Grandmothered Plans and Transitional Relief

Grandmothered plans occupy a distinct and often misunderstood middle category in ACA compliance — neither fully exempt like grandfathered plans nor fully subject to all individual and small-group market reforms. These plans exist because of administrative transitional relief first issued by the Centers for Medicare & Medicaid Services (CMS) in 2013, and understanding their status is essential for employers, insurers, and enrollees making coverage decisions. This page explains what grandmothered plans are, how the transitional relief mechanism operates, which scenarios produce grandmothered status, and where the compliance boundaries fall.

Definition and scope

A grandmothered plan — sometimes called a "transitional plan" — is a non-grandfathered individual or small-group health insurance policy that was in force before January 1, 2014, and that a state insurance commissioner has permitted to remain in effect beyond the ACA's original compliance deadline through CMS transitional relief. The term does not appear in the text of the Affordable Care Act itself; it is entirely a product of administrative policy.

The underlying legal authority rests in enforcement discretion. In November 2013, CMS issued a letter (CMS Insurance Standards Bulletin SE 13-002) announcing that it would not take enforcement action against insurers renewing non-compliant individual and small-group policies, provided state regulators also chose not to act. This bulletin — not a regulation — is the founding document of grandmothered status. Congress codified related transitional flexibility to some degree through subsequent legislation, but the core mechanism has always been CMS enforcement discretion extended on a year-by-year basis.

Scope boundaries are significant. Grandmothered relief applies only to the individual and small-group markets; large-group employer-sponsored plans have separate rules. A plan must have been continuously in force — meaning the policy was active as of October 1, 2013, and the insurer chose to renew rather than terminate it. For the broader regulatory context for ACA rules governing market reforms, the distinction between grandfathered, grandmothered, and fully compliant plans is one of the most consequential structural divides in ACA administration.

How it works

The grandmothered plan mechanism operates through a layered administrative process involving three actors: CMS, state insurance commissioners, and insurers.

  1. CMS issues (or extends) transitional relief. CMS publishes a bulletin or guidance document announcing that the federal government will not initiate enforcement action under Public Health Service Act Sections 2701–2709 against qualifying transitional policies for a specified plan year. CMS has extended this relief multiple times since 2013.

  2. State insurance commissioner opts in. Because insurance is regulated at the state level, a state's insurance commissioner must independently decide whether to permit insurers operating in that state to continue renewing non-compliant policies. States are not required to adopt CMS transitional relief, and several states declined to do so, meaning grandmothered plans do not exist uniformly in all 50 states.

  3. Insurer elects to renew the policy. Even when both CMS and the state permit it, the insurer retains the option to retire the product line entirely. Many insurers have done exactly that, choosing to migrate enrollees to ACA-compliant plans at renewal rather than maintain separate product administration.

Plans that remain grandmothered do not need to comply with the full set of individual and small-group market reforms, including guaranteed issue, modified community rating, the requirement to cover all 10 essential health benefits under the ACA, and actuarial value requirements tied to metal tier classification. They are, however, still subject to ACA provisions that apply without regard to grandfathered or transitional status — including the prohibition on lifetime dollar limits (45 CFR § 147.126), the extension of dependent coverage to age 26, and the requirement to cover preventive services without cost-sharing.

Common scenarios

Scenario 1: Small employer with a pre-2014 group policy.
A small business purchased a group health plan in 2012. The insurer continued renewing it after 2014 under state-permitted transitional relief. The plan lacks a pediatric dental benefit — one of the 10 essential health benefits — but because it holds grandmothered status, that gap does not generate a compliance violation under federal market reform rules, as long as the state has opted into ongoing transitional relief.

Scenario 2: Individual market enrollee outside the Marketplace.
An individual purchased an off-exchange policy in 2013 and has renewed it each year since. Premium pricing is not subject to ACA's modified community rating rules, so the insurer can vary the premium based on factors ACA would otherwise restrict. The enrollee is not eligible for premium tax credits on this plan because grandmothered plans are off-Marketplace products.

Scenario 3: Plan loses grandmothered status through material change.
If an insurer materially modifies a grandmothered plan — such as significantly increasing cost-sharing or changing the benefit structure in ways that constitute a new product rather than a renewal — the plan may lose its transitional protection. CMS guidance has not defined a bright-line threshold equivalent to the grandfathered plan "change in benefits" rules at 45 CFR § 147.140, but substantive restructuring creates compliance risk.

Decision boundaries

Grandmothered vs. grandfathered. These two categories are frequently conflated but structurally different. A grandfathered plan is defined in ACA Section 1251 and 45 CFR § 147.140 — it existed on March 23, 2010, and has maintained continuous coverage without disqualifying changes. A grandmothered plan existed on October 1, 2013, but not necessarily on March 23, 2010; its ongoing status depends entirely on administrative enforcement discretion rather than a statutory exemption. Grandfathered plans have a firm legal basis; grandmothered plans do not.

Grandmothered vs. fully ACA-compliant. A fully compliant individual or small-group plan must satisfy all market reform requirements, including all 10 essential health benefits, metal-tier actuarial values, and community rating restrictions. Grandmothered plans are exempt from those requirements for as long as transitional relief continues. Should CMS decline to extend relief in a given year, grandmothered plans would be required to come into compliance at the next renewal.

The following factors determine whether a plan can maintain grandmothered status:

  1. The plan was active and continuously enrolled as of October 1, 2013.
  2. The state's insurance commissioner has permitted transitional renewals in each applicable plan year.
  3. CMS has issued an active extension of enforcement discretion for the relevant plan year.
  4. The insurer has not materially restructured the product.
  5. The plan is in the individual or small-group market, not the large-group or self-funded segment.

For employers evaluating whether a transitional plan continues to serve workforce needs, the analysis intersects with questions covered at the ACA compliance overview, particularly where benefit gaps in grandmothered products may create downstream issues around employee satisfaction or market competitiveness — even when those gaps are legally permissible under current transitional relief.

References

The law belongs to the people. Georgia v. Public.Resource.Org, 590 U.S. (2020)