Questions and Answers:
Keeping the Health Plan You
Have: The Affordable Care
Act and “Grandfathered”
Health Plans
During the health reform
debate, President Obama made
clear to Americans “if you
like your health plan you
can keep it.” He emphasized
that nothing in the health
reform law would force
businesses or consumers to
change health plans or
change their doctor. The
new “grandfather” rule
implements the grandfather
provisions of the Affordable
Care Act designed to allow
strong health plans to
continue to grow and remain
vibrant. The grandfather
rule enables businesses and
families to keep their plan
while adding important new
benefits for all Americans
with private insurance. It
provides both market
stability and a more level
playing field as people,
businesses, insurers and
medical providers adapt to
the historic reforms of the
Act.
Here are answers to key
questions about how the
Affordable Care Act, and the
“grandfather” rule which
implements part of the Act,
will affect individuals,
employers and insurers.
What the New Rule Means
for Individuals Purchasing
Health Insurance On Their
Own:
Q: What effect will the
new rule have on my health
coverage?
A: The new rule will allow
you to keep your current
coverage if you like it and
still benefit from many of
the new consumer protections
in the Affordable Care Act,
such as a ban on your
insurance being terminated
just because you get sick
and had made an
unintentional mistake on
your forms.
If your current plan
significantly reduces your
benefits or increases your
out-of-pocket spending above
what it was when the new law
was enacted, then your plan
will lose its “grandfather”
status and you will gain
additional new benefits
under the Act. In the
individual market, people
change plans more frequently
than those insured through
employer plans. As such,
most of the 17 million
people who purchase in the
individual market will
likely gain all the new
protections in the
Affordable Care Act in the
near term.
Read below for more
information on what new
benefits apply to your
current plan, what
additional benefits apply if
you choose a new plan or if
your current plan forfeits
its grandfather status, and
what changes would cause
your current plan to forfeit
its grandfather status.
Q: How will the
regulation help me keep my
coverage if I don’t want to
choose a new private plan?
A: The regulation lets
health plans that existed on
March 23, 2010, when the
Affordable Care Act became a
law, to be “grandfathered”
and thus be exempt from some
of the new law’s provisions.
But the rule sets firm
limits on how much your
current coverage can be
changed before it loses its
grandfathered status.
Compared to their policies
in effect on March 23, 2010,
grandfathered plans:
-
Cannot significantly cut
or reduce benefits – for
example, if your plan
covers care for people
with diseases such as
diabetes, cystic
fibrosis or HIV/AIDS,
the plan cannot
eliminate coverage for
those diseases;
-
Cannot raise
co-insurance charges –
for example, it
increases your share of
a hospital bill from 20%
to 25%;
-
Cannot significantly
raise co-payment charges
– for example, it raises
its copayment from $30
to $50 over the next 2
years;
-
Cannot significantly
raise deductibles – for
example, it raises a
$1,000 deductible by
$500 over the next 2
years;
-
Cannot significantly
lower employer
contributions by more
than 5 percent – for
example, it increases
its workers’ share of
the premium from 15% to
25%;
-
Cannot add or tighten an
annual limit on what the
insurer pays. Some
insurers cap the amount
that they will pay for
covered services each
year. If they want to
retain their status as
grandfathered plans,
plans cannot tighten any
annual dollar limit in
place as of March 23,
2010. Moreover, plans
that do not have an
annual dollar limit
cannot add a new one
unless they are
replacing a lifetime
dollar limit with an
annual dollar limit that
is at least as high as
the lifetime limit
(which is more
protective of high-cost
enrollees).
Q: What new consumer
protections will I get?
A: The Affordable Care Act
requires all health plans –
including grandfathered
health plans – to provide
certain new protections for
plan years beginning on or
after September 23, 2010.
The reforms that apply to
all individual market heath
plans include:
-
No lifetime limits on
coverage for all plans;
-
No rescissions of
coverage when people get
sick and have previously
made an unintentional
mistake on their
application;
-
Extension of parents’
coverage to
young adults under 26
years old;
Q: Will this new
insurance regulation drive
up my health insurance
costs?
A: No. The grandfather rule
is designed to preserve the
ability of Americans to keep
their current plan if they
like it, while providing new
benefits. Other provisions
of the Affordable Care Act
aim to make health insurance
premiums more affordable.
For example, the Act gives
the Secretary of Health and
Human Services the authority
to publicly post on the Web
the proportion of premium
dollars that an insurer
spends on medical care as
opposed to marketing or
profits. If an insurer
spends too much on salaries
and other expenses not
directly related to care, it
will have to give its
customers a rebate. The new
law also helps states
monitor and crack down on
unreasonable premium
increases by insurers. The
Administration recently
announced a new grant
program to strengthen
states’ ability to spot
unreasonable premium
increases and take action
against them.
