What’s the Difference Between a Grandfathered and Grandmothered Plan?
Question: Our company sponsors a group health care plan, which is grandfathered for purposes of the Affordable Care Act (ACA). Recently, we encountered the term “grandmothered plan.” How do these differ from grandfathered plans?
Answer: Grandfathered plans are group health plans (or health insurance coverage) that existed on March 23, 2010, and haven’t undergone certain prohibited design changes since. These plans are excused from some ACA requirements, such as coverage of preventive health services without any cost-sharing and the expanded appeals process and external review, but are subject to other provisions.
Grandfathered status can be maintained indefinitely so long as:
- The plan or coverage continuously covered someone (not necessarily the same person) since March 23, 2010,
- No prohibited plan design changes have been made, and
- The required disclosure and recordkeeping requirements have been met.
Examples of changes that would cause loss of grandfathered status include any increase (measured from March 23, 2010) in a cost-sharing percentage and elimination of all or substantially all of the benefits to diagnose or treat a particular condition. The grandfathered plan rules apply separately to each benefit package (for example, a PPO or HMO) made available under a group health plan. If grandfathered status is lost, it cannot be regained.
Becoming a Grandmother
“Grandmothered plans” is a term used to describe nongrandfathered health plans that are subject to a transitional policy set forth by the Department of Health and Human Services that allows insurers in the individual and small group markets to renew policies they would have otherwise had to cancel because of noncompliance with certain ACA insurance market reforms. Examples of such reforms include:
- Premium rating rules,
- Guaranteed availability and renewability, and
- The requirement to provide essential health benefits.
This transitional relief for grandmothered plans has been extended several times. Under the most recent extension, states may permit insurers that have continually renewed grandmothered plans since January 1, 2014, to renew such coverage again for any policy year beginning on or before October 1, 2018. The policies, however, must not extend past December 31, 2018. 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.
Minding the Details
Plans defined as either grandfathered or grandmothered call for close attention to compliance details. Work with your professional advisors to ensure you’re administering the plan within the rules.