*Craig Ismaili, a legal intern for the National Health Law Program, is co-author of this post.
When Congress passed the Affordable Care Act (ACA) in 2010, it provided a transition period for “grandfathered plans” as a transition to health plans that fully comply with the ACA’s robust protections and coverage standards. The Trump administration, however, is seeking to extend and expand enrollment in grandfathered plans as part of its ongoing effort to sabotage the ACA. Last month, the administration released a Request for Information (RFI) regarding whether barriers to retaining grandfathered plans are too strict.
The National Health Law Program pushed back against this latest administration attempt to scuttle health care reform in comments submitted to the Internal Revenue Service, the Department of Labor, and the Department of Health and Human Services.
Grandfathered plans are exempt from vital ACA protections, including coverage of essential health benefits, coverage of preventive service without cost-sharing, and annual limitations on cost-sharing. Congress never intended the grandfathered plans to continue indefinitely. Nine years after the ACA became law, it is time to sunset these transitional plans so that millions more health care consumers can enjoy the full benefits of ACA-compliant plans.
The transition period has worked as intended; the number of individuals enrolled in grandfathered plans has decreased over time. According to a study by the Kaiser Family Foundation, 56 percent of enrollees in small group coverage were enrolled in grandfathered plans in 2011; and by 2018 that number was just 16 percent. But 20 percent of health insurance firms still offered at least one grandfathered plan in 2018. Loosening the barriers to retaining grandfathered status would stall the further transition to ACA-compliant plans.
Grandfathered plans harm health care consumers by failing to cover all of the ACA’s health care benefits. The ACA requires marketplace health plans to provide items and services in ten benefit categories:
(1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatric services, including oral and vision care.
Before the ACA, many consumers did not have coverage for maternity care, mental health, or substance use disorder services. Expanding or extending grandfathered plans will increase the number of low-income individuals and families seeking health care without access to vital health care.
The ACA also made preventive services and screenings available without cost-sharing. These preventive screenings and services can yield significant cost savings and improve health outcomes for patients. This is especially true of low-income persons for who cost is an onerous obstacle to accessing needed care. Numerous studies show that increased coverage through the ACA leads to increased use of services and higher rates of testing for diabetes, HIV, cholesterol, and various forms of cancer. Grandfathered plans are not required to meet these coverage standards.
Grandfathered plans also do not require plans to provide critical reproductive health services, which have serious consequences. The preventive services requirement of the ACA has increased access to contraceptives. Extending plans without this coverage requirement creates a greater risk unintended pregnancy and other medical complications.
Extending and expanding grandfathered plans not only harms people seeking health care, it also destabilizes the health insurance market by increasing risk pool stratification and decreasing issuer participation. Individuals with fewer health care needs select noncompliant plans, which have fewer covered benefits; individuals with greater needs select ACA-compliant plans with full protections. Issuers of compliant plans must therefore raise premiums or drop out of the market if they do not want to cover populations with greater health needs. This increases cost for vulnerable health care consumers.
To see the devastating effects of noncompliant ACA plans in action, look to Iowa. Iowa legislators cut regulations on grandfathered plans and authorized ACA-noncompliant plans sponsored by the Farm Bureau. By 2018, more than 60 percent of marketplace-eligible Iowans were enrolled in noncompliant plans. Marketplace premiums had ballooned to the second highest in the country, with the average annual premium exceeding $10,000 annually. The increased cost and risk stratification caused many issuers to leave the Iowa marketplace. In 2018, just one group plan issuer, Medica, offered ACA-compliant plans in Iowa, down from four in 2015. A study by the Wakely Consulting Group found that if Iowa sunsetted its grandfathered plans, premiums in the Iowa Marketplace would fall by as much as 18 percent and enrollment would increase by as many as 85,000 individuals.
The effort to extend and expand grandfathered plans is part of the Trump administration’s often stealth strategy to sabotage the ACA. Whether opposing the ACA’s death by a thousand cuts, or the explosive Department of Justice’s request that the 5th U.S. Circuit Court of Appeals invalidate the entire ACA, the health care of millions depends on the efforts of advocates fighting back, at every turn.