EDITOR’S NOTE: As part of healthinsurance.org’s continuing coverage of the 2014-2015 Obamacare open enrollment period, we recently published a 38-page eBook, The Insider’s Guide to Obamacare’s Open Enrollment. Authored by contributor Louise Norris, the publication book is filled with advice written to help consumers more easily – and more quickly – navigate this open enrollment period.
In December, we launched a video series that expands on the topics in the eBook and explores topics that may not have been covered in the book. In the third segment of the series, Norris addresses the topic of grandmothered plans, explaining how the policies differ from grandfathered health plans, which states allow you to renew your grandmothered plan, and how benefits differ from those in ACA-compliant plans.
We hope you enjoy the series and – if you have an open enrollment question that you haven’t seen answered in the eBook or in the pages of this site – drop us a note with your suggestion.
Hi there. My name is Louise Norris. My husband and I own a health insurance brokerage in Colorado and I’ve been writing about health care reform now for more than eight years.
I wrote an ebook which you can download for free from healthinsurance.org and it’s all about the current open enrollment period that’s going on for people who buy their own individual health insurance and one of the topics that I cover in the ebook is grandmothered plans. And so I wanted to go into some more detail about that today in this video.
So grandmothered plans are health insurance plans that you purchased after the Affordable Care Act was signed into law in March of 2010 but before all of the bulk of the ACA regulations went into effect in 2014. So you had a good 3½ years … more than 3½ years there … where people were still purchasing plans that were not fully compliant with the ACA. And in a lot of cases people are still able to keep renewing those plans even though they are not fully compliant with the ACA.
Grandma vs. Grandpa
Grandmothered plans differ from grandfathered plans in that grandfathered plans are the ones people already had when the ACA was signed into law almost five years ago. So if you have a grandfathered plan, you’ve had it now for quite a number of years and as long as the plan hasn’t substantially changed and your carrier is still offering it, you can continue to renew it indefinitely … although that might not necessarily be in your best interest.
Grandmothered plans … originally the plan was that all policies would transition to … people would transition off of their old plans and onto ACA-compliant plans in 2014. And then the Obama administration made a transitional relief fix last fall and then again another one earlier this spring allowing people basically the option if your state allows it and your carrier allows it, you are allowed to keep on renewing those plans all the way out to 2017 in some cases.
So I’ve got a list here of the states where they are not allowing the grandmothered plans to continue to renew for 2015.
So if you’re in one of these states … and in a lot of cases, people in these states had to switch to ACA compliant plans for 2014 already so it’s a moot point … but if you are in one of these states and you do have a health insurance plan that you had in 2013, you will need to switch to a new plan for 2015.
The reason Minnesota has a little asterisk there is because they just required all of their plans to upgrade basically to become ACA compliant as of January 2014 so there aren’t any noncompliant plans in Minnesota at this point.
But anyway, if you’re in one of … so there are only 14 states on this list … which means the majority of the states accepted the Obama administration’s offer to allow the health plans from 2013 to continue to exist in 2014 and now again in 2015. If your carrier is also going along with this plan and is allowing you to renew your plan, he had a choice: Do you want to keep your pre-2014 plan or do you want to switch to a new plan for 2015?
How grandmothered plans comply with the ACA
All plans … whether they are grandfathered, grandmothered or new ACA-compliant plans have to comply with some aspects of the ACA, including they can’t have caps on your lifetime … they can’t have lifetime maximums on the policies … which lifetime maximum used to be very standard in the individual market; that’s no longer the case.
They all have to allow children to remain on the parents’ policy through age 26 and they all have to comply with the medical loss ratio rules, which means in the individual market, they can’t spend more than 20 percent of premiums that they collect on administrative expenses. So at least 80 percent of the premiums they take in have to be spent on medical claims.
But grandfathered plans … which again, those are the ones that people have had now for almost five years or more … those can still have annual limits on the benefits and they do not have to cover preventive care for free.
Grandmothered plans … while they also don’t have to comply with a lot of the Affordable Care Act’s regulations … they do have to end lifetime limits on coverage so they can’t … I’m sorry ANNUAL limits on coverage … they can’t put any limits on how much they’ll pay for your care and they do have to cover preventive care for free with no cost sharing to you.
But both grandmothered and grandfathered plans … the underwriting that was on your policy when you got it is still in place now, so say for example, if you bought a plan prior to 2014 and your carrier excluded asthma … Maybe you’ve got asthma and your carrier said were not covering anything to do with that … that is still the case on your plan. Your plan is not covering pre-existing conditions if it wasn’t covering them when you got the plan.
