An employer-sponsored health plan can be grandfathered if it covered employees when the Affordable Care Act (ACA) was enacted on March 23, 2010, and if the plan does not make certain changes that lower benefits or employer contributions, or does not increase employee-paid deductible, coinsurance or copayment costs.

Key considerations

Grandfathered plans cannot materially change the cost-share, employer contribution levels or benefits (see list below). While grandfathered plans may have lower premiums than some non-grandfathered plans, other factors such as medical trends and benefits design (e.g., variations in deductibles) may have an impact on renewal rates.

  • Grandfathered plans are exempt from some health care reform provisions, including:
    • Certain benefit mandates, such as essential health benefits or requirements to cover preventive benefits with no cost-sharing.
    • Maximum out-of-pocket and deductible limits.
    • Clinical trial coverage.
    • External appeals process.
    • Non-discrimination testing for fully insured plans.
    • Some of the additional reporting and disclosures.
    • Guaranteed availability and renewability.
  • Grandfathered plans may not change insurance companies.
  • Grandfathered plans cannot:
    • Significantly cut or reduce benefits.
    • Raise employee coinsurance charges.
    • Significantly raise copayment charges (15 percent more than medical trend since 2010).
    • Significantly raise deductibles (15 percent more than medical trend since 2010).
    • Significantly lower employer contributions (more than 5 percent of proportional cost share for any coverage category).
    • Add or tighten an annual limit on what the insurer pays.

    Tax credit availability

    • The employer will not be eligible to receive small-business tax credits.
    • Employees may be eligible to receive health insurance marketplace subsidies if their employer’s coverage does not provide minimum value coverage and/or the employee contribution is more than 9.5 percent of the employee’s household income.

    Administration and reporting

    Employees need to be notified of the grandfathering status.

    The employer will continue to use their current practices to work with issuers to obtain and maintain coverage.

    Employers will submit required reporting to the Internal Revenue Service starting in 2016. For more information about reporting requirements:

    Penalties

    Employers with 50 or more full-time equivalent employees may be subject to shared-responsibility penalties if coverage either does not meet affordability or minimum value requirements. Employers must offer coverage to 95 percent of full-time employees and their dependents.

    Voluntary insurance

    Employers will have the ability to revise their voluntary benefits package, even though the medical benefits package is grandfathered. These policies provide peace of mind to employees by helping with out-of-pocket costs associated with illness or injury. Learn more at Aflac.com.

    For more information

    A comprehensive summary is available in The Benefits Decision Guide. Learn more at aflac.com/health-care-reform.

    To learn more about coverage available in your state, visit: healthcare.gov, cciio.cms.gov and irs.gov.