The PPACA includes a provision that considers health plans that existed on March 23, 2010, as “grandfathered.” Grandfathered plans are not required to comply with some of the PPACA provisions. Grandfathered plans can make routine changes to plan designs without losing grandfathered status. However, plans will lose their grandfathered status if they make changes that significantly cut benefits, increase out-of-pocket spending for individuals or reduce the employer contribution toward the cost of the plan.
A November 2010 amendment allows employers to keep grandfathered status if:
- An insured plan changes insurance policies (to a new carrier) and the new policy was effective on or after November 17, 2010
- A self insured plan changes to an insured plan and the policy was effective on or after November 17, 2010
Early Retiree Reinsurance Program
The federal program will pay employers for part of the cost of health benefits they pay for retired employees age 55 and over, their spouses, surviving spouses and dependents. The program started June 1, 2010 and ends January 1, 2014 or when its $5 billion budget is used.
The Early Retiree Reinsurance Program refunds employers for up to 80 percent of claims that cost between $15,000 and $90,000. Employers must use the early retiree reinsurance program funds on health care programs that help to control employee costs.
Read our Early Retiree Reinsurance Program FAQ
Health insurance companies must post health plan options online for consumers. This provision applies only to fully insured individual policies and small group plans.
Appeals and external review
Important: Grandfathering applies to this provision differently for individual and group plans. See details below.
All non-grandfathered individual and group health plans must have an effective appeals process for coverage determinations and claim decisions for plan years beginning on or after September 23, 2010. The PPACA requires plans and issuers to offer an external review process that meets minimum requirements.
Follow Employee Retirement Income Security Act (ERISA) rules pertaining to claims and appeals.
- Consider a rescission (retroactive cancellation) of coverage to be an adverse benefit determination
- Provide to the claimant any new or additional evidence or rationale considered, relied upon or generated in connection with the claim prior to giving a final adverse determination
- Address urgent pre-service initial determinations within 72 hours
- Meet additional adverse determination notice requirements, including:
- Providing information sufficient to identify the claim
- Providing a description of the available internal appeals and external review processes
- Disclosing information about any applicable office of health insurance consumer assistance or ombudsman
There is a foreign language requirement for notices under certain circumstances.
Grandfathered group plans are exempt from this requirement.
Read our news alert to learn about reform’s claims and appeals process
Cancellation of coverage (rescissions)
Insurers and plans cannot retroactively cancel coverage except in cases of fraud or intentional misrepresentation. If coverage is cancelled, the PPACA requires 30 days advance notice to all enrollees.
Note: Cigna voluntarily complied with this provision on May 1, 2010.
Read our rescission on self-insured plans FAQ
Dependent coverage to age 26
The PPACA requires dependents under age 26 be covered regardless of marital, student, residency or financial status. The Department of Health and Human Services requires plans to cover those:
- Currently enrolled on the plan
- Previously terminated from the plan
- Never enrolled on the plan
Spouses and children of dependents are not eligible unless the plan already covers these individuals.
Until 2014, grandfathered plans are not required to cover dependents that have access to another employer-sponsored plan.
- Funds from Health Reimbursement Accounts (HRAs) and Flexible Spending Accounts (FSAs) may be used for dependents up to age 26.
- Plans may also offer retroactive FSA reimbursement for expenses incurred by a dependent up to age 26 – as far back as March 30, 2010. The IRS Ruling (2010-38) allows for this exception as long as you amended your cafeteria plan documents by December 31, 2010.*
- Health Savings Account (HSA) funds may not be used to pay the expenses of covered dependents who are not claimed as dependents for tax purposes.
*Under certain circumstances, extending FSA coverage to dependents up to age 26 may be optional. Please speak to your own legal counsel to determine if your FSA plan is required to provide this extension of coverage.
Enrollees must be allowed to select the primary care physician (PCP), including a pediatrician, of their choice. Enrollees must be able to visit an OB/GYN without a referral from the PCP. This rule does not apply to grandfathered plans.
Dollar limits on essential health benefits
Important: Grandfathering applies to annual dollar limits differently for individual and group plans. See details below.
- Plans are restricted from having lifetime limits on coverage defined as Essential Health Benefits. Health care reform allows an annual limit on Essential Health Benefits until January 1, 2014. Final government definitions of essential benefits remain outstanding. However, plans and insurers are expected to make a good faith effort to comply with the lifetime and annual guidance provided so far.
The following minimum annual limits are allowed for plan years beginning on or after these dates:
- September 23, 2010: not less than $750,000
- September 23, 2011: not less than $1.25 million
- September 23, 2012: not less than $2 million
- 2014: No annual dollar limits allowed
Plans and insurers must offer a one-time, 30-day special enrollment period to any individual whose coverage previously ended due to reaching the lifetime dollar limit. This applies if that individual would otherwise still be eligible for coverage.
