Grandfathered Plans PPACA Update

The PPACA healthcare reform legislation makes specific references to a grandfathered health plan.  The Interim Rules have been published but trade groups, small employers and insurance brokers have petitioned HHS to amend the rules.  In general, grandfather status will be lost if there are significant reductions to benefits or increases in out-of-pocket spending for employees, such as deductibles or copays.

Grandfathering allows groups to keep their existing plan from March 23, 2010 which exempts an employer from SOME of the healthcare legislation.  An employer can escape some of the healthcare reform legislation by keeping your current benefit structure and not changing current payroll deductions.  How realistic is this?  No healthcare changes and healthcare premium increases from now until 2014 when healthcare costs will continue to escalate on an average of 5-8% per year for the next 4 years?  Unfortunately, the government does not understand that each of you must maintain a competitive benefits package in the wake of the biggest downturn in the U.S. economy in 75 years.

The grandfathered status for most employers will fall on deaf ears.  It’s not if  you will make a change in your plan or contributions, it’s when.    The following changes would cause a loss of grandfathered status:

  • Eliminate all benefits to diagnose or treat a particular condition
  • Increase coinsurance or cost sharing above the level at which it was set on March 23, 2010.  Any change in plan design will most likely eliminate the grandfather provision
  • Increase the deductible, copayment or out-of-pocket expense limit by more than the sum of medical inflation plus 15%, or $5 increased by medical inflation.  Very confusing and subject to interpretation
  • Change in insurance carrier.  Saving money will eliminate the grandfathered provision

We will keep you abreast of healthcare reform as it evolves.  Thanks again for your business.

Burman S. Clark

Burman S. Clark, RHU, CSA is the President of Muneris Benefits and a licensed insurance broker and consultant. His independent practice and focuses on employee benefits, individual life, disability, medical, and senior products. Burman has traveled extensively and provided guidance to large employer associations with regards to the Affordable Care Act.