Agency Extends Relief for ‘Grandmothered’ Small Group Health Plans

Transitional plans that aren’t grandfathered get another year’s reprieve

Stephen Miller, CEBS By Stephen Miller, CEBS April 1, 2019
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The Trump administration will let state regulators give small businesses an extra year to renew so-called grandmothered health plans that don't fully comply with the Affordable Care Act (ACA) and that don't fall under the open-ended exemption for grandfathered plans.

The federal Centers for Medicare and Medicaid Services announced on March 25 that states may extend the expiration date for grandmothered plans until Dec. 31, 2020. Thirty-two states still allow renewals of grandmothered plans.

Grandmothered plans, also known as transitional plans, are small group and individual market health plans that aren't fully ACA-compliant and that took effect from March 23, 2010—the date of the ACA's enactment—through the end of 2013. By contrast, grandfathered plans are those in either the small or large group market with unchanged major provisions that were in effect before March 23, 2010. They are exempt from many changes required under the ACA, and they can remain grandfathered as long as they don't make significant changes that reduce benefits or increase costs to employees.

"Grandmothered plans comply with the ACA's early market reforms, such as the coverage of preventive services without cost-sharing and dependent coverage to age 26. However, these plans do not comply with most of the ACA's major reforms that went into effect on Jan. 1, 2014," such as coverage of an essential health benefits package and a ban on pre-existing condition exclusions, among other requirements, explained attorney Katie Keith, a principal at Keith Policy Solutions, in a post for the Health Affairs blog.

[SHRM members-only toolkit: Communicating with Employees About Health Care Benefits Under the Affordable Care Act]

Multiple Extensions

The grandmothered plan policy "was initially announced in November 2013 by the Obama administration and has been extended each year since then," noted Keith, who added that the initial extension "was largely adopted in response to political pressure from consumers who were receiving cancellation notices for their 2013 coverage during the first ACA open enrollment period."

Not everyone thinks the new extension is a good idea. "So much has changed in the past decade that perpetuating the support of [grandmothered and grandfathered] plans may actually be hurting those employees that the regulations purport to want to help," said Shandon Fowler, founder and principal of benefits consultancy Four8 Insights in Charleston, S.C. Millions of Americans have benefited from the ACA's essential health benefits and other provisions, he noted.

Related SHRM Article:

Is It Time to Let Grandfathered Health Plans Finally Retire?, SHRM Online, March 2019


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