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In an effort to combat the growing tide of discontent towards “Obamacare”, President Obama announced yesterday that insurers may continue to offer existing health plans in the individual and small-group markets that would otherwise be cancelled in 2014 due to the loss of their “grandfathered” status for at least one more year.  This extension of the “grandfather clause” only applies to health plans in the individual and small-group markets.  Other health plans not eligible for the extension must still comply with the requirements applicable for “non-grandfathered” plans as of the effective date of the change that caused such plan to loss its grandfathered status. 

In his announcement, President Obama explained that individuals whose plans have been cancelled can choose to re-enroll in the same kind of plan despite non-compliance with provisions of the Affordable Care Act.  The exception will only be available if the insurer provides notification regarding: (1) what protections the renewed plan does not include, and (2) the new options offered in the marketplace which provide more coverage and in some instances, tax credits to cover higher premiums. 

Despite the exception created by President Obama’s announcement, some insurers still may not be able to legally allow the non-grandfathered health plans to be renewed.  A number of states have adopted the reforms made by the Affordable Car Act to be effective on January 1, 2014.  Unless those states enact similar exceptions as to those announced by President Obama, the prior insurance policies will not be in conformance with the requirements of such state’s law.  In addition, because many insurers did not anticipate President Obama’s announcement, they may not be administratively prepared to renew these health plans even if they are legally able to do so.

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