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Employers must determine if maintaining grandfathered status is their best option
Grandfathered health plans under the Affordable Care Act (ACA) are those existing without major changes to their provisions since March 23, 2010, the date of the ACA's enactment. As employers determine their plan designs for the coming year, those with grandfathered plans must decide if maintaining that status is their best option.
To help sponsors of group health plans make this decision, below are presented 14 frequently asked questions (FAQs) and answers about grandfathering and group health plans.
Q1: May plans maintain grandfathered status?
Yes, they may. There is no specific end date for grandfathered status.
Q2: What are the advantages of grandfathered status?
Grandfathered plans are
not required to meet these ACA requirements:
Employers with fewer than 50 employees typically purchase fully insured coverage subject to an individual state's
small group insured market regulations.The ACA as amended allows states to expand their small group market regulations to include employers having at least one but no more than 100 employees, although most states have chosen not to do so.
Q3: What ACA requirements apply to grandfathered plans?
Most ACA requirements
still apply to grandfathered plans. These include:
Q4: What must a plan do to maintain grandfathered status?
To maintain grandfathered status, a plan must look at its benefits and contribution levels as of March 23, 2010 and must not:
The plan also must:
Q5: How are changes measured?
Changes are measured cumulatively since March 2010. So, for example, if an employer contributed 70 percent of the cost in March 2010, and reduced its share to 68 percent in January 2012, it could again reduce its share, to 65 percent, in January 2015 without losing grandfathered status.
Or, if the deductible was $500 in March 2010 and it was increased to $550 in July 2011, it could be increased to $600 in July 2014 without losing grandfathered status.
Q6: Will violating just one of the requirements forfeit grandfathered status?
Q7: What changes may a plan make and keep grandfathered status?
A plan will not lose grandfathered status if it:
Q8: If an employer offers several plan options, can it keep grandfathered status for some plans even if it has lost it for others?
Yes, it can. So, for instance, an employer could have a grandfathered PPO option and a nongrandfathered HMO option.
Q9: Can an employer add tiers without losing grandfathered status?
Yes it can, as long as it maintains its contribution level for all tiers at the required level. For example, if the employer offered a 2-tier plan and paid 90 percent of the cost of employee-only coverage and 75 percent of the cost of family coverage in March 2010, it could move to 4 tiers in March 2014 without losing grandfathered status as long as it paid at least 85 percent of the cost of employee-only coverage and at least 70 percent of the cost of employee plus spouse, employee plus children and family coverage.
Q10: Can an employer add a wellness program without losing grandfathered status?
An employer can add a wellness program without losing grandfathered status, but needs to take care to make sure it maintains contributions and benefits at the needed levels. (Wellness plans do not have special rules that would give them extra latitude.)
Q11: If an employer loses grandfathered status, can it get it back?
With the exception of a transition period in 2010, a plan that loses grandfathered status, even inadvertently, cannot get it back. This seems to include losing status because the required notice was not provided.
Q12: What happens if a plan loses grandfathered status?
The plan must comply with all of the requirements that apply to nongrandfathered plans as of the effective date of the change that caused the loss of status. So, for example, if the plan is amended to increase the coinsurance level effective Jan. 1, 2014 but the amendment isn't signed until Feb. 6, 2014, grandfathered status is lost as of Jan. 1, 2014.
Q13: Are there special rules for bargained plans?
A fully-insured plan maintained under one or more collective bargaining agreements ratified before March 23, 2010 may remain a grandfathered plan at least until the date on which the last agreement relating to the coverage that was in effect on March 23, 2010 terminates. (Self-insured plans maintained under a collective bargaining agreement are not eligible for this collectively bargained exception.) After the date on which the last of the collective bargaining agreements terminates, the usual rules for maintaining grandfather status apply - the current terms of the plan are compared to the terms that were in effect on March 23, 2010.
Q14: Should a plan keep grandfathered status for 2014?
Whether to keep grandfathered status for 2014 is the plan sponsor's decision. Typically, the employers most interested in maintaining grandfathered status are those that:
United Benefits Advisors (UBA) is an Indianapolis-based alliance of more than 140 independent benefit advisory firms.
© 2013 United Benefit Advisors. All rights reserved. The above FAQs originally appeared in UBA's PPACA Advisor
and are republished with permission. This information is provided for educational purposes only. It reflects UBA's understanding of the available guidance as of August 2013 and is subject to change. It is not intended to provide legal advice.
Related External Article:
Sponsors of Non-Grandfathered Group Health Plans Must Soon Review Their Definition of 'Provider,' Segal Consulting, November 2013
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