The Centers for Medicare & Medicaid Services (CMS) has announced an extension for individuals and small businesses who have certain, non-Affordable Care Act (ACA) compliant policies. The extension applies to non-ACA compliant coverage offered in the individual and small group market that are commonly referred to as “grandmothered” policies.
These policies are available in over 30 states (California is not one of them) and regulated under applicable state laws. The transition policy is not new; it was originally implemented by the Obama Administration and has been extended several times. The latest extension applies to policies beginning on or before October 1, 2018 that end no later than December 31, 2018. Estimates are that about one million people have these grandmothered policies.
The transition relief only applies to individuals or small businesses with coverage that has been in effect since 2014, under the original transition relief. Because these policies are not subject to the ACA, the plans are regulated under state law and are not required to meet certain ACA requirements, including:
- Community premium rating standards
- Guaranteed availability
- Guaranteed renewability
- Coverage of essential health benefits
Small group policies also must not have preexisting condition exclusions for adults or discriminate based on a health factor, but these rules do not apply to individual policies. Insurance companies can choose to adopt some or all of these reforms in renewed policies. Insurers renewing coverage under this extension must notify all individuals and small businesses of the transition relief extension and their coverage options.
States can elect to extend the transition policy for shorter periods and may apply it to just the individual market, just the small group market, or to both markets. CMS will work with insurance companies and states to implement this policy, including options such as allowing policy years that are shorter (but not longer) than 12 months or early renewals with a January 1, 2018 start date.
Earlier answers to frequently asked questions (FAQs) indicated that transitional policies satisfy the individual mandate requirement to maintain minimum essential coverage (exempting covered individuals from individual shared responsibility penalties). The latest bulletin does not address this issue, so presumably the FAQ guidance continues to apply. While the bulletin represents a continuation of past policy, it takes on additional significance this year given the Trump Administration’s efforts to ease regulatory requirements and efforts to repeal the ACA.
Some people have viewed this extension of grandmothered policies as an indication that the Trump Administration will work to iron out problems with the ACA, rather than undermine it. Others view grandmothered policies themselves as undermining the ACA because they are keeping these policyholders out of the Exchanges and therefore shrinking pools that need to be larger.