When President Barack Obama told employers that if they liked their current health care plan, they would be able to keep it even after reforms had passed, he introduced the idea of “grandfathered” status for health plans.
“The health care reform provisions have to be followed if you do not keep your grandfathered status,” says Marti Lolli, director of health care reform for Priority Health. “There are certain provisions that a grandfathered plan does not have to comply with, provisions that have costs associated with them.”
Smart Business spoke with Lolli about how to ensure your health plan remains grandfathered under its current terms.
Why might an employer want to work to remain grandfathered under its current plan?
Under the health care reform law, one of the new provisions is that you have to cover preventive care at 100 percent. However, a grandfathered plan does not have to comply with that provision.
The second big provision that grandfathered plans do not have to comply with is nondiscrimination based on salary. It’s common for employers to offer better benefits packages to their more highly compensated individuals. However, under health care reform, if your plan doesn’t remain grandfathered, you can’t do that anymore.
What requirements must a plan meet to be grandfathered?
The plan must have been in place by March 23, 2010, and at least one person had to have been enrolled in it. President Obama said, ‘If you like the plan you have, you can keep it.’ Well, if the plan didn’t exist, there’s nothing to keep. If you meet that initial criteria, then you are automatically grandfathered and the question becomes what changes made to the plan will cause the plan to lose that status.
How can a plan lose its grandfathered status?
This status can continue indefinitely, as long as the plan does not commit one of the ‘seven deadly sins’ that cause a plan to lose its grandfathered status.
Basically, anything that increases the employee or participant cost share, both for the premium and for the services of the plan, may cause the plan to lose grandfathered status. Historically, employers have used various levers such as co-payments, deductibles, plan funding and innovative plan designs to help manage costs. Pulling these levers in the future will, in most cases, cost a plan its grandfathered status.
