Grandfathered group health plans: what the status means, and which plan changes cost an employer that status.
Which ACA rules a grandfathered plan is exempt from, the benefit and cost changes that end the status, how a change of carrier fits in, and the notice requirement. Written for the owner or HR lead.
A Plan That Existed Before the ACA Became Law
A grandfathered plan is a group health plan in which at least one person was enrolled on March 23, 2010, and that has kept its status since.
Status Is Held at the Plan Level
A plan keeps grandfathered status only while it avoids the changes the rules prohibit. Once lost, it cannot be regained. Status attaches to a specific plan, not to the employer as a whole, so a company with several plans may have a mix. Track each plan separately and document the reasoning behind every renewal change. You can test your own figures with our renewal cost sharing calculator.
New Hires Can Still Join
New employees and their families may enroll in a grandfathered plan without costing it the status. Keep the plan open to new hires and their dependents in the usual way. A new employee does not reset the clock, but a change to eligibility rules or a move to a different plan design could raise questions worth reviewing with counsel. Try our free dependent age 26 calculator to check the rules for your own group.
Few Remain
Many plans have lost status through ordinary renewals. Employers often do not know whether theirs qualifies, so the answer is worth confirming. Common culprits include a carrier-driven plan change, a shift in contribution strategy, or a deductible adjustment that seemed minor. If nobody can produce the original plan terms, assume the question is open and start gathering the documents.
Some ACA Requirements Do Not Apply, and Others Always Do
Grandfathered status is an exemption from a defined list of rules, not from the ACA as a whole.
Rules That Generally Do Not Apply
Examples include the requirement to cover preventive services without cost sharing and some of the newer appeal and network rules. The exact list of exceptions depends on the provision and on the plan, so do not assume a rule is waived. Ask your adviser or counsel to map each requirement against your plan before you decide to rely on the status.
Rules That Always Apply
Coverage of adult children to age 26, no lifetime limits, no rescission except for fraud and the 90-day waiting period limit all apply. These protections apply to grandfathered plans and nongrandfathered plans alike. If your plan documents or enrollment materials do not reflect them, flag it for your adviser, since an oversight here is easy to miss in older documents.
The Group Plan Test Is Separate
Grandfathered status does not remove the employer mandate or reporting duties, which apply to employers based on size. Whether the plan is grandfathered and whether you owe employer mandate obligations are different questions with different tests. Answering one does not answer the other, so review both when you plan your coverage and your reporting each year.
The Changes That End Grandfathered Status
The rules list specific changes. A plan that makes any of them loses the status.
Cutting Benefits
Eliminating all or substantially all benefits to diagnose or treat a particular condition ends status. This can happen quietly, for example by dropping a covered treatment or service when a plan is rebid. Compare the covered-service lists side by side at each renewal and ask your adviser to confirm nothing important was removed.
Raising Cost Sharing Beyond the Limits
Increasing coinsurance at all, or raising deductibles, out-of-pocket limits or copays beyond the permitted measure, ends status. The measure is tied to medical inflation. Each type of cost sharing is tested against the original plan terms, so a change that looks small on one line can still cross the permitted measure. Ask for a worksheet that shows old versus new for every cost-sharing item.
Reducing the Employer Share
Lowering the employer contribution rate by more than a set number of percentage points for any tier of coverage ends status. The test looks at the employer contribution rate for each coverage tier, not just the overall budget. Before changing contributions, check each tier against the prior rate, and note that dollar-based contribution designs may be treated differently.
Changing Carriers Does Not by Itself End Status
Earlier rules suggested a change of insurer would end the status. Later guidance changed that.
Same Benefits, New Carrier
Generally, switching insurers while keeping the same benefits and cost structure does not end status. The word “same” carries the weight here. A new insurer’s plan must keep the benefits and cost-sharing structure essentially intact, and that is not automatic. Get the comparison done in writing before you sign, not after the switch.
Compare Plan Terms Closely
A new carrier’s plan will rarely match line by line, so even a small difference in cost sharing can matter. Copay amounts, coinsurance, annual limits and covered services can differ even when the plan names look alike. Build a line-by-line comparison against the original terms and ask the carrier to confirm any item that is unclear in writing.
Get a Written Review First
Have counsel or your benefits adviser compare the old and new plan terms before a carrier change. A short written review before the change costs far less than discovering later that status was lost. Ask for a clear yes or no on each test, with the reasoning, and keep the file with your plan records for future audits.
Keep Proof and Say So in the Plan Materials
The plan has to document its status to claim it.
The Notice Requirement
A plan that claims grandfathered status must say so in the plan materials and explain how participants can reach the plan administrator with questions. Check your summary plan description, enrollment guide and open enrollment notices for the grandfathered statement. Older materials may omit it or carry out-of-date wording, so refresh the language whenever those documents are updated or reissued.
Keep the 2010 Plan Terms
The comparison point is the plan as it stood on March 23, 2010. Keep copies of the benefits, rates and contribution rates from then. Documents often live with prior brokers or carriers, so request them early. Useful items include old plan summaries, rate sheets and contribution schedules. Without that baseline, proving status after a dispute or review can be difficult.
Review at Each Renewal
Run each renewal against the grandfathering tests before approving changes. Put the check on your renewal calendar so it happens before decisions are final. Share the carrier’s proposed changes with your adviser early enough to adjust the plan design rather than discover a status problem after the fact.
The questions that come from grandfathered plans.
Six questions employers bring us about grandfathered status.
What is a grandfathered plan?
A group health plan with at least one person enrolled on March 23, 2010 that has not made changes the rules prohibit.
Can new employees enroll?
Yes. Enrolling new hires does not end the status.
Does a deductible increase end it?
It can, if the increase exceeds the permitted measure tied to medical inflation. Any increase in coinsurance ends it.
Does switching carriers end the status?
Generally not, if benefits and cost sharing stay materially the same, but small differences matter.
Is a grandfathered plan exempt from the employer mandate?
No. The employer mandate and reporting apply based on employer size.
How do we know if our plan qualifies?
Compare the current plan to the plan as of March 23, 2010. A benefits adviser or counsel can do that review.
Ready? Send us your renewal, or talk it through with someone first. No cost, no obligation.
General information about grandfathered plan status, not legal advice. Status turns on plan history and the exact changes made, so confirm with counsel before changing benefits.
Related guides.
Association Plans and MEWAs
How multi-employer health arrangements work and the questions to ask before joining.
Short-Term and Limited-Benefit Plans
What these products cover and leave out, and why they are not group major medical coverage.
Changing Carriers
What to compare when you move a group.
Reading Your Plan Documents
Where status and plan terms are documented.
Employer Contribution Calculator
Test the effect of a contribution change.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
Laws and rules referenced
29 C.F.R. § 2590.715-1251 — Grandfathered health plans: preservation of the right to maintain existing coverage.
This page is general information, not legal or tax advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
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