Exemptions in the Affordable Care Act for Grandfathered Plans

Copyright © 2014 AARP. All rights reserved.

Certain types of insurance plans are considered grandfathered and, therefore, are subject to only some of the ACA’s provisions, not all of them. What defines a grandfathered plan is quite specific.

A grandfathered plan refers to individual and employer plans that were in existence by the day the ACA was signed into law (March 23, 2010) and have stayed basically the same since that date.

You may have enrolled in your employer plan after that date, but if the plan existed and has stayed basically the same since March 23, 2010, it may be a grandfathered plan. If you enrolled in a plan sold in the individual market after that date, your plan isn’t grandfathered.

The first item to know is that your insurance company or employer must inform you if you have a grandfathered plan. In the information you receive explaining plan benefits, the insurer or employer must state whether a plan is grandfathered; you shouldn’t have to do any guesswork.

Over time, plans that are currently grandfathered may change coverage to remain competitive and profitable; they would then lose that grandfathered status and need to comply with the ACA.

If your plan is grandfathered, here’s what you need to keep in mind:

  • As with all insurance plans, the grandfathered plan must adhere to these ACA provisions:

    • It cannot place a lifetime limit on coverage.

    • It cannot terminate someone’s insurance coverage unless that person has purposely given false information when applying or has neglected to pay the premiums.

    • It must allow adult children up to age 26 to get coverage under a parent’s family insurance plan.

    • It must provide a Summary of Benefits and Coverage to its existing customers.

    • It must spend at least 80 percent of the premiums it collects on healthcare costs or quality improvements (instead of on overhead, administrative costs, or marketing).

  • Unlike other private insurance plans, a grandfathered plan isn’t required to do the following (although it may do so voluntarily to provide better service and compete more effectively with other plans):

    • Cover the essential health benefits required by the ACA

    • Allow you to choose your own doctor from within its network of providers

    • Let you use an out-of-network emergency room without paying more than you would for in-network care

    • Limit your out-of-pocket expenses

    • Set premium levels based only on certain criteria

    • Grant you the right to appeal its decisions, such as the denial of a claim

    • Publicly state why its premiums are increasing by 10 percent or more

  • Also, if you have an individual grandfathered plan — one that you purchased yourself, not through your workplace — that plan may still have annual limits on coverage and may be able to deny coverage for preexisting conditions.

    If you have a private individual insurance plan that you bought for yourself or your family, definitely find out whether it’s grandfathered. If it is, you may want to at least do some comparison shopping on the Health Insurance Marketplace in your state.

    Your grandfathered plan is required to give you a Summary of Benefits and Coverage (SBC), which makes it fairly easy to compare what you’ve got with other plans that are available to purchase.

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