Most of the 133 million Americans with employer-sponsored health insurance through large employers enjoy some of the benefits of the Affordable Care Act now, regardless of whether their plan is grandfathered. The reforms that apply to all heath plans beginning on or after September 23 include:
• No lifetime limits on coverage for all plans;  
• No rescissions of coverage when people get sick and have previously made an unintentional mistake on their application;
• Extension of parents' coverage to most young adults under 26 years old; and the
• Requirement to provide consumers with a standardized, easy-to-understand summary of coverage.

People who work in smaller firms - which change insurers more often due to annual fluctuations in premiums - will enjoy all of these benefits plus new benefits when they choose a new plan, including:
• Coverage of recommended prevention services with no cost sharing; and
• Patient protections such as guaranteed access to OB-GYNs and pediatricians.

These Americans also can benefit from more affordable choices from health insurance Exchanges - ­competitive market places that will be established in 2014 and will offer individuals and workers in small businesses much greater choice of plans at more affordable rates and the same choices as Members of Congress.

Back to list

The "grandfather" rule which helps to implement the Affordable Care Act preserves the ability of the American people to keep their current plan if they like it, while providing new benefits, by minimizing market disruption and putting us on a glide path toward the competitive, patient-centered market of the future.

While the Act requires all health plans to provide important new benefits to consumers, it allows plans that existed on March 23, 2010 to innovate and contain costs by allowing insurers and employers to make routine changes without losing grandfather status. These routine changes include cost adjustments to keep pace with medical inflation, adding new benefits, making modest adjustments to existing benefits, voluntarily adopting new consumer protections under the new law, or making changes to comply with state or other Federal laws. Premium changes are not taken into account when determining whether or not a plan is grandfathered.

Plans will lose their "grandfather" status if they choose to significantly cut benefits or increase out-of­-pocket spending for consumers - and consumers in plans that make such changes will gain new consumer protections.

The 133 million Americans with employer-sponsored health insurance through large employers (100 or more workers) - who make up the vast majority of those with private health insurance today-will not see major changes to their coverage as a result of this regulation. The "grandfather" rule affirms that most of these plans will remain grandfathered -more than three-quarters of employers in 2011--based on the decisions they made on benefits and costs over the last two years (2008-2009). Most of these plans already offer the patient protections applied to grandfathered plans such as no pre-existing condition exclusions. In addition, they are likely to already give their workers and families some of the additional proiections in the Act, like a choice of OB-GYN and pediatrician and access to emergency rooms in other states without prior authorization.

Based on past patterns of behavior, however, it is expected that large employers will continue to make adjustments to the health plans they offer from year to year so that, by the time the health insurance Exchanges are established in 2014, fewer large employer plans will have grandfather status. However, the assumed market changes depend on the choices large employers make in the future.

People who work in smaller firms - which change insurers more often due to annual fluctuations in premiums -will enjoy all of the benefits of the Affordable Care Act when they choose a new plan. These Americans also will benefit from the new Health Insurance Exchanges that will be established in 2014 to offer individuals and workers in small businesses with much a greater choice of plans at more affordable rates -the same choices as members of Congress.

Back to list

No. Grandfathered plans will have the flexibility to make changes in order to remain active and vibrant just so long as they don't dramatically reduce people's benefits or increase their cost-sharing. Among other things, plans will be able to:
• Raise premiums to reasonably keep pace with health care costs;
• Make some changes in the benefits that they offer;
• Increase deductibles and other out-of-pocket costs within limits; and
• Continue to enroll new employees and new family members.

For more information on what changes will cause employers and insurance plans to lose their grandfather status, please click here.

Back to list

One of the major goals of the Affordable Care Act is to slow the growth of costs by making important changes to the nation's health insurance system. These changes will help consumers and employers regain control of their coverage and health costs. Through the "medical loss ratio" requirement, the Affordable Care Act will help ensure that insurance companies provide value for the premium dollars they charge. The law gives the Secretary of Health and Human Services authority to publicly post the proportion of premium dollars that an insurer spends on medical care as opposed to marketing or profits. If an insurer spends too much on non-medical expenses, it will be required to provide rebates. The new law also helps states monitor and crack down on unreasonable premium increases by insurers. It provides for grants to states to improve monitoring and regulation of premium increases by insurers.

Back to list

Small business owners and entrepreneurs who buy their own insurance often pay the highest prices for coverage and suffer from the greatest limits on their benefits. Because of their relative lack of leverage, small businesses often make substantial changes in coverage from year to year, and therefore are expected to transition from their current grandfathered plans to ones with the Affordable Care Act's new protections over the next few years.

Health reform will immediately help small businesses sustain coverage for their workers, and provide them with affordable choices in the future. In 2010, small businesses may qualify for a tax credit to offset up to 35% of their premium contributions. In 2014, Exchanges will provide small employers and entrepreneurs with greater clout in the insurance market, tax credits up to 50% of their premiums, and stronger protections against objectionable insurance practices such pre-existing condition exclusions for their workers.

