When the Affordable Care Act (“ACA”) was signed into law on March 23, 2010, existing group health plans became “grandfathered” health plans. While every health plan faced new mandates under ACA, grandfathered health plans could avoid some of the costly requirements of the law. And, employers may maintain the grandfathered status of their health plan indefinitely, provided any changes in benefits and cost-sharing remain within the thresholds outlined in ACA regulations.
There are advantages and disadvantages to maintaining grandfathered status, as there are with losing grandfathered status. For example, while a non-grandfathered plan must comply with every applicable mandate of ACA, these plans also have flexibility in benefit design and cost-sharing requirements, which means that employers have the ability to offset added plan expenses with additional employee cost-sharing requirements. Grandfathered plans, on the other hand, are exempt from certain ACA requirements, but employers with grandfathered plans may only make limited changes in benefits or employee cost-sharing.
Many of the substantial ACA provisions, including the launch of the new health insurance marketplaces, will take effect beginning in 2014. Employers may be wondering how the 2014 requirements will affect their plan’s grandfathered status. As stated above, plans may retain their grandfathered status into 2014, and beyond.
The lists below include selected ACA health plan benefit requirements for grandfathered and non-grandfathered self-funded group health plans, including the additional provisions that will take effect for such plans starting in 2014.
Grandfathered and non-grandfathered group health plans must comply with the following:
- No rescissions of coverage except for fraud, misrepresentation, or non-payment
- Lifetime dollar limits on essential health benefits prohibited
- Phase-out of annual dollar limits on essential health benefits (all such limits removed by 2014 – will also affect stand-alone HRAs)
- Dependent child coverage to age 26 (an exception for grandfathered plans when other coverage is available expires in 2014)
- No pre-existing condition limitations for dependents under age 19 (all such limits removed by 2014)
- No waiting periods over 90 days (starting in 2014)
Non-grandfathered plans must comply with additional requirements:
- Dependent child coverage to age 26 even if child is eligible for other coverage
- Coverage of preventive care without employee cost-sharing, including preventive care for women
- Expanded claims and appeal requirements
- Additional patient protections (primary care designation, OB/GYN access, and emergency services)
- Coverage of routine costs associated with clinical trials (starting in 2014)
- Limitations on out-of-pocket maximums starting in 2014 (there are also deductible limitations that apply to small group plans only)
Employers should review their current plan benefits and evaluate how they will meet not only the additional 2014 benefit requirements listed above, but also the 2014 ACA health plan tax provisions, including the Employer Responsibility (“pay or play”) penalties, Patient-Centered Outcomes Research Institute tax, and the Transitional Reinsurance Program fees.