Is It “Worth It” To Keep A Grandfathered Policy?


BudgetLate last week one of my clients got a notice from her health insurance company that the premium for her “grandfathered” health insurance policy would be increased 28% on April 28.

She asked me if the increased premium is “worth it.”

One of the reasons I left the corporate world of insurance marketing and became an independent insurance agent, is that I do not like being told what I must sell.  The reason why you see links to several different insurance companies on my blog is that I feel that my job as an insurance agent is to help people buy the insurance they want.

I can help people understand how an insurance policy works, what it costs and what the probabilities are that they will have future customer service problems with their health insurance.  However, I cannot tell an individual if a policy is, “worth it.”

That is a question of values.  Every persons value system differs from mine.  I could no more tell a person if a health insurance policy is, “worth it” than a politician in D. C. is able to claim that health insurance is “affordable” without reviewing your household budget.

What I can do is explain some of the differences between “grandfathered” policies and the new Obamacare “Essential Benefit Plans.”  It is your decision as to whether it is worth keeping a grandfathered plan.

HISTORY

Some people, in fact most, will not even know what I am talking about.

In 2009, President Barack Obama promised Americans, “If you like the plan you have now, you can keep it.”  As a concession to the president’s promise, the PPACA, that congress passed on March 22, 2010, include a clause that essentially froze health insurance plans that were in effect on March 23, 2010.  As long as people did not make any significant changes to their plans, they could keep them.

However, if they make any significant changes to their plans, they lose their “grandfathered” status and must accept the terms of  the PPACA from that moment forward.

For people who owned individual health insurance plans, that was not a major problem.  They had direct control over their plan.

Things were a little different for people who got their health insurance through a group plan.  Their employer, and not they, controlled the plan.  If the employer elected to make significant changes, the entire group would lose its “grandfathered” status and there was nothing the employee could do about it.

That was almost 4 years ago.  Since that time, the insurance needs of an individual may have changed.  With kids graduating and leaving the house, there may no longer be the need for a plan with a lower deductible or doctor office co-pays.

However, many people have been reluctant to change plans simply because they do not want to look like they are supporting Obamacare.

I am not a supporter of Obamacare but whether I like it or not is immaterial.  Obamacare is the law of the land.  The plans that are offered today are considerably different from what they were in 2010.

It is impossible to get a health insurance plan that is identical to what was available in 2010 in today’s market.  That does not indicate that the plans, that are available in 2014, are any better than those from 2010.  They are just different.

The points below will focus on the biggest differences.

GUARANTEED RENEWABLE PLANS

Most plans that were in existence on March 23, 2010, that were grandfathered, are Guaranteed Renewable type plans.  That means that the only thing the insurance company can change, without your permission, is the premium.  The benefits that are covered by the plan, cannot be changed without your permission.

As long as you pay whatever premium the insurance company charges, the benefits will not change.

Unfortunately, since there is no other way for an insurance company to urge you to give up your grandfathered plan, the only way for insurance companies to cull these older, non-profitable plans from their lists of obligations, is to continue to raise premiums and hope that people “take the hint” and move to one of the Obamacare approved plans.

CONDITIONALLY RENEWABLE

The new “Essential Benefit Plans,” that are available from Obamacare, are “Conditionally Renewable.”  That means that the insurance company is able to change both benefits and premiums without your permission.

Each year, insurance companies are required to build and price plans that conform with rules established for health insurance by the Department of Health and Human Services (HHS).  The PPACA requires that the Secretary of HHS, periodically, review and revise the Essential Benefits that are offered.  When he/she decides that a change needs to be made to what is, or is not covered, the insurance companies will need to rewrite their policies.

The result is that all major medical health insurance policies, that are available through Obamacare, are only good for one calendar year at a time.  Prior to the AEP (Annual Election Period) each year you will need to review the changes in your elected plan, if any, and determine if they are acceptable.  If they are not, you will only have a few weeks, at the end of the year, in which to make adjustments for the following year.

If a change to your plan occurs and you do not react during the AEP for that year, you will be stuck with the unacceptable plan for the next calendar year.

FIN

If you want to boycott Obamacare by keeping your grandfathered plan, and it covers everything that you need, I am not willing to stand in judgement over you.

However, I do want to give you something to consider when, and if, the premium for your grandfathered plan is increased.  The new Obamacare approved plans are not of themselves, any better than what the old plans were.  Neither are they any worse.  They are just different.

Although they worked differently than they used to, what is important is that you do some comparison shopping.  Buy the plan that best meets your needs if you decide to give up your grandfathered status.

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