Healthcare Reform

Grandfathered vs. Non-Grandfathered Health Plans

Many questions have been asked regarding the advantages, or disadvantages of grandfathered health plans. The following is a simple explanation provided by my good friend, Cathy Van Zant.

“Many carriers will be administering both the grandfathered and non-grandfathered plans. A grandfathered plan is defined as the plan of benefits that were in effect as of March 23, 2010, which was the enactment date of the Patient Protection and Affordability Act (PPACA). Changes to the grandfathered plan after the 90 day sunset period could cause an employer to lose their grandfathered status. Any groups that began a plan after March 23 is considered as non-grandfathered. The consensus in our industry is that there are few advantages to remaining grandfathered, and in fact, up to 80% of group plans will be grandfathered by 2013. Most of the PPACA provisions that are effective immediately apply to both grandfathered and non-grandfathered plans. The two exemptions are 1) non-discrimination rules as they relate to benefits and eligibility cannot favor highly compensated employees; and 2)mandated wellness with no cost sharing. Neither of this provisions apply to grandfathered plans. The disadvantage to retaining grandfathered status is that it limited the employer’s ability to make changes to their existing plan so it may not be cost effective to do so.”

At this point we are recommending our clients NOT to remain grandfathered.