The New Health Care Law and 'Grandfathered' or Exempt Plans

Q. What does it mean if my health plan is "grandfathered" under the new health care reform law?

A. During the debate on health care reform, President Obama often promised Americans: "If you like the health care plan you have now, you can keep it." Therefore, the legislation exempts plans that were already in existence on March 23, 2010—the date it was signed into law—from certain requirements that apply to all new plans. Exempt plans are known as "grandfathered" plans.

If your employer provides a grandfathered plan, you should receive a written notice to this effect. If you buy your own insurance, contact the insurer to find out.

Readers seem to have two main concerns about these plans. They want to know whether grandfathered plans must stay exactly the same as they were on March 23—same benefits, same premiums, same copayments — in order to continue to be exempt in future years. And they also ask whether these plans will give them fewer consumer protections and benefits than will be required of new plans.

Administration officials say that the rules for grandfathered plans try to strike a balance between these two concerns—requiring certain new protections to be added to these policies but also allowing the plans a certain amount of flexibility so that they will not lose their grandfathered status if they only make routine changes from year to year.

Some new consumer protections apply to all plans, whether they're grandfathered or not:

• A plan cannot exclude coverage for your children if they have preexisting medical conditions.

• A plan can no longer cancel your coverage if you become sick and had made an unintentional mistake on your application for insurance.

• A plan cannot impose lifetime limits on coverage.
  

• A plan must extend coverage to your adult children up to age 26.
  
  

Some new consumer protections and benefits are not required under grandfathered plans:

• They need not offer screenings and other preventive measures for free.

• They need not provide guaranteed access to ob-gyns and pediatricians.

• Individual grandfathered plans are not required to abolish annual coverage limits.
  
  

Grandfathered plans can lose their exempt status only if they do one of the following:

• Significantly cut benefits, such as eliminating all or nearly all benefits to treat a specific condition such as diabetes, cystic fibrosis or HIV/AIDS.

• Raise charges that are based on a percentage of costs—for example, increasing your share of a hospital bill from 20 to 25 percent.

• Significantly raise copays—for example, from $30 to $50 for a doctor visit over the next two years.

• Significantly raise deductibles—for example, increasing from $1,000 to $1,500 over the next two years.

• Reduce the employer's share of the premium by more than 5 percent—for example, so that the employee's share rises from 15 to 21 percent.

• Reduce existing annual benefit limits or add limits.

• Reduce existing lifetime limits on coverage.
  
  

The National Association of Insurance Commissioners has a detailed chart available online that describes the differences between grandfathered and new plans, and what rules each must follow.

Susan Jaffe of Washington, D.C., covers health and aging issues and writes the Bulletin’s weekly column, Health Care Reform Explained: Your Questions Answered