7 Things to Know About Grandmothered Health Plans

Latest Extension Lets Grandmothered Plans Exist Through 2022

When the ACA was signed into law in 2010, it called for dramatic changes in the individual and small group health insurance markets. A provision was built into the law to allow plans that were already in existence as of March 23, 2010 (the day the law was enacted) to continue to remain in force indefinitely, as long as no significant changes were made to the plan, and as long as the health insurance company continued to offer the plan. These plans are grandfathered and are exempt from many of the ACA's requirements.

But the ACA didn't make any particular allowances for individual and small group plans that became effective after March 23, 2010, but before the bulk of the ACA's insurance regulations were to take effect in 2014. The expectation was that they would terminate at the end of 2013 and be replaced with ACA-compliant coverage at that point, or at the latest, by their renewal date in 2014.

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Transitional Relief Created "Grandmothered" Plans

Then in the fall of 2013, as the health insurance exchanges were getting underway—with significant technical glitches—and as cancellation notices for the non-compliant plans started to show up in consumers' mailboxes, the furor over plan cancellations reached a fever-pitch.

In response, HHS issued transitional relief that allowed states to permit these non-grandfathered plans to renew again until as late as October 1, 2014, with coverage allowed to remain in force until September 30, 2015. 

Less than four months later, in March 2014, HHS issued an extension of the transitional relief, giving states the option to allow these plans (dubbed "transitional" or "grandmothered" plans) to renew as late as October 1, 2016, with coverage that could then be allowed to remain in force as late as September 30, 2017.

On February 29, 2016, CMS issued an additional extension that allowed grandmothered plans to remain in force as late as December 31, 2017. Extensions have been issued every year since then, with the most recent in early 2021. It allows grandmothered plans to last through 2022, as long as the state and insurer agree to allow this.

As a result, in the majority of the states, there are still individual and small group plans in existence (although their numbers are steadily dwindling) that are not grandfathered, and also not fully compliant with the ACA.

But as has always been the case, insurers have the option to terminate transitional plans and replace them with ACA-compliant plans instead, even in states that allow transitional plans to continue to renew.

Transitional Health Plans

1. Grandmothered plans are not the same thing as grandfathered plans. They have different requirements in terms of complying with various aspects of the ACA, and they aren't allowed to remain in force indefinitely. Grandmothered plans have an expiration date, unlike grandfathered plans, which could—in theory—remain in force forever if the carriers opted to go that route (which is unlikely). But it's also noteworthy that enough extensions have already been granted to allow grandmothered plans to exist for nearly an additional decade beyond their initially scheduled termination dates. We might see additional extensions that last until insurers decide to terminate the policies due to dwindling enrollment.

2. Some states opted not to allow grandmothered plans at all, others terminated them by 2016. Even in states that did allow grandmothered plans to continue to renew, some carriers terminated the plans anyway and replaced them with ACA-compliant coverage. The initial transitional relief provision was issued late in the year in 2013, when some states and carriers were so far along the path of ACA-implementation that they determined it would not be in the best interest of insureds to reverse course at that point. In 15 states and DC, there were no grandmothered plans in existence by 2016.

Although most of the states have allowed grandmothered plans to continue, there are at least four of those states where there are no longer any grandmothered plans in existence because carriers have opted to discontinue them. And because people can no longer purchase grandmothered plans, enrollment in these plans has been steadily declining over the years.

3. Grandmothered plans cover preventive care with no cost-sharing, but are not required to cover the rest of the ACA's essential health benefits. The ACA began requiring all health plans to cover certain preventive care with no cost-sharing (ie, free at the time the service is provided) for all plan years beginning on or after September 23, 2010. This applied to new and renewing plans, although it did not apply to grandfathered plans. So grandmothered plans that were effective after March 23, 2010 but before September 23, 2010, had to begin covering preventive care with no cost-sharing as of their first renewal date. And all grandmothered plans effective on or after September 23, 2010 included preventive care with no cost-sharing from the get-go.

4. Grandmothered plans can no longer be sold. Grandmothered plans are those that went into effect after March 23, 2010, but no later than October 1, 2013, or in some states, December 31, 2013. After that point, it was no longer possible to buy a plan and have it be considered grandmothered. Once January 2014 rolled around, no small group or individual major medical plans could be sold at all (including outside the exchange) if they weren't fully compliant with the ACA.

5. Grandmothered plans aren't eligible for subsidies or small business health insurance tax credits. They aren't sold in the exchange, which means they don't qualify for premium subsidies. If you have a grandmothered individual plan, you're paying the full premium yourself (unless your employer has established a health reimbursement account to reimburse you for some of the cost).

6. If your grandmothered plan excluded your pre-existing conditions, that provision still applies. As of 2012, 32 states had no guarantee issue laws and some insurers maintained lists of up to 400 conditions that would exempt someone from being insured by them. And in many states, small group coverage could be issued with higher premiums based on the group's medical history. Although that's no longer the case for new plans, the terms of your grandmothered plan are unchanged—if it excluded your pre-existing condition or charged you a higher premium because of your medical history, that still applies today.

7. When your grandmothered plan ends (or renews), you'll have access to a special enrollment period. Even if your health plan terminates outside of open enrollment, you'll still be able to enroll in a new plan at that point, with no gap in coverage. Under the guidance issued by CMS in 2021, grandmothered plans are permitted to renew as late as October 1, 2022, but the coverage must terminate no later than December 31, 2022.

States that still have grandmothered plans in existence have the option to allow this or not, at their discretion, and the December 31, 2022 termination date could very well be extended again in future federal guidance. But if your health plan follows this schedule and allows your plan to continue to exist until the end of 2022, you'll be able to enroll during the open enrollment period for 2023 coverage (in most states, that's November 1, 2022 to December 15, 2022), and have seamless coverage under an ACA-compliant plan that takes effect January 1, 2023.

But if your plan still has a non-calendar-year schedule (eg, it runs from June to May, for example, and renews on June 1 each year), your insurer might opt to terminate the plan at the renewal date, instead of renewing it for a partial year and allowing it to remain in force for the rest of 2022. In that case, you'll have access to a special enrollment period during which you can pick a new plan, triggered by the loss of coverage, which is a qualifying event.

In addition, you also have a special enrollment period during which you can pick a new, ACA-compliant plan, if your non-calendar-year grandmothered (or grandfathered) plan renews mid-year, even if the plan doesn't terminate at that point.

A Word From Verywell

If you still have a grandmothered plan, it's currently scheduled to terminate no later than the end of 2022, depending on the rules your state has adopted. And additional federal extensions might be issued in the future, allowing grandmothered plans to extend into 2023 or beyond.

But even if that happens, your insurer might decide to terminate grandmothered plans anyway. As the number of people enrolled in these plans dwindles, administrative costs on a per-person basis get higher. And although people on these plans went through medical underwriting back when they first signed up, it has now been more than seven years since anyone enrolled in those plans. So the medical underwriting is "wearing off"—the enrollees in these plans are getting older and aren't necessarily as healthy as they were several years ago, and claims costs might be increasing.

And even if your grandmothered plan ends up being eligible for another renewal, keep in mind that it might not be in your best interest to renew it. Double-check the new plan options that are available to you as replacements.

The new plans are more comprehensive, and although they do tend to have higher full-price premiums, there are premium subsidies available in the health insurance exchange that will offset some of that cost. And for 2021 and 2022, the American Rescue Plan has made the subsidies larger and more widely available. Even if you looked in the past and weren't subsidy-eligible, you may find that you are now. So before you opt to keep your grandmothered plan (assuming that's an option), be sure you've done your homework and compared all of the available choices.

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