As we close in on the 2016 healthcare enrollment period, it may be time to look at whether your organization still offers – and hopes to keep – at least one grandfathered healthcare plan. Employer-sponsored grandfathered plans are those that have had at least one person enrolled since March 23, 2010 and have not significantly cut benefits or increased costs for employees. Grandfathered plans are not required to cover preventative care or certain patient rights and responsibilities.
Since 2011 there has been a steady decline of organizations that offer grandfathered healthcare plans. According to the Kaiser Family Foundation, in 2015 only 35% of offering organizations provide at least one grandfathered plan, down from 54% in 2013 and 72% in 2011. Similarly, the number of US workers enrolled in a grandfathered plan has declined from 56% in 2011 to 25% in 2015.
One reason for the decline in these types of plans is that organizations are recognizing the benefits of flexibility, cost, and consumer-involvement with newer plans. But some employers may lose grandfathered status for other reasons that may or may not be in their control, such as reductions in coverage; significant increases in coinsurance, copays, or deductibles; or the addition/tightening of annual limits on coverage.
Regardless of the reason, if 2016 marks the year that your organization will be grandfather-free, it is recommended that you begin the process of investigating alternatives as soon as possible to ensure a smooth transition. In the past the traditional – and expensive – fully-funded model was the only realistic option for small-midsize companies; however the ACA has opened the door to innovative solutions that allow for more cost-effective and employee-friendly group coverage.
One such possibility is partial self-funding – combining a high deductible health plan (HDHP) with reserve funds to cover out-of-pocket expenses. While large businesses often take advantage of the perks of self-insurance, smaller organizations such as nonprofits have typically opted out of self-funding due to the high financial risks. But nowadays, due to the rise of creative start-up companies that look beyond the status quo, partial (and full) self-funding is becoming more of a financial savvy opportunity for smaller businesses and less of a financial risky one.
For more information about partial self-funding as an option for
transitioning off grandfathered healthcare plans, download the
Nonprofit Executive's Guide to Partial Self Insurance:
The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources believed to be reliable, but there is no guarantee as to its accuracy. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purpose