Small Businesses: Can You Keep Your Current Coverage?

Many businesses, especially small business owners, are asking about “grandfathered” plans, which are the healthcare plans that businesses currently have in place.  The Affordable Care Act allows employers who like their current coverage to keep it, as long as the plan was in existence before reform was enacted on March 23, 2010.

If you are one of these businesses, you are permitted to keep your “grandfathered plan” as long as you don’t make any significant changes in coverage.

If any of the following changes are made, the plan can no longer keep its grandfathered status—which means that all the new consumer protections introduced with reform will apply.

  • Increase medical costs to employees. An increase in cost-sharing above medical inflation (usually 4-5% annually) plus 15% (changes in premiums are not taken into account): 1) Raises copayment charges more than $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15%
  • Raised deductibles. An allowable range is 19-20% from 2010 to 2011; 23-25% from 2011 to 2012; grandfathered plans can only increase these deductibles by a percentage equal to medical inflation plus 15%
  • Increases in coinsurance charges. For example, if coinsurance for a hospital stay is 20% (usually requires the patient to pay a fixed percentage of the charge), it cannot be increased to 25%
  • Reductions in employer contribution. Many small business owners pay a portion of their employee’s insurance premium and this is usually deducted from workers’ paychecks. If an employer decreases the percent of premiums it pays by more than 5%, the plan loses its grandfathered status.
  • Significant cuts or reductions in benefits. For example, if coverage for a specific condition, like diabetes, HIV/AIDS or cystic fibrosis is reduced or eliminated.
  •  Adding or tightening an annual limit. As of 2010, annual limits are restricted and will be phased out. To keep grandfathered status, an annual dollar limit may not be made more restrictive; if the plan had no annual dollar limit on March 23, 2010, a new one can’t be added. There’s one exception: if there was a lifetime cap, it could become the annual dollar limit, so long as it is at least as high as the lifetime cap. Annual limits requirements are as follows:
    • Plan years: Sept. 23, 2010 to Sept. 23, 2011: not less than $750,000
    •  2011-2012, not less than $1.25 million
    •  2012-2013, not less than $2 million

The limits apply only to essential benefits, not yet defined.

What if you lose grandfathered status? Is there a way to remedy the loss?

If employers inadvertently trigger the loss of grandfathered status by violating one of the above rules they may request a delay and make any necessary changes to coverage in order to retain the status.

For more information, visit healthcoverageguide.org.

Filed under: Grandfathered Health Insurance Plans

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