What a Grandfathered Plan Is
A grandfathered plan is a group health plan that existed on March 23, 2010, the date the ACA was enacted, and has continuously covered at least one person since then.
Grandfathered plans are exempt from some ACA requirements, as long as they don’t make certain changes to benefits, cost sharing or employer contributions.
Requirements Grandfathered Plans Don’t Have to Meet
Grandfathered plans aren’t required to comply with some ACA provisions, including:
- Coverage of preventive services without cost sharing
- Certain patient protections, such as rules on choosing a provider and emergency services
- The ACA’s internal appeals and external review procedures
- The ACA’s out-of-pocket maximum (the cap on what a person pays in deductibles, copays and coinsurance each year)
- For small group grandfathered plans, coverage of all ten Essential Health Benefits
Requirements That Still Apply
Grandfathered plans still follow many core ACA rules, including:
- No lifetime or annual dollar limits on essential health benefits
- Coverage of dependent children up to age 26
- No preexisting condition exclusions
- A waiting period of no more than 90 days
- Summary of Benefits and Coverage (SBC) requirements
- The employer mandate, for employers that are Applicable Large Employers
Losing Grandfathered Status
A plan permanently loses grandfathered status if it makes certain changes, such as:
- Eliminating or substantially reducing benefits for a particular condition
- Increasing deductibles, copays, coinsurance or other cost sharing beyond limits set by federal rules
- Reducing the employer’s contribution rate by more than 5 percentage points
Once grandfathered status is lost, the plan must follow all applicable ACA requirements going forward.
Notice Requirement
A grandfathered plan must include a statement in its plan materials explaining that it’s grandfathered and what that means for participants. The U.S. Department of Labor provides model language.
Important: This information is provided for general educational purposes. It is not legal or tax advice. How these rules apply depends on each employer’s specific circumstances, so employers should review their situation with their own legal counsel, ERISA attorney, CPA or tax advisor.