Grandfathered Plans
All plans that were in effect on March 23, 2010 are considered grandfathered plans. Grandfathered plans are exempt from some, but not all, of the reforms. However, grandfathered status may be lost due to certain changes in cost or coverage.
In order to maintain grandfathered status you cannot:
- Significantly lower employer contributions. In order to maintain grandfathered status, an employer group cannot decrease its premium contribution by more than 5 percentage points from March 23, 2010 levels.
- Significantly raise copayment charges. A plan will lose grandfathered status if the copayments in effect on March 23, 2010 are increased by more than the greater of (i) $5—adjusted annually for medical inflation, or (ii) a percentage equal to medical inflation—measured from March 23, 2010—plus 15 percentage points.
- Raise co-insurance charges. Typically, co-insurance requires a patient to pay a fixed percentage of a charge. Grandfathered plans cannot increase this percentage by any amount
- Significantly raise deductibles. Compared with the deductible in place on March 23, 2010, deductibles can only be increased by a percentage equal to medical inflation plus 15 percentage points:
- For example, if the deductible is $100 today and medical inflation is 4 percent, then you cannot move to anything higher than a deductible of $119 [$100 + ($100 x 4%) + ($100 x 15%) = $119].
- A $250 deductible can only be increased to $297.50.
- For each year a deductible does not change, an employer can add each intervening year’s medical inflation. [$100 + ($100 x 4%) + ($100 x 4% ) + ($100 x 4%) + ($100 x 15%) = $127]
Significantly cut or reduce benefits. Plans cannot eliminate or reduce coverage for specific diseases such as diabetes, cystic fibrosis or HIV/AIDS without losing grandfathered plan status.
Add or reduce an annual limit on what the plan pays. In order to retain grandfathered plan status, the plan cannot reduce any annual coverage dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the plan’s lifetime limit.
Change insurance companies. Grandfathered status is lost upon a change in insurers or plan type after March 23, 2010.
Provisions Required to be Implemented upon
Loss of Grandfathered Status
The following ACA provisions must be implemented once a group loses its grandfathered status.
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In-network preventive care services must be covered at 100 percent and not subject to copayments or cost sharing. For non-grandfathered plans, this provision is effective for plan years beginning on or after September 23, 2010.
Recent guidance clarifies those services considered “preventive care” for purposes of compliance with the legislation. LGC plans cover most of these services—subject only to certain office visit copayments, which will be removed. -
Remove any prior authorization or increased cost-sharing for out-of-network emergency services.
LGC benefit plans currently comply with this requirement. -
Implement an “effective appeals process.”
New guidance on this requirement has just been issued. While LGC is still reviewing the guidance, we believe current benefit plans substantially comply with this requirement.
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Provide coverage for routine patient costs in clinical trials for life-threatening diseases.
Guidance has not yet been issued on this requirement; however, we believe that
LGC’s current benefit plans will comply with this requirement. -
LGC benefit plans currently consider an adult child ineligible if they are enrolled in
other group coverage as the primary policy holder through their own employer.
Upon loss of grandfathered status, this distinction cannot apply.
Due to the comprehensive coverage provided by LGC plans, costs associated with these provisions should not significantly affect the rates of individual plans. However, LGC is currently evaluating the impact on a plan by plan basis.
Effects of Losing Grandfathered Status
In light of these restrictions imposed under Grandfathered Plan regulations, employers will need to carefully consider whether it is cost-effective or otherwise desirable to maintain Grandfathered Plan status:
- Employers must provide the benefits described in the above bullets. As previously stated, LGC plans currently satisfy most of these requirements.
- Employers can increase office copayments higher than the $5 cap.
- Employers can increase deductibles and coinsurance amounts.
- Employers can increase employees’ contribution for the cost of premiums.
Decisions about whether to retain or relinquish Grandfathered Plan status will be complex. Such decisions will depend upon existing plan design features and whether the cost savings or other business objectives that may be achieved by remaining grandfathered outweigh savings that could be obtained by making changes going beyond those permitted by regulations. The decision also may be significantly affected by employer preferences and collective bargaining agreements.
Plans Subject to Collective Bargaining
Generally, collectively bargained plans are subject to the same grandfathered rules as other plans. A special rule applies for a fully insured collectively bargained plan. Such plans may retain grandfathered status, even if changes to cost or coverage are part of the agreement, until the last day of the collectively bargained agreement in place on March 23, 2010.
LGC plans are not considered insured plans under state law and, therefore, would not be considered fully insured for purposes of the special rule. Therefore, LGC believes that collectively bargained plans will be subject to the same grandfathered rules as non-collectively bargained plans.