Q: Who will tell me
whether or not my plan or
coverage is grandfathered
and what difference that
makes?
A: The new rule requires
your employer or insurer to
provide you notice of its
decision to remain a
grandfathered plan. If you
buy your own insurance, you
should ask your insurer if
your plan is grandfathered.
Q: What if I don’t like
my current coverage and want
to change?
A: Nothing in the Affordable
Care Act limits your
choices. You are free to
change plans and shop for
what best meets your needs.
In 2014, you will have even
more affordable choices from
Exchanges – competitive
market places that will
offer individuals and
workers in small businesses
much greater choice of plans
at more affordable rates,
the same choices as Members
of Congress.
Q: What new benefits and
protections will I receive
if I choose a new plan?
In addition to the benefits
required of all existing
plans mentioned above, you
will receive some new
benefits if you choose a new
plan, including:
-
Coverage of recommended
prevention services with
no cost sharing; and
-
Patient protections such
as guaranteed access to
OB-GYNs and
pediatricians.
You may also benefit from
more affordable choices from
Exchanges – competitive
market places that will be
established in 2014 and will
offer individuals and
workers in small businesses
much greater choice of plans
at more affordable rates and
the same choices as Members
of Congress.
What the New Rule Means
for Employers:
Q: What effect will the
new rule have on employers
who now provide their
employees with health
coverage?
A: Most of the 133 million
Americans with
employer-sponsored health
insurance through large
employers enjoy some of the
benefits of the Affordable
Care Act now, regardless of
whether their plan is
grandfathered. The reforms
that apply to all heath
plans beginning on or after
September 23rd
include:
-
No lifetime limits on
coverage for all plans;
-
No rescissions of
coverage when people get
sick and have previously
made an unintentional
mistake on their
application;
-
Extension of parents’
coverage to most
young adults under 26
years old;
People who work in smaller
firms – which change
insurers more often due to
annual fluctuations in
premiums –will enjoy all of
these benefits plus new
benefits when they choose a
new plan, including:
-
Coverage of recommended
prevention services with
no cost sharing; and
-
Patient protections such
as guaranteed access to
OB-GYNs and
pediatricians.
These Americans also can
benefit from more affordable
choices from health
insurance Exchanges –
competitive market places
that will be established in
2014 and will offer
individuals and workers in
small businesses much
greater choice of plans at
more affordable rates and
the same choices as Members
of Congress.
Q: Won’t employer plans
eventually lose their
grandfathered status?
A: The “grandfather” rule
which helps to implement the
Affordable Care Act
preserves the ability of the
American people to keep
their current plan if they
like it, while providing new
benefits, by minimizing
market disruption and
putting us on a glide path
toward the competitive,
patient-centered market of
the future.
While the Act requires all
health plans to provide
important new benefits to
consumers, it allows plans
that existed on March 23,
2010 to innovate and contain
costs by allowing insurers
and employers to make
routine changes without
losing grandfather status.
These routine changes
include cost adjustments to
keep pace with medical
inflation, adding new
benefits, making modest
adjustments to existing
benefits, voluntarily
adopting new consumer
protections under the new
law, or making changes to
comply with state or other
Federal laws. Premium
changes are not taken into
account when determining
whether or not a plan is
grandfathered.
Plans will lose their
“grandfather” status if they
choose to significantly cut
benefits or increase
out-of-pocket spending for
consumers – and consumers in
plans that make such changes
will gain new consumer
protections.
The 133 million Americans
with employer-sponsored
health insurance through
large employers (100 or more
workers) —who make up the
vast majority of those with
private health insurance
today—will not see major
changes to their coverage as
a result of this
regulation. The
“grandfather” rule affirms
that most of these plans
will remain grandfathered –
more than three-quarters of
employers in 2011-- based on
the decisions they made on
benefits and costs over the
last two years (2008-2009).
Most of these plans already
offer the patient
protections applied to
grandfathered plans such as
no pre-existing condition
exclusions. In addition,
they are likely to already
give their workers and
families some of the
additional protections in
the Act, like a choice of
OB-GYN and pediatrician and
access to emergency rooms in
other states without prior
authorization.
Based on past patterns of
behavior, however, it is
expected that large
employers will continue to
make adjustments to the
health plans they offer from
year to year so that, by the
time the health insurance
Exchanges are established in
2014, fewer large employer
plans will have grandfather
status. However, the
assumed market changes
depend on the choices large
employers make in the
future.
