:: “Grandfathered Plans” – NAIC Guidance On Essential Points

PPACA SEC. 1251. PRESERVATION OF RIGHT TO MAINTAIN EXISTING COVERAGE.

(2) CONTINUATION OF COVERAGE- With respect to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of this Act, this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply to such plan or coverage, regardless of whether the individual renews such coverage after such date of enactment.

(a) No Changes to Existing Coverage-

(1) IN GENERAL- Nothing in this Act (or an amendment made by this Act) shall be construed to require that an individual terminate coverage under a group health plan or health insurance coverage in which such individual was enrolled on the date of enactment of this Act.

This oddly-worded provision in the PPACA is Orwellian reform-speak intended to assure that the new law will not result in any changes to existing coverage for the 85% of Americans satisfied with their health insurance coverage.  Of course that is not true, as many Americans will lose their coverage,  but that is another subject altogether.

For plan sponsors trying to understand the “grandfathered plan” exception to several (but not all) provisions of the PPACA, the NAIC has published a succinct set of guidelines here.

Questions awaiting regulatory guidance include the following as noted by the NAIC:

The statutory language of PPACA raises a number of questions that will have to be decided in the regulatory
process. The House legislation included a requirement that there be no changes in terms or conditions of
grandfathered plans.iv The final bill, however, did not contain this requirement. A case could be made, however, that
if substantial changes are made to a grandfathered health plan, it is no longer the same plan, and would lose its
grandfathered status. A related question will be whether or not states may change state laws governing
grandfathered plans, and if so, whether compliance with these changes would cause plans to lose their grandfathered
status.