The Grandmother Effect

The insurance industry is famous for its abbreviations, jargon, and sometimes downright silly terminology.  At times, it seems terms are created only to confuse industry outsiders and fuel the need for an insurance insider’s existence.

For instance, a grandmother frequently conjures up images of Sunday evening dinners and sweaters knitted with love.  When used in the insurance industry, however, “grandmothering” takes on a totally different meaning.

When used in the context of health insurance, grandmothering refers to a small group or individual having the ability to keep their pre-ACA (Affordable Care Act) policy beyond the original January 1, 2014, requirement.

Many will remember that the ACA originally required small groups (2-50 full-time equivalents) and individuals to transition policies renewing on or after January 1, 2014, to an ACA-compliant platform.  The new platform changes how products are structured, the layered benefits, and the methodology for how they are priced.

In the fourth quarter of 2013 when President Obama suggested that the intent of the law was to allow those happy with their insurance to keep it, a door was opened to allow state insurance commissioners to grant delays in the transition timeline.  As a result, insurance carriers in most states are allowing small groups and individuals to keep their current plan in 2014.

There is a catch, however, in that any change in the policy (deductible, co-pay, benefit level, network) will trigger the transition to the new ACA-compliant platform.  For some, the new ACA platform could translate to greater coverage at a lower price.  However, most will see price increases that could be quite significant in some states.

Grandmothering is an industry blessing and a curse for it allows some to kick the can down the road a bit but also handcuffs others to a plan that may no longer fit their needs.  As with any transformational market change, there will be winners and losers.  Maybe in this case, the losers will have their grandmothers to hide behind.