People who work in smaller
firms – which change
insurers more often due to
annual fluctuations in
premiums – will enjoy all of
the benefits of the
Affordable Care Act when
they choose a new plan.
These Americans also will
benefit from the new Health
Insurance Exchanges that
will be established in 2014
to offer individuals and
workers in small businesses
with much a greater choice
of plans at more affordable
rates – the same choices as
members of Congress.
Q: Will grandfathering
freeze employers’ health
plans in place, making it
difficult for them to
respond to rising health
care costs and other
changes?
A: No. Grandfathered plans
will have the flexibility to
make changes in order to
remain active and vibrant
just so long as they don’t
dramatically reduce people’s
benefits or increase their
cost-sharing. Among other
things, plans will be able
to:
-
Raise premiums to
reasonably keep pace
with health care costs;
-
Make some changes in the
benefits that they
offer;
-
Increase deductibles and
other out-of-pocket
costs within limits; and
-
Continue to enroll new
employees and new family
members.
For more information on what
changes will cause employers
and insurance plans to lose
their grandfather status,
please visit http://www.healthreform.gov/newsroom/keeping_the_health_plan_you_have.html.
Q: Even with this
flexibility, won’t health
reform drive up employers’
coverage costs?
A: One of the major goals
of the Affordable Care Act
is to slow the growth of
costs by making important
changes to the nation’s
health insurance system.
These changes will help
consumers and employers
regain control of their
coverage and health costs.
Through the “medical loss
ratio” requirement, the
Affordable Care Act will
help ensure that insurance
companies provide value for
the premium dollars they
charge. The law gives the
Secretary of Health and
Human Services authority to
publicly post the proportion
of premium dollars that an
insurer spends on medical
care as opposed to marketing
or profits. If an insurer
spends too much on
non-medical expenses, it
will be required to provide
rebates. The new law also
helps states monitor and
crack down on unreasonable
premium increases by
insurers. It provides for
grants to states to improve
monitoring and regulation of
premium increases by
insurers.
Q: What does health
insurance reform and the new
rule do for small
businesses?
A: Small business owners and
entrepreneurs who buy their
own insurance often pay the
highest prices for coverage
and suffer from the greatest
limits on their benefits.
Because of their relative
lack of leverage, small
businesses often make
substantial changes in
coverage from year to year,
and therefore are expected
to transition from their
current grandfathered plans
to ones with the Affordable
Care Act’s new protections
over the next few years.
Health reform will
immediately help small
businesses sustain coverage
for their workers, and
provide them with affordable
choices in the future. In
2010, small businesses may
qualify for a tax credit to
offset up to 35% of their
premium contributions. In
2014, Exchanges will provide
small employers and
entrepreneurs with greater
clout in the insurance
market, tax credits up to
50% of their premiums, and
stronger protections against
objectionable insurance
practices such pre-existing
condition exclusions for
their workers.
Q: Will the Act and the
new rule mean more red tape
for employers who provide
their employees with health
coverage?
A: No. Employers that
already provide many of the
benefits and protections
provided for under the
Affordable Care Act will
experience relatively little
change. The grandfather
regulation provides
illustrations to help guide
employers’ decisions. When
employers tell employees
about their health plans,
employers who believe their
health plans are
grandfathered must include
information about their
status and maintain records
needed to verify it. In
addition, the regulation
includes provisions to
smooth the transition to the
new system by letting the
government take into account
a “good faith effort” by
employers to comply. It
exempts retiree-only and
“excepted benefit plans”
like dental insurance.
Q: How does this policy
affect plans that are
negotiated by unions –
collectively bargained
arrangements?
A: Health plans subject to
collective bargaining
agreements are generally
able to maintain their
grandfathered status through
the end of the agreement.
The law and regulations also
include a special rule for
collectively bargained plans
that gives additional
flexibility to change
insurers during the
collective bargaining
agreement in effect on the
date that the Affordable
Care Act was signed. After
that, collective bargaining
agreements are subject to
the same rules as other
health plans.
What the New Rule Means
for Insurers
Q: Which insurance plans
and policies are eligible
for grandfather status and
which are not?
A: Whether or not a plan or
policy is considered the
“same” as it was on March
23, 2010 depends on the
changes that it makes from
that point forward.
Grandfathered health plans
will be able to make routine
changes to their policies
and maintain their status.
These routine changes
include cost adjustments to
keep pace with medical
inflation, adding new
benefits, making modest
adjustments to existing
benefits, voluntarily
adopting new consumer
protections under the new
law, or making changes to
comply with state or other
Federal laws. Premium
changes are not taken into
account when determining
whether or not a plan is
grandfathered.
