Most people are familiar with Grandfathered plans but do you know what Grandmothered plans are and how they differ from Grandfathered plans?
Grandfathered plans are plans that were in place prior to the Patient Protection Affordable Care Act’s (PPACA) passing. These plans had to be in effect prior to March 23, 2010. As long as you kept your plan or maintained a comparable plan within certain parameters, you were able to maintain your plan under pre-PPACA requirements.
Grandmothered plans, also known as transitional plans, were purchased after the passing of the PPACA but before October 1, 2013. These plans usually offered coverage at a lower premium than PPACA-compliant plans because they were medically-underwritten and/or did not include all of the PPACA required services. Transitional plans were meant to have a short shelf-life and were required to terminate at their first renewal after the implementation of the PPACA in 2014. However, the final decision on when the plans would have to be terminated was left to individual states and insurance carriers offering such plans.
Additionally, Grandmothered plans only applied to smaller employers that were losing their “modified” Community Rating methodology and moving to a Community Rating methodology that no longer took a group’s health risk into consideration when developing premiums.
Fast-forward to 2019 - Grandmothered plans are still around. In 2014, the Department of Health and Human Services extended the transitional relief for these plans through 2016. Ever since, additional extensions were given in 2016 through 2017, in 2017 through 2018, and in October 2018 through 2019. It is possible that another extension will be granted again this year. However, if a 2019 extension is not granted, these plans will finally sunset on December 31, 2019.
Employers covered under these plans will begin to receive notifications from their carriers about a transitional plan and potential impacts of being on such a transition. One potential impact would require dropping their current plan on December 31, 2019 and moving to a PPACA compliant plan on January 1, 2020. This will likely impact the rates for these groups as Grandmothered plans are typically a healthier population than the PPACA population as a whole. It may also be disruptive to the group and its members to have to renew their plan on a short plan year.
As detailed in this article, many feel that Grandmothered plans should terminate to help the larger PPACA pool. Since Grandmothered plans were medically underwritten, and those that maintained their plans were doing so due to an underwriting discount, this shift, while it would hurt these groups, should help the larger PPACA pool through an injection of a large healthy population.
No matter what happens with the extension this year, there will be winners and losers. If your group plan is on a transitional plan, you should discuss potential consequences and strategize around potential solutions with your brokerage firm. If you have questions about how this might impact your organization, and are looking for some assistance in navigating this potential change, please feel free to contact us for assistance.