Grandmothered ACA Plans Receive Transition-Relief Extension
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The U.S. Department of Health and Human Services’ Center for Medicare and Medicaid Services (CMS) has extended the period of non-enforcement for certain non-compliant health policies under the Affordable Care Act through the end of 2020.
The extension, detailed in a recent memo, applies to certain health insurance plans in the individual and small group markets that took effect after the ACA was enacted but before the applicable ACA provisions went into effect. These “grandmothered” plans were originally sold post-ACA enactment (March 23, 2010) but before January 1, 2014 (before ACA market reforms took effect). The extension of ACA non-enforcement for these plans applies to policy years beginning on or before October 1, 2020, provided that health insurance coverage becomes compliant with ACA requirements by January 1, 2021.
How do “grandmothered” plans differ from “grandfathered” plans? Here’s the breakdown:
Grandfathered Plans
- Plans that are pre-ACA enactment (March 23, 2010) were grandfathered in and exempt from some of the ACA market reforms.
- These plans do not require transitional relief, as they can exist indefinitely, provided that retain grandfathered status eligibility (primarily restrictions against significant changes to the plan) and comply with certain disclosure and documentation requirements.
- These plans can lose eligibility for their grandfathered status, depending on changes to the plans.
Grandmothered Plans
- Plans that were originally sold post-ACA enactment (March 23, 2010), but before January 1, 2014 (before ACA market reforms took effect).
- Transitional relief was provided originally in 2013 and to remain in force until 2014, and extended for another two years in 2014, another year in 2016, and then until 2018.
- The new ruling provides these plans with a termination date, currently on or before December 31, 2020.
- Limits to transitional relief vary from state to state or by market (individual or group).
While this extension allows ACA non-compliant plans to continue for a longer period, at some point, companies will be required to offer employees plans that are compliant with ACA requirements. Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs), employers with 50 or more full-time employees and full-time equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to IRS 4980H penalties.
Employers that fail to comply with the ACA’s Employer Mandate can face penalties in the millions of dollars. The IRS is currently issuing penalties for non-compliance in Letters 226J for the 2016 tax year. Over $228 billion in penalties are projected through 2026 and organizations should prepare for continued ACA enforcement. More than $4.5 billion were assessed to employers for failing to comply with the ACA in the 2015 tax year.
If you are not confident in your knowledge of ACA requirements and how to assess the effectiveness of your ACA compliance process, you may want to consider undertaking an ACA Penalty Risk Assessment. This risk assessment will identify any potential ACA filing errors and will help your organization to improve your ACA compliance process to avoid ACA penalties. Many vendors will offer this service free of charge.
To learn more about ACA compliance in 2020, click here.
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