Plans will lose their
grandfathered status if they
choose to make significant
changes that reduce benefits
or increase costs to
consumers. If a plan loses
its grandfathered status,
then consumers in these
plans will gain additional
new benefits including:
-
Coverage of recommended
prevention services with
no cost sharing; and
-
Patient protections such
as guaranteed access to
OB-GYNs and
pediatricians.
Under the Affordable Care
Act, these requirements are
applicable to all new plans,
and existing plans that
choose to make the following
changes that would cause
them to lose their
grandfathered status.
Compared to the coverage in
effect on March 23, 2010,
grandfathered plans:
-
Cannot significantly cut
or reduce benefits – for
example, if your plan
covers care for people
with diabetes, cystic
fibrosis or HIV/AIDS, it
cannot drop coverage for
those diseases;
-
Cannot raise
co-insurance charges –
for example, it
increases your share of
a hospital bill from 20%
to 25%;
-
Cannot significantly
raise co-payment charges
– for example, it raises
its copayment from $30
to $50 over the next 2
years;
-
Cannot significantly
raise deductibles – for
example, it raises a
$1,000 deductible by
$500 over the next 2
years;
-
Cannot significantly
lower employer
contributions by more
than 5 percent – for
example, it increases
its workers’ share of
the premium from 15% to
25%;
-
Cannot add or tighten an
annual limit on what the
insurer pays. Some
insurers cap the amount
that they will pay for
covered services each
year. If they want to
retain their status as
grandfathered plans,
plans cannot tighten any
annual dollar limit in
place as of March 23,
2010. Moreover, plans
that do not have an
annual dollar limit
cannot add a new one
unless they are
replacing a lifetime
dollar limit with an
annual dollar limit that
is at least as high as
the lifetime limit
(which is more
protective of high-cost
enrollees).
Q: Is the grandfathering
rule broad enough to protect
against disruption,
especially in the market for
individual policies?
A: Yes. The Affordable Care
Act, and the new grandfather
rule that helps implement
it, provide stability and
flexibility to insurers and
businesses that offer
insurance coverage as the
nation transitions to a more
competitive marketplace in
2014 where businesses and
consumers will have
affordable choices through
Exchanges.
An estimated half of
employer-sponsored health
plans that insure well over
half of American workers and
their families will remain
grandfathered through 2013.
Change is likely to come
more swiftly in the
individual market because up
to two-thirds of individual
policyholders switch
coverage in a given year so
that policies are likely to
lose their grandfathered
status and consumers will
gain new protections more
quickly. But this is a
market that would experience
rapid change even without
the grandfathering
regulation of health
insurance reform.
Q: Who’s going to enforce
the new grandfather rule?
A: The Departments of Health
and Human Services, Labor
and Treasury have authority
to enforce these provisions
of the Affordable Care Act.
The Federal government will
work closely with the
states, which have
additional enforcement
authority.
Q: The grandfather
regulation says that that
the government may issue
still more rules on this
subject. Will they be
substantially different and
tougher than these?
A: The rule is “interim
final” regulation with a
public comment period of 60
days. This means that while
it has the effect of a final
regulation, the Departments
of the Treasury, Labor and
HHS, which are issuing the
rule, will examine the
comments that we receive and
make necessary changes when
the regulation is issued in
final form. Additional
clarifications to address
issues that may arise under
these regulations could also
be published by the
Departments in an on-going
manner through
administrative guidance
other than in the form of a
regulation. The grandfather
rule does state that any
changes that are made after
it is published will only
apply prospectively.
Why Change Health Plans
at All?
Q: Why do we need to
change? Why can’t we leave
health care and health
insurance the way they are?
A: People have grown
increasingly frustrated by a
lack of control over their
own health care insurance.
During the past decade, the
cost of coverage has climbed
more than three times faster
than the average hourly
wages of Americans. The
Affordable Care Act makes
important changes to our
health insurance system to
put patients back in charge
of their coverage. In 2019,
health spending per insured
person is estimated to be
about $16,800 without
reform. With reform, that
number decreases about 10%
to a little over $15,000.
The grandfather rule is
designed to strike a balance
between allowing existing
health plans to make routine
changes and preventing plans
from making such large
changes that they are no
longer the plans people once
had and liked. As such,
they will ease the
transition that the nation’s
health care and health
insurance industries must
make to comply with the
reforms of the Affordable
Care Act.
Read the Press Release at:
http://www.hhs.gov/news/press/2010pres/06/20100614c.html.
Read the Fact Sheet on this
subject at:
http://healthreform.gov/newsroom/keeping_the_health_plan_you_have.html. |
