Monday, April 26, 2010

Grandfathered Health Plans

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post)

So what’s included in Sec. 1251 of the Affordable Care Act, concerning the grandfathered health plans?

Individuals who are enrolled in a group health plan or individual health coverage at the date of enactment of the Patient Protection and Affordable Care Act may not be required to terminate that coverage. Any group health plan or health insurance coverage to which this provision applies is considered a “grandfathered health plan.” Thus, individual or group health plans providing coverage on March 23, 2010 are grandfathered.

Grandfathered plans are exempt from many of the provisions governing new plans, including these:

  • Insured health plan compliance with nondiscrimination rules

  • Requirement to provide preventive care services

  • Implementation of effective claims appeals processes

  • Selection of any participating primary care provider

  • Insurance premium rates limitations

  • Guaranteed availability and renewal

  • Prohibition on discrimination based on health status

  • Essential benefits coverage package and limited insured annual cost-share

However, grandfathered plans are subject to the following new provisions in the Public Health Service Act (PHSA):

  • PHSA Sec. 2708, prohibiting excessive waiting periods (effective for plan years beginning on or after Jan. 1, 2014);

  • PHSA Sec. 2711 prohibiting lifetime limits (effective for plan years beginning on or after Sept. 23, 2010);

  • PHSA Sec. 2712, prohibiting rescissions (effective for plan years beginning on or after Sept. 23, 2010);

  • PHSA Sec. 2714, extending coverage to adult children under age 26 (effective for plan years beginning on or after Sept. 23, 2010).

Grandfathered plans that are group health plans also are subject to these provisions:

  • PHSA Sec. 2711 prohibiting annual limits(effective for plan years beginning on or after Sept. 23, 2010);

  • PHSA Sec. 2704, eliminating pre-existing condition exclusions (effective for plan years beginning on or after Jan. 1, 2014);

  • PHSA Sec. 2714, relating to extension of dependent coverage in a grandfathered group health plan, but only if the dependent is not eligible to enroll in an eligible employer-sponsored health plan (effective for plan years beginning before Jan. 1, 2014.).

Finally, grandfathered plans also must comply with these reform provisions for plan years beginning on or after March 23, 2010:

  • Requirements to provide uniform explanations of coverage and standardized definitions (PHSA Sec. 2715).

  • Requirements to provide loss-ratio reports and rebate premiums if loss ratios fall below 80% (Sec. 2718).

Family members, new employees. As long as the terms of the group plan or insurance coverage allow it, family members of an individual may enroll in a grandfathered plan in which that individual is enrolled. This rule applies if the individual was enrolled in the grandfathered plan on the date of enactment and the coverage is later renewed.

A grandfathered group health plan may provide for the enrollment of new employees and their families.

Although the law does not require individuals to terminate their existing coverage, the law also does not prevent a group health plan or insurance coverage from dropping those grandfathered plans. Thus, whether an individual can maintain her existing coverage will depend in large part on whether the plan sponsor or insurer continues to provide that type of grandfathered plan.

So far, there are no guidelines for maintaining a grandfathered plan or for determining what changes to the plan (such as cost, deductibles, coverage) would end the grandfathered status.

Effective date. This provision is effective on March 23, 2010.

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