And they also don’t have to cover the essential health benefits that are mandated in the Affordable Care Act with the exception of preventative care for grandmothered plans. So a lot of these grandmothered and grandfathered plans they don’t cover mental health, they don’t cover maternity.
Prescription drugs is another area where a lot of plans were, you know, definitely had gaps in coverage prior to 2014. They might not cover prescriptions at all or in a lot of cases maybe only cover generics or … So there are definitely some gaps there … as opposed to all of your plans that you’re purchasing new for 2015 or that you purchased in 2014 and are renewing for 2015. They all are fully compliant with the ACA, regardless of whether you are inside the exchange or outside the exchange.
No subsidies from ‘Granny’
Now another thing you’re obviously grandfathered and grandmothered plans are not subsidy-eligible so if you are eligible for subsidies under the Affordable Care Act, you can’t get those if you keep your grandfathered or you grandmothered plan.
And the subsidies extend well into the middle class. A family of five … you can earn up to $111,000 a year as a family of five and still qualify for subsidies. So the majority of American households do qualify for subsidies and if you are holding onto a grandmothered or grandfathered plan because maybe you just haven’t checked to see what else is available, I would definitely encourage you to take a look around and see in your exchange what you can get because you might find that you’re eligible for subsidies that you weren’t aware of.
The other thing to be aware of with your grandfathered and grandmothered plans is the way the pricing works and again going back to the medical loss ratio … at least 80 percent of the premiums that are taken in have to be spent on claims so by far and away the driving factor for prices is medical costs … you know the amount of money they’re spending on claims … and in both your grandfathered and grandmothered plans, they have what’s called a closed block in terms of the covered lives they have. Because nobody new can enroll in those plans.
So grandfathered plans haven’t been able to enroll anybody new for almost five years now and grandmothered plans for a year now, no one new has been purchasing those plans. So the average age of their enrollees is increasing and statistically, as your average age of your enrollees increases, so do health costs.
In the individual market where you have new people joining constantly, it’s sort of always refreshing that pool of insureds and once you have a closed block, people can leave but people can’t come in. So in a lot of cases, rate increases on grandmothered and grandfathered plans are maybe higher than you might see in the new plans that are available that started becoming available in 2014.
Why you should shop around
So a good example of this is my own family’s plan. Here in Colorado, we, last year, had the option to renew our grandmothered plan for 2014 and we also had the option to shop around for a new plan and at the time it was going to … switching to a new plan was going to cost us at a minimum $150 more per month. The cheapest fully ACA-compliant plan we could get would have been $150 more than just renewing our grandmothered plan.
But if we … now that 2015 is coming around one year later … there’s a carrier in our market here that is offering new plans much less expensive than they were last year and actually the cost of replacing our plan with an ACA-compliant plan is 13 percent less than it would’ve been last year and at the same time our grandmothered plan is increasing in price by 13 percent.
So they’ve almost met in the middle now; at this point we could switch to an ACA-compliant plan for virtually the same as were paying for our … as would we be paying in 2015 for our grandmothered plan.
And I think people will find in that a lot of cases … obviously it’s not just Colorado … because of the way I described how the rating works on those closed-block plans as opposed to your new plans where they are constantly enrolling new people and obviously … you know … working to gain market share and making the prices competitive and trying to enroll as many people as possible … in a lot of states there are carriers offering plans for lower premiums in 2015 than they were in 2014 and in virtually all cases you’ll find that your grandmothered or your grandfatherered plan will be going up in price.
So if you checked last year and found that it was going to be too expensive to switch, definitely check again because you might find that with your new rate increase on your grandmothered plan or your grandfathered plan and with possible rate decreases in the new market … either in the exchange or outside the exchange if you don’t qualify for the subsidy … there might be a plan that’s definitely a better value for you if you switch.
If you do opt to renew your grandmothered plan and then change your mind in January, you can still do that you can still go on and shop for new plan all the way until February 15.
If in doubt at all seek out help. Remember there’s no cost for having a navigator or broker help you.
We have tons of FAQs and informational posts at healthinsurance.org where you can find out more information about all of the stuff. My takeaway point here would be if you have a grandmothered plan or grandfathered plan … if you do have one of those plans and you’re thinking about keeping it for 2015 definitely don’t just automatically default to that without really taking the time to shop around and just see what’s available … see what you could get in terms of replacing your plan before you make the decision.
So thank you very much.