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What Is the Difference Between a Grandfathered and a Grandmothered Health Plan?

EBIA  

EBIA  

QUESTION: Our company sponsors a group health plan, which is grandfathered for purposes of the ACA. We’ve been reading about extended transition relief for grandmothered health plans. How are these plans different from grandfathered health plans?

ANSWER: “Grandfathered plans” are group health plans (or health insurance coverage) that were in existence on March 23, 2010, and have not undergone certain prohibited design changes since then. These plans are excused from some requirements under the ACA, 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 (see our Checkpoint article). Also, following enactment of the Consolidated Appropriations Act, 2021 (CAA), grandfathered plans are subject to certain expanded patient protections, including the provisions addressing surprise medical billing (see our Checkpoint article).

Grandfathered status can be maintained indefinitely so long as the plan or coverage has continuously covered someone (although not necessarily the same person) since March 23, 2010; no prohibited plan design changes are made; and the required disclosure and recordkeeping requirements are 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 (e.g., PPO or HMO) made available under a group health plan. If grandfathered status is lost, it cannot be regained.

On the other hand, “grandmothered plans” is a term used to describe non-grandfathered health plans that are subject to an HHS transition policy allowing insurers in the individual and small group markets to renew health insurance policies they would otherwise have had to cancel due to noncompliance with certain ACA insurance market reforms (e.g., premium rating rules, guaranteed availability and renewability, and the requirement to provide essential health benefits). After several extensions of the transition relief allowed states to permit insurers that had continually renewed grandmothered plans since January 1, 2014, to renew such coverage again for any policy year beginning on or before October 1, 2022, HHS indefinitely extended the nonenforcement policy to apply for policy years beginning after October 1, 2022, and to remain in effect until HHS announces that such coverage must comply with the relevant ACA requirements (see our Checkpoint article).

An insurer that renews a grandmothered plan is required to provide an annual informational notice to affected individuals and small businesses explaining the right to retain existing coverage. Also, note that grandmothered plans generally must comply with the CAA’s surprise billing requirements.

For more information, see EBIA’s Health Care Reform manual at Sections VI (“Grandfathered Health Plans”), XIV.A (“Introduction and Understanding Small and Large Group Markets”), and XII.B (“Patient Protections”).

Contributing Editors: EBIA Staff.

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