Grandfathered vs. Non-Grandfathered Plans

If your insurance plan existed on March 23, 2010, and did not make changes to benefits and cost-sharing arrangements beyond routine changes under certain thresholds, your plan may be grandfathered. The PPACA has established several provisions that must be adhered to, but not all of these provisions apply to grandfathered group plans. Plans will lose their grandfathered 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.

 

Adult Dependent Coverage
Implementation: Effective for plan years beginning on or after Sept. 23, 2010

Young adults will be allowed to stay on their parents’ plan until they turn 26 years old (in the case of existing group health plans, this right does not apply if the young adult is offered insurance at work). This change is in effect for both grandfathered and non-grandfathered plans.

(PPACA 1001)  

 

Free Preventive Care

Implementation: Effective for plan years beginning on or after Sept. 23, 2010

All new plans must cover certain preventive services such as well-being visits, mammograms and colonoscopies without charging a deductible, co-pay or coinsurance.  This change only applies to non-grandfathered plans.

(PPACA 1001) 

 

Coverage of Children with Pre-Existing Conditions 

Implementation: Effective for plan years beginning on or after Sept. 23, 2010

The health care law includes new rules that provide coverage to children under the age of 19 regardless of pre-existing conditions.  This change applies to all plans except grandfathered individual market plans.

(PPACA 1201 & 10103)  

 

Elimination of Lifetime Limits on Insurance Coverage 

Implementation:  Effective for plan years beginning on or after Sept. 23, 2010

Under the law, insurance companies can no longer impose lifetime dollar limits on essential benefits, like hospital stays. This change applies to all plans except grandfathered individual market plans.

(PPACA 1001)  

 

Small Business Health Insurance Tax Credits

Implementation: Jan. 1, 2010

Small businesses are eligible for tax credits to help them provide insurance benefits to their workers. The first phase of this provision provides a credit worth up to 35 percent of the employer’s contribution to the employees’ health insurance. Small non-profit organizations may receive up to a 25 percent credit. The second phase of small business tax credits will be implemented on Jan. 1, 2014.

(PPACA 1421)

 

Review of Health Insurance Plan Increases

Implementation: Jan. 1, 2010

The federal government, in conjunction with the states, will create a process to ensure that large insurance rate increases are thoroughly reviewed. The regulation will require (began in 2011) that all insurers seeking rate increases of 10% or more in the individual and small group market publicly disclose the proposed increases and the justification for them. Under the proposed regulation, states with effective rate review systems would conduct the reviews. If a state lacks the resources or authority to do thorough actuarial reviews, the Department of Health and Human Services will facilitate them. 

   

 

Medical Loss Ratio 

Implementation:  Jan. 1, 2011

At least 85 percent of all premium dollars collected by insurance companies for large employer plans must be spent on health care services and health care quality improvement. For plans sold to individuals and small employers, at least 80 percent of the premium must be spent on benefits and quality improvement.  If insurance companies do not meet these goals, because their administrative costs or profits are too high, they must provide rebates to consumers.

(PPACA 1001)  

 

See Wellmark’s spending per premium dollar

 

Flexible Spending Account Changes

Implementation:  Jan. 1, 2011

Healthcare spending accounts (HSAs), flexible spending accounts (FSAs), Health Reimbursement Accounts (HRAs), or Medical Savings Accounts (MSAs) can no longer be used to purchase over-the-counter (OTC) drugs and medications unless prescribed by a doctor (effective for expenses incurred after December 31, 2010). In addition, the HSA penalty was increased from 10% to 20%, plus income tax for non-qualified distributions.   

(PPACA 9003)

(IRS Bulletin 2012-26, Notice 2012-40) 

 

 

Coverage of Women’s Preventive Services

Implementation:  Aug. 1, 2012

Non-grandfathered plans that are effective or renewed on or after August 1, 2012, must include 100 percent coverage for women’s preventive services when performed by an in-network physician. Coverage includes services like prenatal visits, FDA-approved contraceptives, mammograms and pap smears.

(PPACA 2713)

 

Summary of Benefits and Coverage

Implementation:  Effective in the individual market Sept.23, 2012. Effective in the group market during the first open enrollment period or plan year occurring on or after Sept. 23, 2012.

Insurers and/or group health plans must provide a summary of benefits and coverage (SBC) document to enrollees/potential enrollees at specific times (upon application, by the first day of coverage, following a special enrollment, upon renewal and upon request.) The new rules also require 60-days-prior-notice to enrollees and beneficiaries when a group health plan sponsor or issuer modifies the terms of coverage, and the change impacts a previously issued SBC.

