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

By: | 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.

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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.

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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. &

Risk Matrix: Presented by Liberty Mutual Insurance

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The R&I Editorial Team can be reached at [email protected]