Should You Stick With Your Grandfathered Health Plan?

NEW YORK (MainStreet)—Come October, millions of Americans will face an important decision: whether to stay with their grandfathered health plan or get a new one from their state exchange.

In order to be grandfathered, a plan had to be in place on March 23, 2010.

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Whether a plan is grandfathered or not, if you're insured, you're already receiving some of the new benefits provided by the regulations: health plans can no longer have a lifetime cap on benefits, and they must provide coverage for policyholders' children up to age 26 (this requirement starts in 2014 for grandfathered group plans, if the dependent currently can get group coverage outside of the plan). Further, insurers can no longer cancel policies for errors on applications, unless they were intentional.

However, grandfathered plans don't have to include the features that the plans offered by the new state exchanges, which are often referred to as the "metallic" plans, referring to the four different levels of coverage -- bronze, silver, gold, and platinum -- are required to provide under the Affordable Care Act (ACA). For instance, grandfathered plans don't have to include certain preventive services with no cost sharing or the new ACA protections when appealing claims and denial of coverage, and they don't have to allow you your choice of health care providers and access to emergency room care outside of your network without higher copayments or co-insurance or prior approval. Further, while these plans can no longer have lifetime benefit caps, they may continue to have annual caps.

The answer of whether to stay or go "depends entirely on what you personally value in terms of coverage, what you can afford, and what you may qualify for in terms of government subsidies," says Sarah Garcia, consumer specialist. She points out that grandfathered plans are not required to provide "essential health benefits," such as brand name prescription drug coverage and maternity care, as are the new state plans. Nor are they required to pay for "a host of preventive medical screenings at no out-of-pocket cost to you, even if your deductible hasn't been fulfilled," she notes.

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Consider how the prices compare, says Mike Nickols, CEO of America's Health Insurance. In some states, premiums for exchange plans are expected to skyrocket, although he notes that they typically come with more benefits.

Consider also if you qualify for the subsidy. "If you earn no more than 400% of the Federal Poverty Level in 2014 ... you may be eligible for government help to pay for your coverage," Garcia says. She places the top number at about $44,000 for singles and about $92,000 for a family of four. "Depending on how much you earn per year, subsidies can ensure that you pay no more than 3% to 9.5% for your monthly health insurance premiums," she says. "Subsidies aren't available for people in grandfathered plans," Garcia notes.

In addition, Nickols points out that if you have a pre-existing condition that is not covered under your current plan, it will be covered under the metallic plans. Further, some of the older grandfathered plans may be old enough (priced high enough) to make the metallic plans attractive, Nickols says. However, the new plans have many mandated benefits, such as mental health coverage and maternity, which you may or may not need, he notes. And "the differentiation spread between older and younger premium payers was changed from 6 to 1 to 3 to 1. This benefits and lowers the premiums of older people and raises the premiums of younger people to subsidize the old, he notes, so it's advantageous if you're older and not advantageous if you're younger. The federal government believes that most of the 133 million Americans who have their health insurance through large employers will keep their current coverage, which is typically comprehensive and comparable to the metallic plans. However, people who work in smaller firms and those who have individual policies may shop around as they typically have in the past.

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In the long run, you may not have a choice. It is likely that these plans will not last. Grandfathered plans cannot significantly reduce benefits or increase costs to policyholders without losing their status.

--Written by S.Z. Berg, author of College on the Cheap

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