Key Points to Remember When Managing Federal ‘Grandmothered’ Health Care Plans

By: Dennis Fiszer | May 24, 2019

Dennis G. Fiszer is the chief compliance officer for HUB International Employee Benefits, Eastern Region, and is a nationally recognized speaker on health care reform and the Affordable Care Act. He provides compliance and consulting services regarding health plans and other employee benefits. His areas of expertise include COBRA, Health Insurance Portability and Accountability Act of 1996 (HIPAA), wellness programs, federal and state health care reform, employment and labor issues, ERISA and the Family and Medical Leave Act.

The Department of Health and Human Services (HHS) has once again given so-called “grandmothered” plans an operational extension. Plans qualifying for grandmothered protections can continue in existence through the end of 2020.

Grandmothered Plan Defined

Much like the Affordable Care Act’s (ACA) grandfather protections, qualifying grandmother plans are a different classification of health coverage programs deemed entitled to temporarily avoid certain otherwise applicable ACA obligations.

Grandmothered plans include individual or small group (generally less than 50 employees) plans that have been in effect since before January 1, 2014 and did not comply with certain parts of the ACA.

Specifically, grandmothered plans do not have to comply with:

Rating methodology: Rules limiting the carrier’s ability to set rates based solely on age bands, geography and tobacco use. This means policy holders might be charged more based on factors such as gender or a preexisting medical condition, for example.

ACA Market protections:

Standards for guaranteed availability, so it might exclude consumers based on factors such as a preexisting medical condition.
Standards for guaranteed renewability, so the carrier could decline to renew.
Standards for covering the costs of participation in clinical trials.
Standards for non-discrimination with respect to health care providers

Comprehensive plan design: Rules requiring the plan to cover essential health benefits or to limit annual out-of-pocket spending. As a result, it might not cover benefits such as prescription drugs or maternity care, or might have unlimited cost-sharing.

Preexisting conditions: For individual policies only, it also may exclude an adult (but not a child) based on preexisting medical conditions and may discriminate based on an individual’s health status.

Contrasted With ACA Grandfather Protections

Rules governing grandmothered plans are far different than those directing grandfathered plans.

Grandfathered plans were plans in effect before the March 2010 passage of the ACA. They can avoid these and certain other ACA requirements but must limit the cost increases (both in premiums and cost sharing) that they can pass on to participants.

Moreover, grandfathered plans must generally maintain the same benefits they offered before ACA was passed.

By contrast, grandmothered plans must generally comply with more ACA regulations than grandfathered plans. For example, grandmothered plans must comply with the annual preventive screening rule that grandfathered plans avoid.

Why Is There a Non-Enforcement Policy?

The initial reason for the policy, back in 2014, was to allow certain individuals and smaller employers to keep their existing plans.

Those plans, HHS said at the time, were often cheaper than ACA-compliant plans. The current extension failed to offer any specific explanation, but it’s likely that agency reasons for the new extension remain the same as before.

What’s Next?

If you are covered by one of these plans, you may get a notice from your carrier telling you that your plan will be extended. However, there are several key items to note:

States maintain regulatory authority: Your state may or may not continue grandmothered plans.

States hold the power to limit grandmothered plans to either the individual market or the small group market, if they choose to. Many have already eliminated such plans from their market.

States are also authorized to provide a shorter extension or may enact rules forcing grandmothered plans to come into compliance with some (or all) ACA requirements.

Insurance carrier discretion: Your insurer may or may not continue grandmothered plans. Insurers are not required to continue these policies; the policy is permissive, not mandatory. Therefore, at some point, the insurer could simply stop offering these plans.

Consumer choice: Individuals and/or plan sponsors may not want to stay in a grandmothered plan.

Individuals and/or plan sponsors have the option of picking an ACA-compliant plan. However, know that if you opt to exit a grandmothered plan, you may not be able to get back in.

Allowing further grandmothered plan extensions remains a hotly-contested policy debate. Critics argue that enabling grandmothered plan operations negatively impacts ACA-compliant plans by artificially keeping a healthier population out of the larger national ACA-protected risk pool.

On the other hand, proponents counter that argument by asserting that cost savings associated with grandmothered plans promotes broader health coverage access.

Although grandmother plans have won another temporary life-support extension, grandmother’s long-term future remains uncertain. &

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.