What Is a Grandfathered Health Plan?
A grandfathered health plan is a health insurance policy created or purchased on or before March 23, 2010. A grandfathered health plan is exempt from many consumer protections required under the Patient Protection and Affordable Care Act (ACA), the U.S. health reform signed into law on March 23, 2010, by President Obama.
Grandfathered status applies to group health plans and individual health insurance policies respectively created or purchased before the enactment of the ACA. With group plans (through an employer), grandfathered status depends on the date of plan creation, not the date an employee joins the plan.
- A grandfathered health plan is a group or individual plan that was active before the Affordable Care Act (ACA) was signed into law on March 23, 2010.
- Grandfathered plans offer the same coverage they did before the passage of the ACA and are not required to offer the benefits or protections that non-grandfathered ACA plans must include.
- Consumers with grandfathered plans can keep their pre-ACA coverage, and meet the coverage standards of the law, therefore avoiding the tax penalty levied on the uninsured.
- Grandfathered group plans can keep enrolling people, provided the plan remains mostly unchanged.
- Any change that makes the plan more expensive or strips it of previous benefits would result in it losing its grandfathered status.
How a Grandfathered Health Plan Works
Grandfathered health plans enable consumers to keep the coverage they had in place prior to the ACA. Members of grandfathered plans are considered insured and thus exempt from the ACA tax penalty levied against uninsured U.S. residents. It's OK for grandfathered group plans to continue enrolling new people as long as the plan remains substantially unchanged. Changes that reduce benefits or increase the cost for consumers result in the plan losing its grandfathered status.
For work-based plans, only limited changes can be made that affect the percent of the premium for which employees are responsible; significant changes would result in the loss of grandfathered status. Plans may increase the total premium amount without losing grandfathered status. If the grandfathered status is lost, the plan will have to change to comply with new requirements under the ACA or cease to be offered.
After Sept. 23, 2010, all plans, whether grandfathered or not, must include certain consumer protections:
- Plans cannot apply lifetime dollar limits to key health benefits
- Your insurance plan cannot be canceled solely because of an honest mistake made by you or your employer on your insurance application
- Plans must extend dependent coverage to adult children until they turn 26
Job-based plans and grandfathered plans are not required to:
- Provide at no cost certain recommended preventive services
- Offer new consumer protection regarding claim appeals and coverage denials
- Protect consumers’ choice of health care providers and access to emergency care
In addition, individual plans (not job-based coverage) that are grandfathered are not required to:
- Phase-out annual dollar limits on key benefits
- Eliminate the pre-existing condition exclusion for children under age 19
If you are unsure if your health insurance plan is grandfathered, ask your insurer or employer. If an insurance company cancels a grandfathered plan, it must provide 90 days' notice to all policyholders.