Grandfathered or Grandmothered? What’s the Difference?

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The terms “grandfathered plan” and “grandmothered plan” are now a common part of Affordable Care Act (ACA) terminology but do they mean the same thing?  The answer is no.  There are noteworthy differences between a “grandfathered plan” and a “grandmothered plan.”

A “grandfathered plan” is one that existed before the ACA was signed into law on March 23, 2010.  These plans are exempt from many, but not all, of the ACA’s coverage requirements.  Certain mandates, such as coverage of dependents up to age 26 and no dollar limits on essential health benefits, apply to both “grandfathered” and “non-grandfathered plans.”

A plan may lose its “grandfathered” status if significant changes are made that reduce benefits or increase costs.  If any of the following changes are made, then the plan will lose “grandfathered” status:

  • Elimination of all or substantially all benefits to diagnose or treat a particular condition.
  • Increasing the percentage cost-sharing requirement (e.g., raising an individual’s coinsurance requirement from 20 to 25 percent).
  • Increasing the deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points.
  • Increasing the copayments by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation).
  • Decreasing the employer’s contribution rate by more than five percentage points.
  • Decreasing annual dollar limits that were in effect on March 23, 2010 or introducing an annual limit that is less than the lifetime limit in effect on March 23, 2010.

A “grandmothered plan” is different.  The term refers to a plan or policy in the individual and small group market that is subject to a specific transition policy available through the Department of Health and Human Services (HHS).  Under the ACA, insurers are required to stop offering plans or policies in the individual and small group markets that do not comply with certain requirements, such as covering essential health benefits or using community rating.  The HHS transition policy, which has been extended several times, allows non-compliant plans and policies to be renewed for a limited time.

Under the policy, states may allow insurers that have continually renewed their “grandmothered plans” since January 1, 2014 to continue renewing the coverage for plan or policy years beginning on or before October 1, 2018; however, the coverage cannot extend beyond December 31, 2018.  While some states allow these plans or policies to renew through the end of 2018, other states, such as California, do not.  In fact, California stopped allowing renewal of non-compliant plans and policies in the individual market in 2014 and in 2016 for the small group market.