New rules apply when companies change health insurance

The health care law passed by Congress earlier this year contains a wide variety of new rules for employer-provided health insurance, such as requirements of coverage for pre-existing conditions and dependents up to age 26. However, if a company had a plan in place on March 23, 2010 that didn’t meet these requirements, in some cases it can be “grandfathered” and remain exempt from them, at least for a time.

But this is tricky. If a company makes certain changes to its plan, it can lose its “grandfather” status. For instance, a company can be “de-grandfathered” if it eliminates or substantially reduces certain types of coverage, such as dropping cancer coverage. It can also lose grandfather status if it reduces employer contributions by more than five percent, raises co-payments more than $5 or 15 percent (whichever is greater), or raises deductibles more than medical inflation plus 15 percent.

Interestingly, companies can also lose grandfather status if they change carriers – even if the plan itself remains identical.