(PPACA 1001)  

 

Learn more about SBCs.

 

W-2 Reporting

Implementation:  Covers employee 2012 W-2 form – provided to employees in Jan. 2013

Employer-sponsored groups that file 250 or more W-2 forms must report on employees’ 2012 W-2 forms – to be issued in January 2013 – the total cost of their 2012 employer-sponsored coverage on their W-2 forms.  

(IRS Notice 2012-9) 

 

Learn more about W-2 reporting

 

The Patient-Centered Outcomes Research Fee

Implementation: Oct. 1, 2012

Health insurance issuers and sponsors of self-funded group health plans will be assessed an annual fee to fund patient-centered outcomes research. The fee is imposed for a limited number of years, beginning in 2012 and ending in 2019. The trust funds the Patient-Centered Outcomes Research Institute, which finances efforts to find medical treatments that are more effective and cost efficient.  

 

Self-funded plan sponsors and providers of fully-insured plans are required to pay $1 per member, per year for the time period Oct. 1, 2012 through Sept. 30, 2013; for plan years of Oct. 1, 2013 through Sept. 30, 2014, the fee is $2 per member per year.  The fee may then be adjusted for plan years through 2019.

(PPACA 6301)

 

 

Medical Flexible Spending Account Maximum Decreased

Implementation:  Jan. 1, 2013

The maximum contributions to a medical flexible savings account will be decreased from its previous $5,000 limit to $2,500 per year.  Future adjustments to the limit will be based on the Consumer Price Index.

(IRS Bulletin 2012-26, 2012-40)

 

W-2 Reporting 

Implementation:  Jan. 1, 2013

Employees will begin to see the total cost of their 2012 employer-sponsored coverage on their W-2 forms (for the tax year 2012) in January 2013. This requirement only applies to employer-sponsored groups that file 250 or more W-2 forms per year.     

(IRS Notice 2012-9) 

 

Learn more about W-2 reporting

 

Elimination of Retiree Prescription Drug Tax Deduction

Implementation: Jan. 1, 2013

Beginning Jan. 1, 2013, the amount of the deduction for retiree prescription drug costs will be reduced by the amount of the excludable subsidy payments received. Currently, sponsors of qualified retiree prescription drug plans are eligible for subsidy payments for a portion of each qualified covered retiree’s gross covered prescription drug costs. These are excludable from the taxpayer’s (plan sponsor’s) gross income for regular income tax and alternative minimum tax purposes. For tax years beginning before 2013, a taxpayer may claim a business deduction for covered retiree prescription drug expenses even though it excludes qualified retiree prescription drug plan subsidies allocable to those expenses. This change is in effect for both grandfathered and non-grandfathered plans.

 

Employer Notice of Exchanges

Implementation: March 1, 2013

Beginning March 1, 2013, employers must provide all employees and new hires with a written notice of the availability of the health insurance exchange. (link to ‘health insurance exchanges below)  The notice will inform employees of the existence of the exchange, describe the services provided by the exchange and inform employees that they may be eligible for a premium tax credit or a cost-sharing reduction through the exchange in certain circumstances. 

(PPACA 1512)

 

Open Enrollment for Health Insurance Exchanges

Implementation: Fall 2013

Beginning in the Fall of 2013, open enrollment will begin for the new health insurance exchanges (link to ‘health insurance exchanges’ again) 

(PPACA 1311)

 

Increase to Patient-Centered Outcomes Research Fee

Implementation: Oct. 1, 2013

Since Oct. 1, 2012, health insurance issuers and sponsors of self-funded group health plans have been assessed an annual fee to fund patient-centered outcomes research. The fee is imposed for a limited number of years (beginning in 2012 and ending in 2019) and funds the Patient-Centered Outcomes Research Institute, which finances efforts to find medical treatments that are more effective and cost efficient.  

 

Beginning Oct. 1, 2013, self-funded plan sponsors and providers of fully-insured plans are required to pay $2 per member, per year for the time period Oct. 1, 2013 through Sept. 30, 2014 (the previous year’s fee was $1 per member, per year)

(PPACA 6301)

 

Navigators

Implementation:  Date TBD, 2013

Navigators are non-profit, grant-funded entities that will provide consumer education and advice about the public health insurance exchange. Specifically, they will provide outreach to underserved populations, help individuals with enrollment on the exchange, assist with questions about tax credits and answer grievances or complaints. Navigators will not be allowed to sell health insurance plans. They may be compensated by the exchange, but not by insurance carriers. States will have the flexibility to further determine the role of navigators. 

