What Is a Grandfathered Plan?

The Affordable Care Act (ACA, or Obamacare) is a set of laws that govern how health plans have to operate. However, there is an exception for grandfathered plans, or health plans that were acquired before March 23, 2010. The grandfathered status simply means that it doesn’t fall under ACA rules and regulations but enrollees do not have to abandon their plans to meet these new standards. However, these plans also don’t have the same rights, benefits and protections that the new plans include.

What this means is that if you have stayed on an old plan that were “grandfathered in” to the new healthcare rules, then you are still at risk of being dropped from coverage for various reasons and being denied treatment for pre-existing conditions. They are also allowed to have lifetime dollar limits.

The only time you should stick with a grandfathered plan is if you really and truly like it. But in the event that your plan loses the grandfathered status, you’ll have to upgrade your plan to one that falls within the requirements of Obamacare. Your insurer will more than likely notify you that you need to switch plans.

Do You Have a Grandfathered Plan?
Private group health insurance plans, family plans and individual plans are now classified in two categories – those that were acquired after the Affordable Care Act was established and those that went into effect before (grandfathered). Your insurer is required to notify you if your plan falls under grandfathered status.

The President Says You Can Keep Your Plan
It was President Obama’s plan to provide Americans access to new affordable, comprehensive insurance plans or to allow those who already have insurance and like their plan to keep it. You previously had until 2015 to switch from a grandfathered plan to a new plan that falls under ACA guidelines, but this was extended to 2017. At this time, you will have to switch from your grandfathered plan to one that complies with the new protections, rights and benefits of Obamacare. If you decide to keep your grandfathered plan until then, you have to live in a state that agrees with the extension and the insurance provider has to continue furnishing the same plan to you.

The only way you can keep your plan until the deadline is if the following criteria is met:

• You have a private plan with a grandfathered status that won’t be changed by the insurer
• You have a plan without the grandfathered status that meets ACA requirements
• You have public health care, such as Medicaid, Medicare or TRICARE

You may have to switch to a new plan if your plan doesn’t meet these criteria or changes from a grandfathered status and doesn’t fall within ACAs requirements.

How Does a Plan Lose Grandfathered Status?
Grandfathered plans that make significant changes to benefits or fees can lose their status. Insurance providers that choose to update their health plans often result in dropping their grandfathered status. This and the plethora of non-compliant health plans being sold after 2010 are causing Americans to switch to new plans before the 2017 deadline.

If your plan loses its grandfathered status, then you will have to either change to a new version of your plan or opt for another policy altogether. Some folks are able to find a plan that’s similar to the one they had within their State’s health insurance marketplace. If they do, they may qualify for a subsidy and save even more money for more comprehensive coverage. Cost assistance in the exchange is also available to those who earn less than 400 percent of the Federal Poverty Level.

Once an insurer makes changes to a grandfathered plan, it loses that status and must now comply with Obamacare rules. There are some insurance companies that are choosing to change these plans on their own before the deadline. This is pushing Americans out of their plans and forcing them to find new ones that are ACA-compliant. So it isn’t Obamacare forcing them to do this, per se, it is the insurance companies.

Approximately 40 percent of insured individuals are switching to ACA-compliant plans each year. In most cases, you are in a one-year contract with the insurance company, but it’s up to the insurer to continue the grandfathered plan or change it.

According to the Affordable Care Act, there are various factors that can cause a plan to lose its grandfathered status. The rules are applicable to each benefit package an employer offers. This is how your health plan can potentially lose its grandfathered status:

• There’s been a significant reduction or cut in benefits by either removing majority or all of the benefits designed to treat or diagnose an illness, or any necessary element that can be used to treat or diagnose a health problem.
• The coinsurance rates have been raised.
• The deductibles, out-of-pocket limits and other fixed cost-sharing has been raised by more than medical inflation plus 15 percentage points.
• The employer contributions have been substantially reduced by five percentage points for any given coverage tier.
• Copayments have been substantially raised more than medical inflation plus 15 percentage points or $5, which is adjusted based on medical inflation.
• Tightening or adding annual limits.
• Failure to cover at least one person continuously (doesn’t have to be the same person).
• Reclassifying workers, so they become eligible for another plan (even if it is grandfathered), without having a bona fide employment reason to do so.

The following plan changes will not remove a plan’s grandfathered status:

• Premium changes.
• Changes made to insurers or third-party administrators within the group market.
• Entering into an agreement to bind renewals before March 23, 2010, becoming effective on or after March 23, 2010.
• Enabling new workers and new enrollees who aren’t new workers (and their dependents) to enroll in the plan (anti-abuse rules apply).
• Enabling new dependents to be added to a policy holder’s plan.
• Changes made that comply with federal or state laws, such as voluntary changes to comply with ACA.

Why Does Grandfathered Status Matter?
It’s important to know whether your health plan meets ACA standards or falls under the grandfathered status. If it doesn’t, then you risk having to pay the penalty for being uninsured or underinsured. There are pros and cons associated with grandfathered plans. For instance, they’re able to offer tiered benefits, which are based on the salaries of workers. There are also annual and lifetime limits that can be set for treatment.