Considering Grandfathered Plans and Health Subsidies

There are a few situations where the proposed health subsidy offered as part of Health Reform might not be the best approach.  One of them deals with having an existing Grandfathered health plan.  We need to really understand what this means before making any changes including changes to a health subsidy eligible plan.  It doesn't mean the new plan with a health subsidy isn't the better course but we need to consider all avenues.  Let's start by determining what a Grandfathered health plan is.

The line in the sand:  October 23rd, 2010.

There was a requirement in the original Health Reform bill that you could keep your existing plan if you like it.  This was even said by Obama a few times leading up to the pivotal vote on health reform.  These are the Grandfathered plans.  Essentially, if you have had a qualified health plan which was effective before October 23rd, 2010 and for which you have not made any changes (other a few allowances such as adding dependent family members, etc), you would be able to keep that plan when the new Health Exchange plans come online Jan 1st, 2014.  What would be the advantage to these Grandfathered plans?

Grandfathered plans are all about the cost

The Grandfathered plans would not be subject to the main mandates of health reform.  They may also be much less rich in benefits than the proposed Metallic health plans that are being rolled and and required which means although less rich, they might be much less expensive than the new plans.  Let's all be honest...the request these days from the public has not been towards richer benefits but towards lower premiums and for good reason...the costs have gone through the roof for over a decade now.   Many people that currently have a Grandfathered plan may very well want to stay on them when they see the new unsubsidized rates.  If you make any changes to your Grandfathered plan, you lose the status and you will have to change to one of the new health reform plans.  So why would anyone risk losing this protection?  Health Subsidies.

Grandfathered plans will find it hard to compete if you qualify for a subsidy

If you qualify for a health subsidy, the amounts we are looking at are very large...$1000's of dollars per year.  It will be hard for the grandfathered plan to outprice a heavily subsidized Health Exchange plan.  Probably impossible since most people should see 50-80% of their health insurance premium reduced by the subsidy.  You can find out whether you might qualify for a subsidy with our Health Subsidy Calculator and starting October 1st, 2013, you can actually quote health plans with the Subsidy calculation built right in to the quotes through our Health Quote page.  In the meantime, if you have a Grandfathered health plan, it's advisable to hold on to it until you see what the new rates and plans will be.  It's also advisable to speak with a licensed health insurance agent through the Quote page partner about your particular situation.  This is one of those areas where a change can have long lasting effects on your pocketbook. 

 



Los Angeles, Family of 4
making $60K.
  Subsidy=$8,388*


Iowa, Single Adult making $30K
Subsidy=$4,222*

*Based on age, expected costs, and other assumptions according to Kaiser Calculator.  Actual subsidies will vary and official subsidy amounts will be available Oct 1st, 2013. 


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