Generally, any health plan or coverage that was in existence and had at least one person enrolled on March 23, 2010, is a grandfathered plan. Grandfathered plans are deemed to have minimum essential coverage. This allows both individuals and employers alike to avoid the penalties for failure to have minimum essential coverage.
This benefit allows an individual or business to maintain their current coverage indefinitely. Nothing requires any person to change coverage. If the person changes the plan, coverage or carrier, however, grandfathered status will be lost. Grandfathered plans do not go completely unscathed, as certain benefits must be maintained.
- No lifetime or annual limits.
- No rescission of coverage.
- No exclusion due to pre-existing conditions.
- No excessive waiting periods.
- Benefit and coverage summaries must be provided.
Failure to meet these and other requirements will result in failure to have minimum essential coverage. Until reporting under §6055 starts, it is difficult to know if a plan is grandfathered without reading the plan documents. Practitioners can generally rely on the client if the taxpayer knows. Furthermore, as indicated on healthcare.gov, a plan must indicate if it is grandfathered. This will facilitate time spent on tax returns verifying information.
Featured in TAXPRO Weekly - September 19, 2013