CMS Extends Transitional Policy for Grandmothered Plans Through 2018

On Feb. 23, 2017, CMS announced an additional one-year extension for certain individual and small group policies commonly referred to as grandmothered plans. As background, on Nov. 14, 2013, President Obama — via a CMS letter — announced the availability of a transitional policy that allowed individual and small group health insurance plans that were previously cancelled due to noncompliance with PPACA insurance mandates to be renewed in 2014 without being subject to PPACA-related penalties. Specifically, the Nov. 14, 2013, CMS letter stated that health insurance coverage in the individual or small group market that was renewed for a policy year between Jan. 1, 2014, and Oct. 1, 2014, would not be considered to be out of compliance with the following market reforms:

  • Community rating;
  • Guaranteed issue and renewability of coverage;
  • Prohibition of coverage exclusions based on pre-existing conditions;
  • Non-discrimination based on health status;
  • Non-discrimination regarding health care providers;
  • Comprehensive coverage (i.e., coverage of essential health benefits and the application of maximum out-of-pocket limits); and
  • Coverage for participation in clinical trials.

In March 2014, the transitional policy was extended, meaning that such plans could continue through 2016. Then in February 2016, a second extension was granted through Dec. 31, 2017. The latest extension means that the non-grandfathered health insurance coverage in the individual or small group market that has been continually renewed since 2014 may continue to be renewed for policy years beginning on or before Oct. 1, 2018, with all policies ending by Dec. 31, 2018. Such policies continue to be exempt from the above mentioned requirements.

Although the transitional policy allows the continuation of noncompliant plans at a federal level, the practice must be approved by a state regulator for the policies to be available in a particular state. Further, an insurer then has the choice as to whether to continue to offer the policies.

Any small employers who are currently covered by such a policy should work with their advisor and insurer regarding renewal of the coverage.

CMS Memo »