The PPACA provides an annual limits waiver program for limited benefit plans, which are typically for part-time or seasonal employees, that were in effect prior to September 23, 2010. The waivers are generally granted if compliance would significantly increase premiums or decrease access to coverage for current enrollees.
In June 2011, the Department of Health and Human Services extended the waiver program through 2014. To obtain a waiver, an extension request must have been received by September 22, 2011. Annual limit updates must then be sent by December 31, 2012 and December 31, 2013 to extend the waiver through 2014.
The PPACA has disclosure requirements for plans that receive waivers. They must clearly communicate limits of the coverage so plan participants understand them.
When state insurance exchanges open and other coverage options become available, waivers and annual limits will no longer be allowed.
For individual plans, annual dollar limits do not apply to grandfathered plans.
Read our extending annual limits waiver alert
Learn about annual and lifetime maximums in our FAQ
Read our waiver process/special consideration FAQ
The PPACA requires insurers to cover all emergency services* as in-network benefits even if the emergency services are received out-of-network. Also, the PPACA does not allow insurers to require prior authorization for out-of-network emergency care.
Doctors and hospitals may balance bill participants once their benefit plan or insurer pays an amount equal to the greatest of the:
- Amount negotiated with in-network providers (median cost, if more than one amount is negotiated)
- Amount of the in-network, cost-sharing (without reduction for out-of-network cost-sharing, i.e. the Usual and Customary Rate or “UCR”)
- Sum generally paid by Medicare
These requirements do not apply to grandfathered plans.
*Plans must adopt a standard the “prudent layperson” definition for emergency services.
Read our emergency care FAQ
Prohibition in favor of highly compensated individuals
Health care reform does not allow plans to discriminate by giving highly compensated employees better benefits. Employers may be fined $100 per day multiplied by the number of employees denied participation in the plan. The Department of Treasury has delayed enforcement of this rule until the Department of Health and Human Services issues additional rules.
Distinction based on a job factor, such as hours, salary or location may be acceptable.
Grandfathered plans do not have to follow this rule. A similar rule already exists for self-funded plans.
No pre-existing condition limitations for enrollees under 19
Important: Grandfathering applies to this provision differently for individual and group plans. See details below.
Plans cannot deny benefits and coverage for people age 19 or under, whether they are an employee, spouse or dependent, because they have a pre-existing condition.
Beginning January 1, 2014 no one can be denied coverage based on pre-existing conditions.
Grandfathered individual plans are exempt from this requirement.
Preventive services/immunizations without cost share
Plans must cover preventive care services and immunizations with no cost-sharing, such as deductibles, coinsurance, copayments or any other payment. However, cost sharing does not include premiums, balance billing amounts for out-of-network services or costs for non-covered services.
Grandfathered plans do not have to follow this rule.
The PPACA does not require preventive care to be covered for services received out-of-network. If a grandfathered or non-grandfathered plan includes out-of-network coverage, then cost-sharing, such as deductibles and coinsurance, are allowed. The preventive care services are covered in full under the in-network coverage.
Dollar limits on out-of-network preventive services and immunizations are not allowed.
Preventive care services and immunizations include:
- Recommended evidence-based preventive services from the United States Preventive Services Task Force with a rating of A or B.
- Immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention.
- Preventive care guidelines developed by the Health Resources and Services Administration and the American Academy of Pediatrics.
- On August 1, 2011, HHS adopted additional Guidelines for Women’s Preventive Services – including well-woman visits, support for breastfeeding equipment, contraception and domestic violence screening – that will be covered without cost sharing in new health plans starting in August 2012. The guidelines were recommended by the independent Institute of Medicine (IOM) and based on scientific evidence.
- These additional guidelines apply to new non-grandfathered plans (new or renewing) beginning with the first plan year on and after August 1, 2011.
- Please visit hrsa.gov/womensguidelines to read the Guidelines for Women’s Preventive Services.
Visit hhs.gov to read a list of covered preventive services.
Read our preventive health services without cost-sharing alert
Access our coverage of preventive health services without cost-sharing fact sheet
Temporary high risk pools
Temporary high-risk pools give health insurance to people with pre-existing conditions who have not had insurance for at least six months. These pools will be available until state exchanges begin operating and selling insurance in 2014.
If insurers and employers encourage individuals to leave their current plan to join a high-risk pool they will be held responsible for the health care expenses paid by the high-risk pool.
No unreasonable premium increases
Every year the federal government will review plan premium increases. Health and Human Services is establishing a process to review unreasonable increases. This provision applies only to fully insured individual policies and small group plans.