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 crated or purchased before 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.
BREAKING DOWN Grandfathered Health Plan
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 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.
Grandfathered Health Plans Must Still Meet Some New Standards
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; and
- 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; or
- 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.