The Grandfathered Plan

During the effort to reform health care in 1993-4, President Clinton was pilloried by opponents who charged that the President’s plan would amount to a government takeover of everyone’s health insurance.  To blunt similar criticism, President Obama made a point to stress that under the Patient Protection and Affordable Care Act (PPACA), “if you like your health plan, you can keep it.”

For Medigap insurance, dental plans, long-term care, and “retiree-only” plans, this is true, as such plans are exempt from PPACA’s insurance reforms.  Other health plans will remain the same only if they qualify for “grandfather status.”

Under rules promulgated last week by the Department of Health and Human Services, any group or individual insurance plan that existed on March 23, 2010 is automatically grandfathered.   Family members and current enrollees can enroll under a grandfathered plan.  New employees under grandfathered group plans.  Grandfathered plans do not have to comply with most PPACA mandates, allowing employers to keep their same plans intact without having to make immediate changes.

However, grandfathered plans will still have to make some changes beginning on September 23, 2010 in order to comply with PPACA.  Grandfathered plans will have to extend coverage to dependents until age 26 (an issue that will be addressed in a forthcoming blog post), not rescind coverage when those on the plan get sick, and abolish any lifetime coverage limits.  Group plans that wish to stay covered can no longer exclude coverage for children with pre-existing conditions, and eliminate any dollar-amount limits on coverage that is below standards that will kick in at some point in the future.

After complying with these rules, grandfathered plans do not have to stay grandfathered.  The status can be lost if the plan is altered.  Plans are permitted to enhance or offer new benefits, but certain relatively moderate changes can force your plan to become completely PPACA compliant.

A grandfathered plan will lose its grandfathered status if it raises deductibles by more than $5 plus medical inflation or co-pays greater than medical inflation plus 15 percentage points.  Grandfathered plans cannot change insurance companies or increase coinsurance charges.

Perhaps somewhat troubling for some, drastically reducing or eliminating benefits for a condition (even if nobody in the pool qualifies for that condition) will also eliminate the plan’s grandfathered status.

These changes will blunt some of the benefits for insurers to offer the same plan in hopes of avoiding new costs under PPACA mandates.  The New York Times reported the Administration estimates that approximately half of all plans will have lost the exemption by 2013.

Troubling?  Probably not.  Many of the items that PPACA requires for a plan to maintain grandfathered status are already in many large plans.  While many employers may allow grandfathered status to wither away; for many insurance consumers nothing major will actually change.

It’s not quite as facile as “if you like your health plan, you can keep it”; and more simplicity would be welcome.

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