Reforms and Grandfathered Status

Which reforms DON’T apply to grandfathered plans?

The new law exempts grandfathered plans from certain requirements:

  • Preventive health coverage. Group health plans and health insurance issuers offering group or individual coverage must cover certain preventive health services (mammograms, colonoscopies, etc.) without passing the cost on to consumers.
  • Patient protections.The following rules offer additional safeguards for patients and apply to group health plans and health insurance providers offering group or individual coverage:
    • Plans that require designation of a participating primary care provider must allow each participant, beneficiary and enrollee to select any available participating primary care provider (including pediatricians for children).
    • No preauthorization or increased cost-sharing requirements for emergency services (in our out of network).
    • Obstetrical and gynecological care offered through the plan may not require preauthorization or referral of a participating primary care provider for such services.
    • Restrictions on insurance premiums. Plans may not charge discriminatory premiums for health insurance in the individual or group market, and may only differ by individual or family coverage, rating area and age and tobacco use, subject to certain restrictions.
    • Guaranteed issue and renewal of coverage. Health insurance providers offering coverage in the individual or group market must accept every employer and individual that applies for coverage and must renew or continue the coverage at the option of the plan sponsor or the individual.
    • Nondiscrimination rules. New rules protect consumers from discrimination:
      • Fully insured plans must satisfy the requirements of IRC section 105(h)(2) that requires a plan to not discriminate in favor of highly compensated individuals when considering eligibility and for the benefits provided under the plan.
      • Plans may not establish eligibility or continued eligibility rules based on health status-related factors and wellness programs must meet nondiscrimination requirements.
      • Group health plans and health insurance issuers offering group or individual coverage can’t discriminate against any provider operating within their scope of practice. However, this provision doesn’t require a plan to contract with any willing provider or prevent tiered networks. Individuals cannot be discriminated against based on whether they receive subsidies or cooperate in a Fair Labor Standards Act investigation.

Other provisions of the new law that don’t apply to grandfathered plans include quality of care reporting, effective appeals processes, limits on cost-sharing and coverage for clinical trials.

Which reforms DO apply to grandfathered plans?

The following provisions apply to both grandfathered and new health plans under the healthcare reform law:

  • Extension of dependent coverage. Group health plans must provide coverage for adult dependent children up to the age of 26 if the child isn’t eligible to enroll in other employer-provided coverage (other than the grandfathered plan). Coverage provided to adult children is tax-free to employees.
  • Elimination of lifetime and annual limits. Plans may not establish lifetime caps on the dollar value of essential benefits and group health plans may not establish unreasonable annual limits. By 2014, all annual limits will be abolished.
  • Elimination of preexisting condition exclusions. Children cannot be denied coverage for preexisting conditions; this will apply to all enrollees in 2014.
  • Limits on rescissions. Coverage may not be rescinded except in the case of fraud or intentional misrepresentation of facts. Policyholders must be notified prior to cancellation.

Additionally, plans cannot require a waiting period of more than 90 days beginning in 2014, and on March 23, 2012, insurers and sponsors of self-funded plans were required to begin providing a summary of benefits to participants and applicants. Agencies responsible for implementing this provision have provided a model summary template for insurers to use. In 2014, two additional pieces of information will need to be included in the summaries: 1) whether a plan meets minimum essential coverage requirements; and 2) whether it meets minimum value requirements. Health insurance providers must also report the percentage of premiums spent on non-claim expenses on an annual basis, and currently, insurers must provide rebates if more than the applicable percentage is spent on these costs.