June 2010

Regulations on "Grandfathering" under the Affordable Care Act

Some of the requirements of the Affordable Care Act1—the new health reform law—do not apply to employment-based health plans that were in existence on March 23, 2010, when the law was passed. These are referred to as "grandfathered plans." Since enactment, it has been an open question whether a health plan that is changed in some way after that date is still grandfathered. On June 14, 2010, the agencies implementing the Affordable Care Act released interim and temporary regulations explaining the grandfathering rules, and how much plans can be changed before they lose grandfathered status.2 This Bulletin outlines key features of those new regulations. The rules are applicable for plan years beginning on or after September 23, 2010. Comments are due on or before August 16, 2010.

In some cases, the financial burden to stay grandfathered may be outweighed by the need for plan changes. Adopting the new standards that apply to "new plans" may be modest for some health plans. As a result, plan sponsors that are undergoing major cost-savings efforts (e.g., aggressive new insurer bids or plan redesign) may want to forgo grandfathered status in order to be able to implement those strategies.

Regardless of whether a plan is grandfathered, it must comply with a number of the Affordable Care Act's requirements, starting with the first plan year beginning on or after September 23, 2010, as noted in the first column of the table below.

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