On March 5th, 2014, the Obama Administration announced that it was giving states the option to further extend non-grandfathered health insurance plans. This announcement created some questions for consumers: What are non-grandfathered plans? Why would they be extended? And most of all, how does this affect me?
Understanding Grandfathered Plans
The Affordable Care Act (ACA), better known as ObamaCare, created a lot of new rules for health insurance plans. Any new plans offered after the passage of the law had to meet new guidelines. Any plans in existence before the law passed were “grandfathered” in – that is, they were allowed to continue without changes. Plans can lose their grandfathered status by making certain changes to coverage amounts or cost sharing. No date has been set as to when grandfathered status will expire for all plans.
Non-grandfathered plans are subject to the transitional policy extension. These plans came into existence after the March 23rd, 2010 passage of the ACA. Insurers who offer these plans must modify them to follow the new ACA rules as of January 1st, 2014. Insurers can either stop offering these policies or cancel a policy at any time. The Obama Administration permitted the individual states to extend non-grandfathered policies until renewals on October 1st, 2016.
As originally envisioned by the ACA, on January 1st, 2014, there were to be only two types of insurance plans: grandfathered plans that existed on March 23th, 2010, and ACA-compliant plans. The Administration’s action to allow states to permit the extension of non-grandfathered plans means there will be three types of plans until September 30th, 2017: grandfathered plans, non-grandfathered plans, and ACA-compliant plans.
The technical issues with the state Marketplaces and with Healthcare.gov in the fall of 2013 made it difficult for all eligible Americans to sign up for new insurance. Therefore, the Obama Administration advised the states that they could continue the non-grandfathered plans through 2014. Because states generally have jurisdiction over health insurance markets, each state was able to make its own decision. Many states extended non-grandfathered plans. Some did not.
On March 5th, 2014, in response to a large number of consumer complaints about current policies being cancelled, the Obama Administration again advised the states that they could choose to extend non-grandfathered insurance plans through 2016 renewals. This meant that Americans’ old health care plans could stay in place through September 2017. Fewer states have chosen that option, however, fearing the long-term consequences.
How Grandfathered Plans Differ from ACA Plans
The ACA had a number of provisions that were designed to offer a deeper level of coverage with far fewer restrictions. The grandfathered plans do not have to adhere to all of the changes the ACA proposed. In particular, grandfathered plans don’t have to:
- Cover preventive care with no cost-sharing (deductible or copayment)
- Protect your choice of doctors and provide coverage for out-of-network emergency room visits
- Guarantee that you have a right to appeal decisions
- Go through a stringent rate-review process for rate increases
In addition, grandfathered individual plans don’t have to:
How Grandfathered Plans Affect Consumers
Many grandfathered plans are less expensive than ACA-compliant plans, largely because of the allowed limitations on coverage. For younger, healthier Americans who don’t need deep levels of insurance coverage, the grandfathered plans may seem like a better deal. However, if the grandfathered plan is renewed and an unforeseen medical emergency occurs, such as traveling and needing out-of-network emergency care, those citizens can end up with a large and unpleasant medical bill.
If you receive a notice that your grandfathered plan is renewing, keep in mind you don’t have to agree to the renewal. You can cancel your existing plan and move to an ACA-compliant plan instead if you choose. However, if you do renew, make sure you understand the differences in coverage that are being offered to you.
For the system as a whole, there are concerns about maintaining pre-ACA plans. One concern is that only sicker Americans would enter the ACA Marketplaces, causing them to have higher costs and driving prices up. This two-tier health insurance market would destabilize the industry and disincentive companies from participating in ACA Marketplaces. As a result, many states are not continuing to allow non-grandfathered plans to renew beyond 2014.
The Obama Administration’s recent statement that non-grandfathered plans can be continued beyond 2014 raised questions in a lot of consumers’ minds. It’s important to understand the differences between grandfathered and ACA health insurance plans, and make sure to choose the best option for you and your family. Knowing you are appropriately covered if a need arises will bring peace of mind and predictability to your finances as you move into the future.