(PPACA 1311)

 

 

Minimal Essential Coverage

Implementation:  Jan. 1, 2014 

Minimal Essential Coverage (also referred to as the ‘individual mandate’) will require consumers to have acceptable, basic health insurance coverage or pay a penalty of $95 in 2014, $325 in 2015, $695 (or up to 2.5 percent of income) in 2016. Families will pay half the amount for children, up to a cap of $2,250 per family. After 2016, penalties are indexed to the Consumer Price Index. Tax credits and subsidies will be available for low income individuals and families.

(PPACA 1501)

 

Guaranteed Issue

Implementation:  Jan. 1, 2014 

The law will require insurance companies to accept all individuals that apply for coverage regardless of health status or pre-existing conditions. Rating variation will be allowed based on age, geographic area, family composition, and tobacco use in the individual, small group market and Exchanges.

(PHSA 2702)

 

Health Insurance Exchanges

Implementation:  Jan. 1, 2014 (Open enrollment will be October 2013)

A health insurance exchange is a new retail-like marketplace that offers health insurance and coverage options to individuals and small employers. Exchanges will offer consumers a choice of health plans that meet certain benefits and cost standards.  

 

Starting in 2014, if you are seeking individual coverage or if your employer doesn’t offer insurance, you will be able to buy it directly in an American Health Benefits Exchange or Small Business Health Options Program (SHOP) Exchange where individuals and small businesses can purchase qualified coverage.

(PPACA 1311)

 

New Premium Calculations

Implementation:  Jan. 1, 2014 

For non-grandfathered plans, (link to ‘grandfathered plans’ listed in 2010) individual plans premiums may only vary by: Age (3:1 maximum), Tobacco use (1.5:1 maximum), Geographic rating area or Type of Coverage (individual or family.)

(PHSA 2702)

 

Tax Credits and Subsidies

Implementation:  Jan. 1, 2014 

Premium tax credits and cost-share subsidies are available for low income individuals and families. Individuals and families with incomes between 100-400 percent of the Federal Poverty Level (FPL) can receive a premium tax credit through the public exchange to offset their health insurance premium. Additionally, individuals and families with incomes below 250 percent of the Federal Poverty Level (FPL) can also receive a cost-share subsidy through the public exchange that will decrease copayments, coinsurance, and deductible amounts.

 

The tax credits and cost-share reductions are only available if:

The individual or family is not eligible for government sponsored coverage (e.g. Medicaid);

• The individual’s employer does not offer access to minimum essential coverage;
• The individual’s employer offers coverage; however, employer contribution for self-only coverage exceeds 9.5 percent of  an employee’s household income; or
• The individual’s employer-sponsored plan pays for less than 60%, on average, of covered health care expenses.

(PPACA 1401)

 

Small Business Tax Credit Increase 

Implementation:  Jan. 1, 2014 

The law implements the second phase of the small business tax credit for qualified small businesses and small non-profit organizations. In this phase, the credit is up to 50 pecent of the employer’s contribution to provide health insurance for employees.  There is also up to a 35 percent credit for small, non-profit organizations. 

(PPACA 1421)

 

Young Adult Coverage

Implementation:  Jan. 1, 2014 

If your plan covers children, you can now add or keep your children on your health insurance policy until they turn 26 years old. The provision applies to children who are married, not living with you, attending school, not financially dependent or who are eligible to enroll in their employer’s plan. There is one temporary exception – Until 2014, grandfathered group plans do not have to offer dependent coverage up to age 26 if a young adult is eligible for group coverage outside of their parent’s plan.

 

 

Essential Health Benefits Package

Implementation:  Jan. 1, 2014 

The law requires that all non-grandfathered individual and small group health insurance plans sold in a state, including those offered through an Exchange, must provide the essential health benefits (EHBs) package, which places requirements on cost-share, actuarial value, and covered services.

• Cost-share – plans may not have a cost-share that exceeds the out-of-pocket maximum placed for high deductible health plans. Small group plans may not have a deductible greater than $2,000 individual / $4,000 family.
• Actuarial Value – all plans must meet actuarial value designs, which are simplified into four categories of plans called Metallic Tiers. The Metallic Tiers indicate the portion of claims paid by the plan:
  • Bronze = 60 percent plan; 40 percent member
  • Silver = 70 percent plan; 30 percent member
  • Gold = 80 percent plan; 20 percent member
  • Platinum = 90 percent plan; 10 percent member
• Covered services  – plans must cover the following essential health benefits:
  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance abuse disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

This change is in effect for non-grandfathered individual and small group plans.

