Code section 105(h)(2) wherein plans may not discriminate in favor of highly compensated individuals for either the eligibility for or the benefits provided by the plan.

    Quality of Care Reporting

    Reporting requirements developed for group health plans or individual health coverage which are designed to improve health outcomes, prevent hospital readmissions, improve patient safety, reduce medical errors, and implement health and wellness activities.

    Improved Appeals Process

    For plan years on or after September 23, 2010, group health plans must implement an improved internal appeals process and meet minimum requirements for external reviews.

    Insurance Premium Restrictions

    Effective for plan years beginning on or after January 1, 2014, premiums for health insurance coverage in the individual or small group market may not be discriminatory and may vary only by individual or family coverage, rating area, age, and tobacco use, subject to certain restrictions.

    Guaranteed Issue and Renewal of Insurance

    Effective on or after January 1, 2014, health insurers offering health insurance coverage in the individual or group market in a state must accept every employer or individual in the state that applies for coverage and must renew or continue coverage at the option of the plan sponsor or individual.

    Nondiscrimination in Health Care

    For plan years beginning on or after January 1, 2014, group health plans and issuers offering group or individual coverage may not discriminate against any provider operating within the scope of their practice. This provision does not require a plan to contract with any willing provider or prevent tiered networks.

    Comprehensive Health Insurance Coverage

    For plan years beginning on or after January 1, 2014, health insurers that offer health insurance coverage in the individual or small group market must provide the essential benefits package (essential health benefits) required of health plans sold in health insurance exchanges.

    Limits on Cost-Sharing

    Effective January 1, 2014, group health plans must comply with a cost-sharing limit with respect to their coverage of essential health benefits. This cost sharing limit is an overall annual limit (out-of-pocket maximum) for self-only coverage and family coverage, subject to an annual adjustment for inflation. This includes self-insured and fully-insured plans of any size.

    Coverage for Clinical Trials

    Effective January 1, 2014, group health plans must permit certain enrollees to participate in certain clinical trials, must cover routine costs for clinical trial participants, and may not discriminate against participants.

    At each renewal since 2010, employers have had to decide whether to make significant changes to plan benefits and costs and lose grandfathered status, or to minimize those changes in order to retain grandfathered status. At each renewal, employers have weighed whether or not losing grandfathered status is appropriate in order to help manage employer costs or to provide a better balance between employer costs and employee costs.

    So for the last seven years, employers have struggled with this evaluation and many have chosen to forego their grandfathered plan status in favor of either liberalizing their plan coverage or to better manage their healthcare spend. In 2018 however, all of this will come to an end on December 31, 2018.

    The ACA includes a "grandfather clause" allowing individuals to keep their health plans purchased before ACA was enacted, and the administration extended this deadline twice for the clause's expiration. Under those extensions, the plans were allowed to continue through 2017, provided insurers did not significantly alter the coverage. The clause also gave states the choice of allowing the grandfathered plans or requiring individuals to enroll in ACA-compliant coverage. About 35 states chose to allow grandfathered plans.

    Under the latest extension, Centers for Medicare and Medicaid Services (CMS) said it will allow states to permit grandfathered plans to operate through December 31, 2018. States can allow the extension to both the small group and individual markets or either market separately. States also can allow insurers to issue partial-year policies to ensure that their coverage ends by 2019.

    CMS said it issued the guidance because it is committed to "smoothly bringing all non-grandfathered coverage in the individual and small group market into compliance with all applicable" ACA requirements.

    If you'd like a review of your current health plan, click here to request a consultation with one of our benefits experts.

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    Linda Hummel

    Linda T. Hummel, an insurance industry veteran, joined SWBC in 2013 as CEO of the Employee Benefits Consulting Division. She is responsible for the strategic direction and oversight of the operations, sales, and marketing efforts to employee benefits clients and prospects. Hummel brings over 25 years of health benefits experience to the company. Before joining SWBC, she was President of the Employer Group Division for Humana-Texas. Hummel graduated from Rochester Institute of Technology, Rochester, New York. Hummel was named “Texas Business Woman of the Year” by the Women’s Chamber of Commerce of Texas and most recently, she was recognized by the Austin Business Journal’s “Profiles in Power and Women of Influence Awards.”

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