“Grandmother What Big Teeth You Have”

I was asked today about steps employers with 50 to 99 full-time equivalent employees may take to avoid the rapidly approaching 2016 requirement that their health plans be treated as small employer plans – and all that entails. Some states are allowing existing plans to continue under the existing rules that allow these plans to be considered large employers. Such transition relief treatment is allowed based on a March 2014 letter from CMS. Plans that enjoy this relief are often called “grandmothered” plans.

Credit: Tony DiTerlizzi
Credit: Tony DiTerlizzi

 I have heard that some insurance companies are encouraging employers to use this special transition relief and also change their plan renewal and plan year to extend the relief as far as possible into 2017.  I’m reminded of the story of Little Red Riding Hood when she said, “Grandmother what big teeth you have,” speaking of course about the wolf who subsequently gobbled her up.

 Why? Because, employers who change their renewal date likely run the risk of disqualifying their plan from the previously allowed transition relief that delayed the implementation of the employer responsibility requirements. This relief postponed compliance with the pay or play penalties for employers with 50 to 99 full-time equivalents until January 2016 or their renewal in 2016. A change in plan year would lose this delay with the result that they could face these penalties in 2015!

 The moral of the story, Grandmother may really be a lot more than you bargained for.