February 12th, 2014
When discussing the changes to health insurance plans due to the Patient Protection and Affordable Care Act (PPACA) of 2010, the subject of "grandfathered plans" has been in the news lately. Plans that do not undergo "substantial changes" are not required to meet the requirements of the PPACA. So the question that arises is, what is a substantial change?
The following six changes are considered to be "substantial" when compared to policies in effect on March 23, 2010:
- Elimination of all or substantially all benefits to diagnose or treat a particular condition.
- Increase in a percentage cost-sharing requirement (e.g., raising an individual’s coinsurance requirement from 20% to 25%).
- Increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points.
- Increase in a copayment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation).
- Decrease in an employer’s contribution rate towards the cost of coverage by more than 5 percentage points.
- Imposition of annual limits on the dollar value of all benefits below specified amounts.
Not Substantial Changes
The following items are not considered to be substantial changes to the plan. If no other changes are implemented that are listed above, then the plan is still considerered to be 'grandfathered':
- Addition of family members of an individual who is enrolled in a grandfathered plan and addition of new employees (whether newly hired or enrolled) in a grandfathered plan.
- Disenrollment of one or more individuals enrolled on March 23, 2010 (provided that the plan or coverage has continuously covered someone since March 23, 2010).
- Changes in premiums.
- Changes required to conform to federal and state laws and regulations.
- Voluntary adoption of PPACA consumer protections.
- Changing third-party administrators (TPAs).
A health plan must disclose in its plan materials whether it considers itself to be a grandfathered plan and must also advise consumers how to contact the U.S. Department of Labor or the U.S. Department of Health and Human Services with questions.