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Grandfathered Versus Grandmothered Health Plans

Under the Affordable Care Act (ACA) “grandfathered plans” are group health plans (or health insurance coverage) that were in existence on March 23, 2010, and have not undergone certain prohibited design changes since then. Those prohibitions, in summary fashion, are: an elimination of benefits, an increase in percentage cost-sharing requirements, and an increase in a fixed amount cost-sharing requirement other than a co-payment (with some limitations) or a decrease in employer contributions by more than 5% of its established contribution on March 23, 2010.

Needless to say, not many grandfathered plans remain. In the Kaiser Health Organization 2016 Employer Benefit Survey it was noted that only 23 percent of employers nationally, maintain at least one grandfathered benefit option. Grandfathered plans are excused from some of the requirements under the ACA, such as coverage of preventive health services without any cost-sharing and the expanded appeals process and external review.

However, they still must comply with other provisions, including: (1) provide a uniform explanation of coverage, (2) report medical loss ratios and provide premium rebates if medical loss ratios are not met, (3) prohibit lifetime and annual limits on essential health benefits, (4) extend dependent coverage to age 26, (5) prohibit health plan rescissions, (6) prohibit waiting periods greater than 90 days, and (7) prohibit coverage exclusions for pre-existing health conditions.

Employers of grandfathered plans have a notice requirement where the plan must provide, in any plan materials describing benefits for participants or beneficiaries, (a) a statement that the plan or coverage is believed to be a grandfathered plan, and (b) contact information for questions or complaints. Failure to provide this notice can result in loss of grandfather status. Another condition of retaining grandfather status is that as long as the status is asserted documentation must be maintained to show that the coverage in effect as of March 23, 2010 has not made any of the prohibited changes. This requirement reinforces the importance of a plan sponsor having and keeping an updated plan document, which must be available for review upon request. Grandfathered status can be maintained indefinitely as long as no prohibited plan changes are made, however, once lost, it cannot be regained.

In contrast, the ACA did not make any particular allowances for individual and small group plans that became effective after March 23, 2010. It was expected that these plans would terminate at the end of 2013 and be replaced with ACA compliant coverage. However, due to multiple problems for small groups with ACA implementation, the Department of Health and Human Services (HHS) issued transitional relief that allowed states to permit non-grandfathered plans to renew their pre-ACA plans.

Therefore, a “grandmothered plan” (also referred to as a transitional health policy) is a non-grandfathered health plan that is subject to a HHS transition policy. This policy allows insurers to extend coverage which are free from certain ACA reforms, basically, they are non-compliant plans. The main insurance market reforms to which grandmothered plans are not required to comply are the premium rating rules, guaranteed availability and renewability and the requirement to provide the ten Essential Health Benefits.

Originally issued in 2013, transition relief for grandmothered plans has been extended several times with the most recent extension permitting insurers that have continually renewed grandmothered plans since  January 1, 2014, to renew such coverage again for any policy year beginning on or before Oct. 1, 2018 (However, the insurance policies must not extend past Dec. 31, 2018). As a reminder whether a plan can be grandmothered is governed by state insurance law, and not all states have adopted the transitional relief. Additionally, an insurer that renews a grandmothered plan is required to provide an annual notice explaining the right to retain existing coverage to affected individuals and small businesses.

If you have a grandfathered plan you can keep it indefinitely, as long as your plan does not make any of the certain prohibited plan design changes which causes the loss of grandfather status. Likewise, if you have a grandmothered plan, you can keep it (at least in Pennsylvania) through Dec. 31, 2018. You should continue to stay updated on the status of the ACA and how your grandfathered or grandmothered plan can be affected.

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