On Monday, April 9, the Centers for Medicare and Medicaid Services announced that the transitional plans in the individual and small group markets, also known as “grandmothered” plans, will be extended one more year through the end of 2019. This is welcome news for clients who currently have a transitional policy, but it does feel a bit like the government is crying wolf. Every year, clients worry that they will need to search for another solution since they are likely to see their rates increase if they are forced to move to an ACA-compliant metallic plan, and every year they learn that they can hang on to their current coverage a little longer. This year is no different.
The Affordable Care Act created a number of market reforms that were scheduled to go into effect in 2014—on January 1 for individuals and on the plan renewal date for employers. Among those changes were a guaranteed issue provision with modified adjusted community rating and an essential benefits package to be included in all non-grandfathered individual and small group plans.
These changes were pitched as a good thing for consumers because anyone who wants health insurance would be able to buy coverage without any surcharges, exclusions, or denials and because health plans would cover more services that people need, like maternity and mental health care.
The problem, of course, is that not everyone benefits from these changes. For younger, healthier individuals and small employer groups who were paying below-average premiums before the ACA, these market reforms would have increased the premiums they pay for health coverage and added protections they were unlikely to use.
It is true that there was a grandfathering provision in the health care law that allowed people who liked the plan that they had before the Affordable Care Act was signed into law on March 23, 2010 to keep that coverage and avoid many of the new rules of the Affordable Care Act. However, since many of the benefits of being grandfathered did not materialize until 2014, the majority of individuals and employers lost their grandfathered status in the first three years of the ACA.
As we approached 2014, these same small employers and individuals began to receive letters from their health carriers saying that their existing non-grandfathered plan would be eliminated and that they would be mapped to an ACA-compliant metallic plan. There was a huge uproar, congressional hearings were held, the administration got a lot of bad press, and ultimately President Obama announced that people would be able to keep their current policy for another year before moving to a plan with all the protections created by the Affordable Care Act.
On their first renewal date after September 23, 2010, non-grandfathered individual and small group policies were required to implement a few of the patient protections created by the Affordable Care Act. The most notable of these protections was unlimited, up-front preventive care with no cost sharing, so that is the primary difference between transitional plans and grandfathered plans: grandmothered plans include expanded preventive care while grandfathered plans do not.
Most of the big market reforms created by the Affordable Care Act, including the essential benefits provision and modified adjusted community rating, went into effect in 2014 and, just like grandfathered plans, clients with these transitional plans were able to avoid the new rules. Again, this is helpful for younger and healthier individuals and employers who pay lower premiums as a result of the old coverage and rating rules.
President Obama’s announcement about transitional policies gave individuals and small employers in states that permitted this option and whose insurers agreed to offer the transitional policies one year to continue their current plans. The initial CMS guidance in November, 2014 said that the federal government would consider whether an extension of the transitional plans would be appropriate.
By March, 2014, CMS had decided that a two-year extension of the transitional coverage was, in fact, necessary, so individuals and small employers would have the option of renewing their existing coverage through October 1, 2016 as long as that coverage ended by October 1, 2017.
CMS later extended that transitional relief another year to October 2018 and then again to the end of 2018. For that reason, the April 9 announcement was not totally unexpected.
The most recent CMS announcement means that individuals and employers that currently have a transitional policy will be able to renew their current coverage once again. They will continue to avoid the essential benefits provision and modified adjusted community rating provision of the Affordable Care Act. Again, this is good news for clients who benefit from the old pre-ACA rules.
That said, staying grandmothered does mean that these individuals and employer groups have to renew as is. They cannot switch to a higher deductible plan or modify their copayments without giving up their grandmothered status and starting to play by the new, less friendly rating rules. This can be frustrating for clients who in the past may have modified their health plans every couple years to offset the annual increases that come with nearly all health insurance coverage.
For that reason, brokers may still want to search for other options for their individual and small group clients. In the next three posts, we’ll offer some solutions for grandmothered and grandfathered clients whose current plans are no longer working for them. Please be sure to read them. While it may still make sense for some of your clients to keep their current policies, those same clients will certainly want to hear all of their options so they can make an educated decision.