Health Care Reform: Understanding the Grandfather Rules


The coverage mandates and insurance reforms in Subtitles A and C of the Patient Protection and Affordable Care Act (PPACA) will require significant changes to employer-sponsored health plans. Several of the mandates become effective in 2010 or 2011, requiring immediate attention, while others become effective over the next several years. Also, though PPACA generally applies to all group health plans and health insurance coverage going forward, certain existing plans and coverage are exempted, or “grandfathered,” from a number of the new requirements. The grandfather provision delays the time a new rule will apply to a grandfathered plan in some cases and in other cases seems to provide a complete exemption from the rules.

The grandfather provision, found in section 1251 of PPACA1, is intended to provide plan sponsors and insurers with greater certainty regarding their current benefit arrangements. Grandfathered plans will be able to maintain many of their current coverage provisions and will require fewer changes to plan documents and administrative procedures in order to comply with the new law. However, with its caveats, ambiguities and exceptions, the grandfather provision has raised as many questions as it has answered, particularly for large employers with complex benefits arrangements.

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