Grandfathering frequently asked questions

What is grandfathering?

From a health reform perspective, a grandfathered plan is one that maintains the benefits that were available to enrollees under the plan as of March 23, 2010. The law grants grandfathered plans exceptions to adopting some reform mandates. Grandfathered plans must adopt certain key reform requirements, such as the removal of the lifetime maximum.

Who is eligible to grandfather?

Large group employers in Washington and Oregon that renew with Providence Health Plan may choose to grandfather their plans.

What does grandfathering mean?

For large group employers it means being permitted to keep the following:

  • Option to keep a cost-share, such as a copay or coinsurance, for preventive benefits
  • Ability to deny enrollment to dependents under 26 with access to other employer health coverage
  • Option to provide benefits that favor highly paid employees

For small group employers in Washington it means being permitted to keep the following:

  • Option to keep a cost-share, such as a copay or coinsurance, for preventive benefits
  • Ability to deny enrollment to dependents under 26 coverage if they have access to their own or their spouse's employer-sponsored health care coverage
  • Option to provide benefits that favor highly paid employees

If employer groups choose the grandfathered option they must accept all three provisions.

In order to be compliant with the Department of Health and Human Services’ grandfathering rules, what are employers unable to change to maintain grandfather status?

In order for employers to maintain grandfather status they must not:

  • Drop or cut benefits for any particular health issue (e.g., diabetes, cystic fibrosis or HIV/AIDS)
  • Increase coinsurance
  • Significantly raise copayments or deductibles: Grandfathered plans will be able to increase copays by no more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points. (Note: Carrier changes filed with the state insurance division prior to March 23, 2010, will not cause a group to lose its grandfathering status.) Deductibles can only be increased by a percentage equal to medical inflation plus 15 percentage points.
    Example: For a family with a $1,000 annual deductible, this would mean their deductible could be raised by $190 or $200 from 2010 to 2011, and raised by another $50 the following year.
  • Increase the portion of insurance paid by employees by more than 5 percentage points. Example: A company whose employees are currently paying 15 percent of their insurance premiums cannot require employees to begin paying more than 20 percent next year.
  • Decrease or impose a new annual limit

These rules only apply to employer plans effective on or before March 23, 2010. Employer plans put in place after March 23, 2010, are not eligible for grandfathering. In addition, grandfathered plans have disclosure and documentation requirements. If employers don’t satisfy these criteria, they will lose their grandfathered status.

What can a grandfathered plan do and still maintain grandfathered status?

A grandfathered plan can:

  • Add family members of an individual who is enrolled in a grandfathered plan
  • Add new employees of an employer who is enrolled in a grandfathered plan
  • Disenroll one or more individuals who were enrolled on March 23, 2010 (provided that the plan or coverage has continuously covered someone since March 23, 2010)
  • Change premiums
  • Make changes required to conform to federal and state requirements
  • Voluntarily comply with Patient Protection and Affordable Care Act
  • Change third-party administrators

Which benefits are not available to be grandfathered?

The reform provisions that are not optional and are required to be implemented regardless of grandfathering status are the following:

  • Coverage extended to under 26 dependents (open enrollment must be provided), except those eligible for their own or their spouse’s employer coverage
  • Lifetime maximum removed
  • Annual limits on essential health benefits restricted
  • Pre-existing conditions for children 18 years and younger covered
  • Emergency departments visits same cost for in- and out-of-network
  • Plan rescission allowed only for fraud or intentional misrepresentation
  • New appeal processes for health plan benefit disputes
  • Choice of any participating primary care provider
  • Inclusion of pediatricians as a primary care provider
  • No authorization requirement for an OB/gyn visit

These represent the “near-term” reforms that must be adopted in 2010-2011. Grandfathered plans must also adopt certain other reforms for later plan years.

Can employers with collective bargaining agreements grandfather plans?

Yes, employers with collective bargaining agreements can grandfather plans. Grandfathered collective bargained plans must adopt all of the same reforms as other grandfathered plans upon renewal effective Oct. 1, 2010, and after. However there are unique rules that apply to collective bargaining agreements regarding their ability to maintain grandfathered status. Contact your broker for more information.

Can an employer grandfather a plan if changes were made to plans after March 23?

Employers that renewed between March 23 and July 1, 2010, and made changes to their plans (that are in conflict with the grandfathering rules provided above) can revoke those changes at their next renewal and reinstate a grandfathered plan.

Can employers later reverse their decisions about grandfathering?

If they are no longer grandfathered, they can’t go back to being grandfathered, but a group always has the right to move from a grandfathered to non-grandfathered plan during a renewal.