Health care plans that weren’t in place before March 23, 2010 don’t have grandfathered status under the Affordable Care Act. Consequently, these newer plans must meet the provisions under the law including:
|Unisex premiums (Gender-defined premiums are prohibited under the ACA)|
|Prohibition of lifetime benefit caps|
|Maximum age-related premium differential (The ACA prohibits carriers from charging premiums on older employees at more than three times the rate of younger employees. For smokers, the maximum authorized premium differential is 5-to-1)|
|Coverage for emergency services|
|Requirement to allow “any willing provider” to make services available|
|Guaranteed issue of coverage|
|Prohibition of discrimination against applicants with pre-existing conditions|
|New government reporting|
These provisions can be expensive for some employers. A sudden, unexpected loss of grandfathered status could result in higher premiums and expenses, more reporting requirements, and a restructuring of a company health plan.
Here are seven actions that could trigger a loss of a plan’s grandfathered status.
- Changes in co-insurance or cost-sharing” arrangements.
- Increases in deductibles. Medical plans may increase deductibles without forfeiting grandfathered status, but the increases can’t exceed the medical inflation rate. If a plan’s deductible increases above that, the Department of Health and Human Services will declare the increase to be material and revoke grandfathered status.
- Increases in co-pays.
- Increases in out-of-pocket maximums. A plan may adjust out-of-pocket maximums to an extent — up to the medical inflation rate, plus 15 points. Beyond that, the plan will lose its grandfathered status.
- Changes in employer contribution levels. Reducing the percentage of premium an employer pays on employees’ behalf may cause a loss of grandfathered status, if the contribution falls by more than five percentage points for any tier of employees. The tiers refer to plans that are Bronze, Silver or Gold level.
- Employee Reclassification. If an employer moves employees from one eligibility category to another without a bona fide employment justification, the plan may lose its grandfathered status.
- Cancellation of withdrawal of benefits to cover specific conditions. If a plan used to cover a condition, for example, drug addiction, and benefits related to that condition are withdrawn, the plan will lose its grandfathered status.
Finally, a plan must cover at least one employee at all times. If a plan no longer has participants, the plan will lose its grandfathered status even if it later adds new employees.
The decision to make changes in a health plan must be made with caution. Otherwise, even well-meaning changes could subject a health plan to more stringent and more expensive requirements. Contact us if you need assistance understanding the Affordable Care Act or its provisions.