Fact Check on Grandfathered Policies

Given all the attention on this issue, we wanted to provide some additional information on the grandfathering provision included in the ACA:

  • Policies that were in effect when the ACA was signed into law (March 23, 2010) may be considered “grandfathered” and therefore would not have to meet the new requirements.
  • Most policies in the individual market are not “grandfathered” and therefore have to come into compliance with the ACA requirements starting on January 1, 2014 or when those policies renew throughout the year.
  • The primary reason most policies are not grandfathered today is because people chose to change their policies or purchased new coverage after the law was enacted.  According to regulations released by HHS, “between 40 percent and 67 percent of policies are in effect for less than one year” and “the high turnover rates described here would dominate benefit changes as the chief source of changes in grandfather status.”
  • Moreover, the regulations issued by HHS put restrictions on changes to grandfathered plans that effectively make grandfathering temporary.  The regulations state that grandfathered status would be lost if any of the following changes were made to a policy at any time after March 23, 2010:
    • coverage for a particular condition or illness is eliminated,
    • an annual dollar limit on benefits is imposed or an existing limit is reduced,
    • a coinsurance percentage is increased to any extent,
    • a dollar co-payment is increased by more than the greater of $5.00 indexed for medical inflation or 15 percent (one-time allowance) plus medical inflation beyond what was in effect at the time the ACA was enacted,
    • deductibles or out-of-pocket maximums are increased by more than 15 percent (one-time allowance) plus medical inflation beyond what was in effect at the time the ACA was enacted, or
    • the employer changes eligibility requirements in certain ways or increases its employees’ contributions to premium by more than 5 percent plus medical inflation.

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