Is Our Health Plan ‘Grandfathered’ Under the ACA? 5 Ways a Plan Can Lose Grandfather Status

The Affordable Care Act imposes a large number of mandates on employers. But according to the terms of the law, most health plans that were purchased prior to March 23, 2010 are exempt from some of these provisions. They don’t have to offer the same selection of benefits or protections as do newly-offeredIRS Health Savings Accounts plans. Indeed, they are exempt from these 13 additional requirements and mandates under the ACA:

 

  • Annual reporting
  • New government reporting
  • First dollar coverage
  • Prohibition of discrimination against pre-existing conditions
  • Guaranteed underwriting
  • Requirement to allow any willing provider to provide services
  • Emergency services
  • Maximum age-related premium differential of 3:1 (5:1 for smokers)
  • Claims review
  • Prohibition of lifetime caps
  • Gender-defined premiums. Non-grandfathered plans must underwrite based on ‘unisex’ premiums.

 

Under certain circumstances, a plan may lose its ‘grandfathered’ status under the Affordable Care Act, which would then trigger an obligation by the plan sponsor to bring group health plans into compliance with the ACA’s provisions for newer plans.

Cost-sharing or co-insurance increases

Any increase in your plan’s co-insurance amount, however small or trivial, will trigger the loss of your group plan’s ‘grandfathered’ status in the ACA, and therefore trigger a number of additional requirements and mandated coverage.

Deductible Increases

If you increase your plan’s deductible amounts by any amount that exceeds ‘medical inflation,’ plus 15 percentage points, the U.S. government will deem that to be a material increase, and therefore will deem your plan to be out of compliance with the Affordable Care Act.

Copay Increases

A ‘copay’ is a flat dollar amount your plan beneficiaries must pay whenever they access their benefits, see a doctor, get a prescription, etc. Copays are normally in addition to any copays and deductibles.

‘Out-of-Pocket Expense Increases

The same will apply to any ‘out of pocket’ maximums: If your plan increases them by an amount over medical inflation plus 15 points, your plan will lose its ‘grandfather’ status, and you will have to comply fully with the employer mandates of the Affordable Care Act.

Withdrawing or cancelling benefits treating or diagnosing a specific medical condition.

If your plan used to cover hair loss treatments, or drug addiction, or any other medical condition, and you change plans or your carrier withdraws benefits related to that particular condition, your plan will lose its grandfathered status under the terms of the Affordable Care Act.

Reclassification.

If you reclassify employees in such a manner as to qualify your employees for a different plan – even a grandfathered plan – without a legitimate employment reason, you will lose your plan’s grandfathered status.

Employer contribution changes

If your employer portion of premium payments goes down by more than five percentage points, your plan will likely lose its grandfathered status under the Affordable Care Act. The change is measured for each tier of coverage. So if used to cover 60 percent of total premiums for employees enrolled in Bronze-level coverage, but you make no changes in Silver or Gold-level coverage, your whole plan may lose its grandfather status.

Failure to maintain at least one person on the plan.

If a plan has no enrollees, it’s no longer grandfathered.

 

BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such.  Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.

 

Posted 7/10/15

 

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