Have you heard the term grandfathered group health plan and asked yourself, what is that? If so, we have some answers to your questions. Understanding the terms and facts will help you make better decisions for both employers and employees.
1. What is a grandfathered group health plan?
A grandfathered group health plan is a plan where an individual was enrolled on March 23,
2010. A grandfathered plan can be a single employer plan, a multi-employer plan, or a multiple
employer plan and it can also be an insured or a self-insured arrangement.
2. My plan appears to be grandfathered. What does that mean?
Depending on the provision, grandfathered plans may benefit from either a delayed effective date
for compliance with, or a total exception from, certain insurance market reforms and coverage
mandates under Subtitles A and C of PPACA. It is important to note that grandfathering
does not protect a plan from the reforms found in other parts of the statute. For
example, the mandatory requirement to include the value of coverage on each employee’s Form
W-2 (effective January 1, 2011), the large-employer mandate to offer affordable coverage to full-
time employees (effective January 1, 2014), the high-cost health plan excise tax (effective
January 1, 2018) and the mandatory automatic enrollment requirement (effective once
regulations are issued).
3. If I add new employees (or new enrollees) to my currently grandfathered plan, does the plan lose
its grandfathered status?
No. Section 1251(c) of PPACA specifically provides that a grandfathered plan may enroll new employees and their families in the plan without losing the plan’s grandfather status.In addition, the statute also states that grandfathering continues to apply to the coverage of an individual covered by the plan on the date of enactment regardless of whether the individual renews coverage or adds family members after the date of enactment. Although the statute does not specifically state that a plan may add other new enrollees (i.e., current employees who have not previously enrolled in the plan), it is unlikely that enrollment of such employees in the ordinary
course will cause the plan to lose its grandfathered status.
4. Can I amend my grandfathered plan without losing the grandfathered status?
Some amendments are permitted, but the complete answer to this question is still unclear. Unlike the grandfather provisions of other legislation, section 1251 of PPACA does not expressly prohibit amendments to a grandfathered plan, nor does it contain a mandate requiring plan sponsors to maintain benefits at current levels in order to preserve grandfather status. Arguably, this means that plan sponsors may freely amend their grandfathered plans without jeopardizing the plan’s grandfathered status. It is unlikely that such a liberal reading of the provision accurately reflects legislative intent. Until further guidance is issued, plan sponsors must consider amendments to grandfathered plans on a case-by-case basis to determine (1) whether the amendment substantively alters the nature of the plan’s coverage in a manner that may jeopardize the plan’s grandfathered status, and (2) the true cost impact of losing grandfather status.
We hope this information has helped you better understand the grandfather rules. If you have questions you benefits consultant is always available to help you.