A grandfathered health plan identifies health insurance policies that were already in existence when the Affordable Care Act (ACA) was signed into law. This status was created to minimize disruption for individuals and employers who wished to maintain their existing coverage. While all health plans must comply with certain key ACA provisions, grandfathered plans are permitted to operate without adopting all new consumer protections and benefit mandates. This designation allows continuity for older policies, though their features may differ significantly from plans created since the law’s enactment.
Defining Grandfathered Status
The definition of a grandfathered health plan is rooted in a specific timeline and legal framework. To qualify, a group or individual health plan must have been in effect and continuously covering at least one person on March 23, 2010, the date the Affordable Care Act was signed into law. This date serves as the fixed reference point for determining the original benefits and cost-sharing structure of the policy.
The legal basis for this status is found in Title I of the ACA, which allowed these existing plans to be “grandfathered” in, exempting them from certain new market reforms. Plans created or sold after March 23, 2010, are considered non-grandfathered and must comply with the full spectrum of the ACA’s regulations.
A plan can retain its grandfathered status even if new employees or family members enroll after the 2010 cutoff date, provided the underlying policy remains substantially unchanged. This status is not permanent; it is contingent upon the plan avoiding significant modifications to its benefits or costs. Because many employer-sponsored plans routinely make design changes, most have already lost this designation over time.
Key Exemptions from ACA Requirements
Grandfathered plans are exempt from many consumer protections that apply to newer health policies. One significant difference is that they are not required to cover certain preventative services without cost-sharing, such as copayments or deductibles. This means a routine screening or immunization might still come with an out-of-pocket charge.
These plans also do not have to adopt the ACA’s comprehensive rules regarding internal and external appeals for coverage determinations. Non-grandfathered plans must provide enhanced patient protections, including the right to choose a primary care provider without a referral and guaranteed access to obstetrics and gynecology services. Grandfathered plans are generally exempt from these mandates.
A crucial distinction for individual and small group plans is the Essential Health Benefits (EHB) requirement. Non-grandfathered plans must cover a standard package of ten benefit categories, including maternity care, mental health services, and prescription drugs. Grandfathered plans are not required to cover the EHB package, which can lead to variations in the scope of their coverage. Despite these exemptions, grandfathered plans must still comply with fundamental ACA rules, such as prohibiting lifetime dollar limits on essential health benefits and allowing dependent children to remain on a parent’s policy until age 26.
Rules for Maintaining Grandfathered Status
To retain the grandfathered designation, a plan must avoid making significant changes that substantially cut benefits or increase costs for members. The regulations specify clear limits on how much a plan can alter its financial structure before losing its status permanently. Once the designation is lost, it cannot be regained, and the plan must become fully compliant with all ACA provisions.
One prohibited change is any increase in the percentage of cost-sharing, such as raising coinsurance. Increases to fixed-amount cost-sharing, like copayments, are tightly restricted. A copayment can only be increased by the greater of $5 (adjusted for inflation) or a percentage equal to medical inflation plus 15 percentage points.
Plans also lose their status if they significantly increase a deductible or maximum out-of-pocket limit beyond a specific threshold tied to medical inflation. For employer-sponsored plans, a reduction in the employer’s contribution toward the premium of more than five percent will cause the plan to lose its standing. Eliminating or substantially reducing benefits for a specific medical condition also triggers the loss of the protected status.
How to Confirm Your Plan’s Status
The law mandates a clear disclosure requirement from the plan or insurer for consumers determining their policy’s status. Any plan materials describing the benefits, such as a Summary of Benefits and Coverage, must include a statement if the plan believes it is a grandfathered health plan. This notice must also provide contact information for participants who have questions about the plan’s status.
If the plan documents do not clearly indicate the status, the most direct course of action is to contact the plan administrator. For group health plans, this is typically the Human Resources department or the benefits manager. An individual policyholder should contact their insurance carrier directly.
The plan is legally required to provide this information because the status impacts which consumer protections apply to the coverage. Knowing the status helps a person make informed decisions, especially during open enrollment periods. The administrator or insurer maintains the necessary records to document the plan’s terms as of the 2010 cutoff date and verify that no prohibited changes have occurred.