Back to list

No. Employers that already provide many of the benefits and protections provided for under the Affordable Care Act will experience relatively little change. The grandfather regulation provides illustrations to help guide employers' decisions. When employers tell employees about their health plans, employers who believe their health plans are grandfathered must include information about their status and maintain records needed to verify it. In addition, the regulation includes provisions to smooth the transition to the new system by letting the government take into account a "good faith effort" by employers to comply. It exempts retiree-only and "excepted benefit plans" like dental insurance.

Back to list

Health plans subject to collective bargaining agreements are generally able to maintain their grandfathered status tbrough the end of the agreement. The law and regulations also include a special rule for collectively bargained plans that gives additional flexibility to change insurers during the collective bargaining agreement in effect on the date that the Affordable Care Act was signed. After that, collective bargaining agreements are subject to the same rules as other health plans.

Back to list

Whether or not a plan or policy is considered the "same" as it was on March 23, 2010 depends on the changes that it makes from that point forward. Grandfathered health plans will be able to make routine changes to their policies and maintain their status. These routine changes include cost adjustments to keep pace with medical inflation, adding new benefits, making modest adjustments to existing benefits, voluntarily adopting new consumer protections under the new law, or making changes to comply with state or other Federal laws. Premium changes are not taken into account when determining whether or not a plan is grandfathered.

Plans will lose their grandfathered status if they choose to make significant changes that reduce benefits or increase costs to consumers. If a plan loses its grandfathered status, then consumers in these plans will gain additional new benefits including:
• Coverage of recommended prevention services with no cost sbaring; and
• Patient protections such as guaranteed access to OB-GYNs and pediatricians.

Under the Affordable Care Act, these requirements are applicable to all new plans, and existing plans that choose to make the following changes that would cause them to lose their grandfathered status. Compared to the coverage in effect on March 23, 2010, grandfathered plans:
• Cannot significantly cut or reduce benefits - for example, if your plan covers care for people with diahetes, cystic fibrosis or HIV/AIDS, it cannot drop coverage for those diseases;
• Cannot raise co-insurance charges - for example, it increases your share of a hospital bill from 20% to 25%;
• Cannot significantly raise co-payment charges - for example, it raises its copayment from $30 to $50 over the next 2 years;
• Cannot significantly raise deductibles - for example, it raises a $1,000 deductible by $500 over the next 2 years;
• Cannot significantly lower employer contributions by more than 5 percent-for example, it increases its workers' share of the premium from 15% to 25%;
• Cannot add or tighten an annual limit on what the insurer pays. Some insurers cap the amount that they will pay for covered services each year. If they want to retain their status as grandfathered plans, plans cannot tighten any annual dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees).

Back to list

Yes. The Affordable Care Act, and the new grandfather rule that helps implement it, provide stability and flexibility to insurers and businesses that offer insurance coverage as the nation transitions to a more competitive marketplace in 2014 where businesses and consumers will have affordable choices through Exchanges.

An estimated half of employer-sponsored health plans that insure well over half of American workers and their families will remain grandfathered through 2013. Change is likely to come more swiftly in the individual market because up to two-thirds of individual policyholders switch coverage in a given year so that policies are likely to lose their grandfathered status and consumers will gain new protections more quickly. But this is a market that would experience rapid change even without the grandfathering regulation of health insurance reform.

Back to list

The Departments of Health and Human Services, Labor and Treasury have authority to enforce these provisions of the Affordable Care Act. The Federal government will work closely with the states, which have additional enforcement authority. 

Back to list

The rule is "interim final" regulation with a public comment period of 60 days. This means that while it has the effect of a final regulation, the Departments of the Treasury, Labor and HHS, which are issuing the rule, will examine the comments that we receive and make necessary changes when the regulation is issued in final form. Additional clarifications to address issues that may arise under these regulations could also be published by the Departments in an on-going manner through administrative guidance other than in the form of a regulation. The grandfather rule does state that any changes that are made after it is published will only apply prospectively. 

Back to list

People have grown increasingly frustrated by a lack of control over their own health care insurance. During the past decade, the cost of coverage has climbed more than three times faster than the average hourly wages of Americans. The Affordable Care Act makes important changes to our health insurance system to put patients back in charge of their coverage. In 2019, health spending per insured person is estimated to be about $16,800 without reform. With reform, that number decreases about 10% to a little over $15,000. The grandfather rule is designed to strike a balance between allowing existing health plans to make routine changes and preventing plans from making such large changes that they are no longer the plans people once had and liked. As such, they will ease the transition that the nation's health care and health insurance industries must make to comply with the reforms of the Affordable Care Act.

Back to list