State of the Industry 2011: Grandfathered Status

October 1, 2010

Most existing benefit plans will lose their grandfathered status by 2019, according to observers

Most existing benefit plans will lose their grandfathered status by 2019, according to observers. Changes that will cause a plan to lose its status include those that significantly increase costs and/or decrease benefits, and those that increase cost sharing by participants in such a way that participants would choose to forgo needed treatments.

Anne Crumlish, a senior consultant for Hewitt Associates, says the company's own research paints a picture more in line with the view of MHE readers.

She believes the vast majority of employers will be non-grandfathered in two to three years. The exemptions of certain requirements of PPACA were not intended to be permanent, and the grandfathered status could be considered as more of a transition.

"The regulations regarding grandfathered status clearly say that grandfathering is meant to be a 'glide path' to change," she says. "Regulators intentionally wrote the requirements in a manner that would make it increasingly difficult to maintain grandfathered status, ensuring that plans would adopt new insurance reforms within a relatively short period of time."

Many employers could choose to retain their status for quite sometime, but it likely won't benefit them enough to do so. Achieving cost control through plan changes will trump the burden of the exempted PPACA provisions.