A grandfathered plan is one that was in existence on March 23, 2010, when the Affordable Care Act was signed. The new regulations don't force these plans to remain frozen in time; certain changes are permissible. For example, insurance companies can voluntarily adopt the new consumer protections in the Affordable Care Act or make changes that are necessary to comply with state laws. They can make regular cost adjustments in order to match medical inflation or add new benefits. But certain changes must be made within reason or the plan will lose its grandfathered status.
The new regulations stipulate that employers can't change insurance companies and that grandfathered plans can't:
- Significantly cut the benefits offered as of March 23, 2010. That means that if the plan has always offered care for HIV/AIDS, then it must continue to do so.
- Raise co-insurance charges. Co-insurance is typically a fixed percentage of a bill, and that percentage can't be changed.
- Significantly raise co-pays. Insurers are allowed to adjust co-pays by no more than the greater of $5 (a figure that will be adjusted yearly for inflation) or a percentage equal to medical inflation plus 15 percentage points. Medical inflation has been 4 to 5 percent for the past few years, so co-pays couldn't be increased by more than 19 to 20 percent.
- Significantly raise deductibles. Insurers are allowed to adjust the costs by a percentage equal to medical inflation plus 15 percentage points.
- Lower an employer contribution to the premium by more than 5 percentage points
- Alter the annual limit for covered services
Your employer should notify you if your plan will be grandfathered. They may also have a few choice things to mumble under their breath when talking about grandfathered health plans; according to the business federations such as the Chamber of Commerce and the National Federation of Independent Business, these regulations are unfair to employers, particularly small business owners. On the other hand, these regulations were written with consumers in mind, and the new rules protect them from rising costs. After all, would you really like the plan you have now if you had to pay 50 percent more for it? We'll examine the reaction from businesses a bit more on the next page.