Employers have several options to provide major medical insurance coverage for their employees in the new health care reform environment. Deciding which option meets both business and workforce needs is important to navigating the new health care landscape, as well as gaining a competitive edge in the battle for top talent.

Maintaining grandfathered status

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. While grandfathered plans may have lower rates (at least in the initial years), they will not include some of the new ACA benefit reforms.

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  • The employer will continue to offer the pre-reform grandfathered benefit plan.
  • The benefit plan will not materially change the cost-share, employer contribution levels or benefits (see list below).
  • Employees need to be notified of the grandfathering status.
  • Grandfathered plans are exempt from some health care reform provisions, such as:
  • 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 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 credits
  • Employers will not be eligible to receive tax credits.
  • Employees may be eligible to receive 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.
  • Starting in 2015, employers with 100 or more full-time equivalent employees need to provide affordable, minimum value health care coverage to 70 percent of all full-time employees and their dependents or face a penalty. If your company didn’t offer dependent coverage in 2013 or 2014, your company won’t be penalized for not providing coverage to dependents in 2015, as long as you are taking steps to provide the coverage in 2016.
  • In 2016, the requirement is extended to employers with 50 or more full-time equivalent employees. Additionally, coverage must be offered to 95 percent of full-time employees and their dependents.
  • The employer will continue to use their current practices to work with issuers to obtain and maintain coverage.
  • The employer will submit required reporting to the Internal Revenue Service starting in 2016.
Employee tools and resources
  • Employees will use the company’s current practices for open enrollment and renew coverage from available health plan choices that are selected by the employer.
  • Employees may use a single seamless process to obtain a comprehensive benefits package, including voluntary benefits options.
Supplemental insurance protection
  • Employers will have the ability to revise their voluntary benefits package, even though the medical benefits package is grandfathered.
  • These policies can be bought separately to help employees with out-of-pocket costs associated with illness or injury.

To learn more about available options visit: aflac.com/business/policies.

Key considerations

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. Many employers make changes to their benefits design and contribution levels annually to keep costs under control, so the number of employers with grandfathered plans and employees in grandfathered plans has steadily decreased each year. Despite the decline, maintaining grandfathered status can be a viable option for businesses meeting the grandfathered status requirements.

For more information

You can find more information about multiple benefits delivery options, including: insurer based, self-funded coverage, maintaining grandfathered status, Small Business Health Option Program (SHOP) Marketplace or a private marketplace at aflac.com/healthcare_reform. A comprehensive summary is available in The Employer’s Guide to Health Care Reform.

As you continue to navigate health care reform, you can rely on Aflac to provide updates and helpful information at: aflac.com/insights. To learn more about coverage available in your state, visit: healthcare.gov, cciio.cms.gov and irs.gov.