Humana Terminates Grandfathered Plans in 11 States

Here's what you need to know if your grandfathered plan is ending

Health insurance carriers can discontinue grandfathered health plans. Humana is doing so in 11 states in 2016
Got a grandfathered health plan? You can keep it for as long as it's offered, but your carrier has the option to discontinue it. Jayneboo Shropshire/Creative RM/Getty Images

When the Affordable Care Act was signed into law in 2010, it called for a significant overhaul of the regulations for individual and small group health insurance, with the bulk of the changes taking effect in 2014. But the law included a provision to preserve individual and small group plans that were already in-force as of March 23, 2010, when the ACA was enacted.

These plans are grandfathered (which is not the same as grandmothered) and they're allowed to remain in existence indefinitely, as long as the plans remain mostly unchanged and don't significantly reduce benefits or increase costs (note that this refers to higher costs for healthcare services; increased premiums alone will not cause a health plan to lose grandfathered status).

To clarify, a grandfathered small group plan is one that the employer had already established as of March 23, 2010 - new employees can still be added to existing grandfathered plans, but employers have not been able to purchase grandfathered plans since the ACA was signed into law.

A grandfathered individual plan is one that had already been purchased by the individual as of March 23, 2010 - nobody has been able to purchase a grandfathered individual plan since March 23, 2010, although new dependents can still be added to grandfathered plans (so if you have a grandfathered individual plan and you have a baby, you can add the baby to your plan).

If your health plan is grandfathered, you have the option to keep it indefinitely. But only if your health insurance carrier continues to offer it. There is no provision in the ACA that requires health insurers to continue to offer a specific plan, or to continue to offer any coverage at all, for that matter.

Why would an insurance carrier end grandfathered plans?

In the individual market prior to 2014, health insurance was medically underwritten in all but five states. So the people who have grandfathered individual plans in most states are people who were relatively healthy as of when their plans were purchased. But as time goes by, medical underwriting "wears off," since health conditions begin to develop in the population that was previously healthy.

And since nobody has been able to purchase grandfathered plans since 2010, the risk pools for those plans have steadily decreased in size over the last six years. People can drop their grandfathered plans and switch to other coverage, but nobody can join the plans unless existing members gain new dependents.

As grandfathered health plans insure fewer members, their per-member administrative costs increase. For some insurers, grandfathered plans are no longer profitable or are no longer a good fit with their overall business model. In that case, the insurance company can opt to terminate grandfathered plans. 

Humana ending grandfathered plans in 11 states

Humana offers individual health insurance in 22 states. The carrier announced in December that they would terminate grandfathered individual health plans in 11 states in 2016: Alabama, Arizona, Colorado, Florida, Georgia, Mississippi, Ohio, Oklahoma, South Carolina, Tennessee and Wisconsin (grandfathered small group plans are not impacted at this point).

The plan terminations will begin March 1, and will be effective as of the plan renewal date - so if your grandfathered Humana plan has a renewal date of August 1, you can keep your plan through the end of July.

My grandfathered plan is ending... what do I need to do?

In order to terminate grandfathered health plans, the carrier must notify insureds at least 90 says in advance of the termination date - so there will be time to plan ahead. And your carrier must also let you know that you have options in terms of replacing your plan. Your carrier may offer to transition you to one of its ACA-compliant plans, but you'll also be able to shop from among any of the plans offered by any of the individual health insurance carriers in your area.

If your grandfathered plan is ending, it's important to understand how the ACA's special enrollment periods work. Loss of coverage is a qualifying event that triggers a special enrollment period

Your special enrollment period will begin 60 days before the date your plan ends, and will continue for 60 days afterwards. And the special enrollment period applies both on and off the exchange.

For example, if your plan is scheduled to end on July 31, you'll get a notice about the termination by the beginning of May, and your special enrollment period would run from June through September. If you enroll in a new plan in the 60 days prior to the loss of coverage, your new plan will be effective the first of the month following your old plan's termination. So if your plan is ending July 31, you can enroll in a new plan during June or July - as late as July 31 - and your new plan will be effective August 1, with no gap in coverage.

If you enroll in a new plan during the 60 days after your old plan ends, you'll have a gap in coverage of at least a month, since there's no provision allowing plans to be backdated in that situation (ie, if you enroll on July 1, your new plan wouldn't take effect until August 1).

The ACA includes a tax penalty for being uninsured, but there's no penalty for a single short gap in coverage during the year, as long as it's less than three months long. So if you're uninsured for one or two months while you wait for your new plan to take effect, you wouldn't be penalized by the IRS, assuming you had coverage throughout the rest of the year. But you would be without health insurance during that time, and would have to pay your own medical bills if an emergency situation were to arise.

How will a new plan be different from my grandfathered plan?

Grandfathered plans only have to comply with a few aspects of the ACA, so your new plan will have far stronger consumer protections. And if you're eligible for premium subsidies, it might be less expensive too. On the other hand, if you're not eligible for premium subsidies, your new plan might end up being more expensive than your grandfathered plan. 

Grandfathered individual health plans can no longer have lifetime benefit maximums (although they can still have annual benefit maximums). They also must allow young adult children to remain on a parent's health plan until age 26, and must spent at least 80% of premiums on medical care.

But grandfathered plans do not have to cover the ACA's essential health benefits, and they don't have to cover pre-existing conditions. So if your plan excluded pre-existing conditions or charged you a higher premium based on your medical history when you bought the plan, those aspects of the plan did not have to change as a result of the ACA.

If you're switching to a new plan - either through the exchange or off-exchange - you'll find that the new coverage most likely has a broader range of benefits, including things like maternity care, prescription drugs, and mental health care. And coverage will be guaranteed-issue regardless of your medical history.

Grandfathered plans also aren't eligible for the ACA's premium tax credits (subsidies), so insureds pay the full cost of their coverage under a grandfathered plan. If the grandfathered plan is ending, you may find that you're eligible for premium subsidies if your household income is no more than 400% of the poverty level, which is currently $47,080 for a single individual, and $97,000 for a family of four (the 2015 poverty level guidelines will continue to be used for subsidy eligibility determination until the 2017 open enrollment period begins in the fall of 2016, although Medicaid/CHIP eligibility is now based on the 2016 poverty level guidelines).

Where should I get my replacement plan?

During your special enrollment period, you can shop in the exchange, or you can go directly to a health insurance carrier and buy a plan. But if you're eligible for premium subsidies - or if there's any chance your income might decline later in the year and make you eligible at that point - be sure to shop for your replacement plan in the exchange. Premium subsidies aren't available outside the exchange, and can't be claimed later on your tax return if you bought your health plan outside the exchange.

If your grandfathered plan is ending and you're unsure of the best option to replace it, seek out help. Brokers and navigators are in every community, and the price of your plan will be the same regardless of whether you have help with the plan selection and enrollment process.

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