Keeping Your Current Plan? Unlikely Under the New Set of Restrictive Regulations

One of the promises President Obama made when pushing through health care legislation was that anyone happy with their plan would get to keep the plan they are on. This includes everyone from those on individual plans to those on group plans.

In other words, everyone would be grandfathered into their current plans if they so choose. In this case, a grandfathered plan refers to group coverage or a health insurance issuer in which an individual was enrolled on March 23, 2010.

The grandfather regulations were just introduced under the Patient Protection and Affordable Care Act a couple of weeks ago. While it was anticipated that some regulations would result in the loss of grandfathered plans, it was a surprise as to how restrictive the regulations really are and the amount of changes that would result in the loss of a grandfathered plan.

Grandfather plans aren’t meant to last forever. They are a way of allowing people to retain their current benefits, just as the President had promised. Under the new regulations, many of the plans that currently exist would vanish fairly soon for a variety of reasons:

• Switching insurance carriers
• Changing any of the benefits, in particular eliminating a benefit for any reason
• An increase in cost sharing percentage requirements
• An increase in fixed amount cost sharing requirements
• Decreasing the employer contribution rate by more than 5% below the premium rate
• Adding or lowering the annual lifetime dollar limits

In some cases, the consequences of losing grandfather status may not be entirely clear because the necessary regulations have not yet been issued.

To keep current grandfathered coverage, a policy must be renewed with very restricted changes, or it would no longer be a grandfathered plan. Additionally, a plan would no longer be grandfathered if a new policy, certificate or contract of insurance occurred after March 23, 2010. This would result in a new plan.

A grace period has been given to changes made after March 23, 2010 and before June 14, 2010 (the date the new regulations were publicly available). If changes were made that would cause the loss of a grandfathered plan, they may be revoked or modified to keep the current plan.