(PPACA 1302)

 

Eliminating Annual Limits on Insurance Coverage 

Implementation:  Jan. 1, 2014 

The law prohibits new plans and existing group plans from imposing annual dollar limits on the amount of coverage an individual may receive. 

 

 

Coverage for Individuals Participating in Clinical Trials

Implementation:  Jan. 1, 2014 

Insurers will be prohibited from dropping or limiting coverage because an individual chooses to participate in a clinical trial (applies to all clinical trials that treat cancer or other life-threatening diseases.) This change only applies to non-grandfathered plans.

(PHSA 2702)

 

Employer Shared Responsibility (Penalties)

Implementation:  Jan. 1, 2014 

Employers of more than 50 full-time equivalent (FTE) employees will face an assessment if a full-time employee receives a premium tax credit through the public health insurance exchange. An employee may be eligible to receive a premium tax credit if:

• Their income is between 100-400 percent of the federal poverty level;
• They are ineligible for government-sponsored coverage (e.g. Medicaid);
• Their employer does not offer access to minimal essential coverage; or
• Their employer offers coverage, and:
  • Their contribution level toward the plan premium for self-only coverage exceeds 9.5% of their household income; or
  • The plan pays for less than 60 percent on average of covered health care expenses.

(PPACA 1513)

 

Risk Mitigation Programs

Implementation: Jan. 1, 2014

Risk Mitigation programs will be developed to help level the playing field for all health plans in the new exchange environment. The programs include:

• Risk Adjustment - This is a permanent provision that transfers dollars from carriers with low-risk members to those with high-risk members. It applies to non-grandfathered individual and small group markets.
• Reinsurance - A temporary reinsurance program that will last from 2014 to 2016. It will protect carriers against catastrophic events. This is a subsidy based on an established threshold known as Transitional Reinsurance Fee. The program will benefit non-grandfathered, individual health plans, but is funded by all markets – insurers, self-funded, grandfathered and non-grandfathered group plans.
• Risk Corridors - Qualified health plans will share profits (or excess gains) with plans that have excess losses.

(PPACA 1341)

 

Annual Fees

Implementation: Jan. 1, 2014

To help finance the PPACA, the government will collect annual fees from the prescription drug industry, insurance industry and on medical devices.  

(PPACA 9008-9010)

 

Pre-Existing Conditions

Implementation:  Plan years beginning on or after Jan. 1, 2014

No one will be denied coverage due to pre-existing conditions. For individuals and small group markets, insurance companies will no longer be able to charge higher rates due to gender or health status.

 

90-Day Waiting Period

Implementation:  Plan years beginning on or after Jan. 1, 2014

The health care law states that waiting periods for coverage that are greater than 90 days cannot be applied by group health plans or insurers offering group coverage.

(IRS Notice 2012-59) 

 

 

Minimal Essential Coverage Tax Increase

Implementation:  Jan. 1, 2015

Maximum tax penalty for not having insurance rises to $325 a year, or 2 percent of taxable income. Learn more about the Individual Mandate.

(PPACA 1501)

 

Employer IRS Reporting

Implementation:  Jan. 1, 2015 (for tax year 2014)

Large employers (including self-insured employers) will be required to report information about the coverage they offer to full-time employees to the Internal Revenue Service (IRS) as well as to each individual employee enrolled in the employer’s plan. Health insurers will report this information to the IRS for employers who offer fully insured plans.

 

 

Auto enrollment

Implementation:  Jan. 1, 2015

Employers with more than 200 full-time employees will be required to automatically enroll full-time employees in the employer’s health plan, subject to waiting periods authorized by law.

(Department of Labor Technical Release 2012-12) 

 

Minimal Essential Coverage Tax Increase

Implementation:  Jan. 1, 2016

Maximum tax penalty for not having insurance rises to $695 a year, or 2.5 percent of taxable income. After 2016, penalties are indexed to the Consumer Price Index. Learn more about the Individual Mandate. (link to ‘2014 Individual Mandate’)

(PPACA 1501)

 

 

There are currently no new provisions scheduled for this year.

 

 

Excise Tax

Implementation:  Jan. 1, 2018

A 40 percent excise tax (also referred to as the ‘cadillac tax’)will be imposed on high-cost, employer-provided health plans beyond $27,500 for family coverage and $10,200 for single coverage; it will increase to $30,950 for families and $11,850 for individuals, retirees and employees in high-risk professions. This change is in effect for grandfathered and non-grandfathered, employer-sponsored, plans.