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  • Is it Better To Keep Your Plan as a Grandfathered Health Plan?

    What is a  “Grandfathered” Health Plan?  It is a group health plan or individual coverage that was already in effect on March 23, 2010, the date of Health Reform enactment.  In general, the law allows a       grandfathered plan to continue as is without losing its grandfathered status. New employees may enroll in a grandfathered plan, and current participants may stay on or change coverage to add dependents to a grandfathered plan.

    The passage of the PPACA Health Reform could cause a loss of grandfathered status for plans that were in effect as of March 23, 2010 due to the following conditions: 

    • Increase in employee contributions that are greater than 15% plus inflation
    • Decrease in employer contributions by more than 5%
    • Increase in coinsurance or copays that are greater than 15% plus inflation
    • Reduction in or addition of annual dollar limits  

    The passage of the PPACA Health Reform will affect plans renewing and effective after September 23, 2010.  If you have a plan that is renewing after that date your plan could lose its status as a grandfathered plan if there is a:

    • Change in carrier
    • Purchase of or merger with another plan to avoid compliance 
    • Elimination of benefits to treat a specific condition

     Why would any group want to keep its grandfathered status?  Remember benefits that must be implemented due to PPACA Health Reform are not required to added prior to 2014.  Retaining grandfathered status to 2014 may prevent a larger increase in premiums due to benefits that must be added and restrictions that must be eliminated, which will probably increase the costs of the health plan.  Additionally grandfathered plans are not subject to discrimination rules, meaning higher levels of benefits for certain classes of employees can still be allowed. 

     Parts of the Health Reform legislation will be implemented over the next few years, with all plans to be in compliance by 2014.  It is highly unlikely that groups will be able to retain their grandfathered status until 2014, as increases in premiums and changes to employee expectations will force change.  For any renewals prior to 2014, carriers will most likely ask the employer to sign a letter verifying their status as either grandfathered or non-grandfathered. 

    Certain changes must be made to all plans, regardless of grandfathering status, as of renewals after September 23, 2010, including: 

    • Elimination of Lifetime Benefit Limits
    • Elimination of annual limits for specific benefits, such as durable medical equipment
    • Elimination of pre-existing condition limitations for children to age 19
    • Children to age 26 must be considered as eligible dependents, unless they are covered by their employer plan
    • Reporting the dollar value of benefits on an employee W-2

     Some of these changes have recently been signed into California state law by Governor Schwarzenegger.

     Please remember that all the legislation will be subject to revision as changes in Washington transpire.  We will, as always, keep you informed of changes as they occur.

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