Updates to ACA's 'grandparent' plans
"Grandmothered" ACA plans have been renewed for another year, while "grandfathered" plans look to stay profitable.
Small group health plans that don’t comply with all the requirements of the Affordable Care Act are getting an extra lease on life, being “grandmothered” for renewal for another year, even as insurers are asking to change some of the restrictions on “grandfathered” plans so they can charge beneficiaries more.
The Centers for Medicare and Medicaid Services have announced 0that states can extend grandmothered plans’ expiration date to December 31, 2020; 32 states still allow renewals of grandmothered plans.
Related: 7 essential facts about grandfathered plans under PPACA
Grandmothered plans are those that took effect from March 23, 2010—the date the ACA was enacted—through the end of 2013. They’re also known as traditional plans and are in the small and individual market. They’re not fully compliant with the ACA.
In contrast, grandfathered plans are in either the small or large group market and have major provisions that took effect prior to March 23 of 2010. They also don’t satisfy all the requirements of the ACA, but as long as they don’t make major changes that cut benefits or boost costs to employees, they’re allowed to live on.
But now they do want to boost costs to employees, with the Blue Cross and Blue Shield Association asking that CMS change how grandfathered plans’ charges to beneficiaries are calculated. At present, plans can raise or lower deductibles or maximum out-of-pocket limits by medical inflation plus 15 percentage points as calculated using the Consumer Price Index for all urban consumers published by the Labor Department.
But according to the association, that’s not enough when it comes to drug costs. Modern Healthcare reports that while the number of grandfathered plans has shrunk, citing Kaiser Family Foundation data saying that last year 20 percent of employers had at least one grandfathered plan, the American Benefits Council, which lobbies for employer-sponsored plans, is cited in the report for comments saying that the CMS needs to enable plans to increase prescription drug copays because “prescription drug inflation exceeds medical inflation.”
According to ABC, few of its 440 members don’t have grandfathered plans thanks to the shift to high-deductible health plans with health savings accounts. However, the Blue Cross and Blue Shield Association, representing 36 insurers, said its plans have about 700,000 members in grandfathered plans on the individual market and, in comments cited in the report, said, “Extrapolating this to the total individual market, there are likely over 1 million persons still enrolled in grandfathered individual market coverage.”
The association said that any flexibility granted to grandfathered group plans should also be granted to individual market plans.
Katie Keith, a principal at Keith Policy Solutions, wrote in a post for the Health Affairs blog, “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.” Some of those reforms not complied with include coverage of an essential health benefits package and a ban on preexisting condition exclusions, as well as other provisions.
Keith pointed out that pressure from consumers getting cancellation notices during ACA’s first open enrollment was largely responsible for grandfathered plans.
But that doesn’t mean everyone favors such extensions. Shandon Fowler, founder and principal of benefits consultancy Four8 Insights in Charleston, S.C., is cited in the report saying, “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.” He pointed out in the report that millions of workers have reaped the benefit of ACA essential health benefits and other provisions.
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