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February 27, 2017

Consumers can keep 'grandfathered' plans for one more year, CMS says

Daily Briefing

    CMS on Thursday announced that it will allow health plans that do not meet the Affordable Care Act's (ACA) coverage requirements to stay in place for an additional year—expanding a "grandfather" provision previously extended by the Obama administration.

    According to Modern Healthcare, about one million people currently have grandfathered individual-market plans. Additional grandfathered plans exist in the small-business market.

    Background on 'grandfathered' health plans

    Unlike individual health plans sold under the ACA, grandfathered plans—those sold before the passage of the ACA on March 23, 2010—can charge consumers more based on gender or pre-existing conditions, and they are not required to meet all of the ACA's essential benefits requirements. Nor do they have to:

    • Comply with the law's limits on annual out-of-pocket costs;
    • Meet standards for participation in clinical trials; or
    • Meet standards for guaranteed renewability.

    The ACA includes a "grandfather clause" that allowed consumers to keep their health plans purchased before the law's passage, and the administration twice extended the deadline for the clause's expiration following outcry over canceled policies. Under those earlier extensions, the plans were allowed to remain in the market through 2017, provided insurers did not significantly alter the coverage.

    The clause gave states the choice of allowing the grandfathered plans or requiring residents to enroll in ACA-compliant coverage. About 35 states chose to allow grandfathered plans.

    Extension details

    Under the latest extension, CMS said it will allow states to permit grandfathered plans to operate through Dec. 31, 2018.

    States can allow the extension to both the small group and individual markets or either market separately. States also can allow insurers to issue partial-year policies to ensure that their coverage ends by 2019. According to Axios' "Vitals," states also can choose to ignore the extension.

    CMS said it issued the guidance because it is committed to "smoothly bringing all non-grandfathered coverage in the individual and small group market into compliance with all applicable" ACA requirements.


    Ceci Connolly, CEO of the Alliance for Community Health Plans, said that "given the confusion and uncertainty" over health care reform, "we believe reducing disruption is important to consumers." The insurance industry had lobbied for the extension, though it is one year shorter than they had requested.

    Some industry observers, however, say grandfathered health plans have resulted in lower exchange enrollment, which could affect the overall risk pool by bringing in fewer healthier enrollees. Tim Jost, an emeritus law professor at Washington and Lee University, said, "It's hard to see how this contributes to the stability of marketplace coverage, although it is apparently what the insurers want" (Meyer, Modern Healthcare, 2/23; Jost, Health Affairs blog, 2/23; Nather, "Vitals," Axios, 2/24; Wall Street Journal, 2/23; Politico Pro, 2/24 [subscription required).

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