Don’t Cry Uncle, Stay Grandfathered

Grandfathered – The right to stay under the old rules and regulations that new policies must follow. The more onerous the new rules and regulations, the more desirable it is to be grandfathered.

The new rules are coming. In a rush to change the delivery and payment of health care as quickly and as irrevocably as possible, Congress made the Patient Protection and Affordable Care Act effective the day it was signed into law, march 23, 2010. The rules have yet to be written. The U.S. Departments of Treasury, Labor, and Health and Human Services are issuing interim final rules. Nothing is set in stone, except that all of the rules they create will apply to all group and individual health insurance policies that aren’t grandfathered.

Policies on the books as of March 23, 2010 may be grandfathered, may be exempted from some of the new rules. Which rules? Who knows? The rules and regs are fluid. The insurers are being pressured to institute some changes “voluntarily”.

How important is grandfathered status? There is no way to assess the value at this point, but the government is attempting to make it very difficult to maintain. So difficult in fact, that the rules to keep that status got my attention. When Washington erects this many roadblocks, and a damaged bridge isn’t involved, you might want to see what is on the other side.

The following, courtesy of Medical Mutual of Ohio, is a synopsis of the Interim Final Rule for the maintenance of the status of a grandfathered plan. The following changes will cause individual and employer plans to no longer be grandfathered:
* A merger, acquisition or similar business restructuring, if the principal purpose of the action is to cover new individuals under the grandfathered plan.
* A substantial elimination of benefits to diagnose or treat a particular condition.
* Any increase in cost-sharing percentage requirements (such as coinsurance) above the level in effect as of March 23, 2010.
* An increase in the fixed-amount, cost-sharing requirements (e.g., deductible or out-of-pocket limits) above the level in effect on March 23, 2010, other than copayments, that exceeds the sum of medical inflation plus 15 percent.
* An increase in copayments above the level in effect on March 23, 2010, by an amount that exceeds the greater of the sum of medical inflation plus 15 percent or $5, adjusted annually by medical inflation.
* A contribution rate decrease by an employer or employee organization of more than 5 percent below the contribution rate on March 23, 2010, for any tier of coverage and any class of similarly situated individuals.
* The addition of an overall annual limit on the dollar value of benefits if the plan was not imposing an overall annual or lifetime limit on the dollar value of benefits on March 23, 2010.
* The addition of an overall annual limit on the dollar value that is lower than the dollar value of the lifetime limit on March 23, 2010.
* Any decrease in dollar value of the overall annual limit (regardless of whether the plan had an overall lifetime limit on March 23, 2010), if the plan imposed an overall annual limit on the dollar value of all benefits.
* A change in health plan carriers (changing a third party administrator has no effect).

Almost any change made since March 23, 2010 disqualifies your plan from being grandfathered. Did you know that in April when you raised your deductible? Have you changed your copays lately? Even replacing the exact same benefits with a different insurance carrier causes you to forfeit your grandfathered status. This isn’t about you, your business, or your employees. It certainly is not about making your current policy more effective.

Will there be any benefit to having a grandfathered health plan? I don’t know. But, the government thinks that there will be a real value and Washington is working very hard to take it away from you.


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8 Responses to Don’t Cry Uncle, Stay Grandfathered

  1. Donna says:

    I'm confused. If the government believes there is something seriously wrong with health care policies as they currently stand, why is anyone even TALKING about grandfathering ANYTHING? You can't affect change if anything or everything is exempt from the new rules.

  2. Dave Cunix says:

    Definately a different view of this. The reason for all of the talk of grandfathering is that the President campaigned during the year before the final vote that if you liked your current plan, you could keep it. Clearly that isn't true. And that is the whole point.

  3. Donna says:

    I don't take things as literally as you do, I guess.

  4. Dave Cunix says:

    The comment comes from a regular reader who prefers to remain nameless:

    The term "grandfather clause" in its current application refers to a legislative provision that permits an exemption based upon a pre-existing condition.

    The fact that the above definition of the term "grandfather clause" rests upon pre-existing conditions and health insurance contracts often refer to pre-exisiting conditions (reform wise and otherwise), your post provides a most curious intersection.

    An attorney who abhors change and who avoids reading small print.
    No Names Please!

  5. Dave Cunix says:

    The new rules cost money. The insurance companies will pass along those costs to their business clients who will, in turn, pass along those costs to consumers. This was not a big part of the conversation prior to the bill's passage because of the way it was sold.

  6. […] blog has tackled the grandfather issue repeatedly since August 2, 2010’s, Don’t Cry Uncle, Stay Grandfathered.  Retroactive rules.  Contradictory edicts.  Those of us who actually work in the insurance […]

  7. […] expensive and inefficient.  Aetna, to the surprise of both agents and insureds, eliminated their grandfathered policies in the summer of 2010.  But this group, incredibly healthy and firmly in the insurer’s […]

  8. Jaywalking | says:

    […] Individual policy purchased prior to March 2010 – Grandfathered […]

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