On February 29, the Centers for Medicare and Medicaid Services (CMS) announced that it was extending the timeframe for “grandmothered” or transitional plans that have not yet implemented all of the requirements of the Affordable Care Act (ACA). This is big news for small companies that are trying to keep their health insurance premiums under control.
In Texas, small employers that have continued to renew their existing non-ACA-compliant plans since October, 2013 have been able to avoid many of the market reform requirements, including the essential benefits requirement and modified adjusted community rating rules, which are having such a big impact on premiums in the small group market.
Under the previous guidance, these plans would have been permitted to renew one last time on or before October 1, 2016 and would need to move into an ACA-compliant plan on their renewal date in 2017. Last week’s guidance from CMS changes the cutoff date: “we will extend our transitional policy to policy years beginning on or before October 1, 2017, provided that all policies end by December 31, 2017.”
Importantly, CMS also says that the agency “will work with issuers and States to implement this policy, including options such as allowing policy years that are shorter than 12 months or early renewals with a January 1, 2017 start date.” What this means is that companies that moved their renewal date to December 1 back in 2013 in an effort to postpone the impact of the market reform requirements and later moved their effective date to October 1 to take full advantage of the transitional plan option will now likely want to shift their renewal date to January 1 to extend the timeframe a few more months. Whether that change will need to take place January 1, 2017 (the early renewal option) or January 1, 2018 (the short plan year option) remains to be seen.
Before we get ahead of ourselves, this guidance was just released. The state of Texas and the separate insurance companies will need to decide whether or not to permit the transitional plans to continue a few more months before employers will be able to take advantage of this option. At this point, there’s no reason to think that they won’t allow this, but we’ll keep an eye on it and let you know.
To read the full CMS guidance, click here.