Family with expensive Grandfathered Health PlanAt some point in every Grandfathered plan’s life, the costs become prohibitive. This is what happened to David Allen and his family in Redding CA.

Summary of Client Situation

David had a grandfathered health insurance plan from Blue Shield of California. He enrolled in the Savings 5200 (HSA Compatible) back in 2008 and been satisfied with the policy until the last couple years.

When David called SPF Insurance on January 26, 2016 he explained that he had received a notice from Blue Shield telling him that the rate on his grandfathered plan was going up to a little over $900/mo. That was more than he could justify for he, his wife, and daughter.

David stated that everyone in the family was healthy and rarely went to see a doctor.

What’s A Grandfathered Health Insurance Plan
A grandfathered health plan is one that you’ve had since before March 23, 2010. These grandfathered policies are allowed to stay in place and are not required to meet the benefit levels of Affordable Care Act (ACA) insurance policies.

Typically these grandfathered plans will have a limited number of members. Each year, some members will decide to get new ACA health coverage. When this occurs the number of people left in the grandfathered policies shrinks.

Any major medical expenses by the remaining members in the grandfathered plan are responsible for paying the medical costs. Consequently, as the pool of members in the plan shrinks, the annual premium increases become larger.

He explained that his wife had specific doctors that she wanted to be able to see, and his daughter had a pediatrician as well. And since he felt Redding did not have any good hospitals he wanted to be able to go to the UC Davis Hospital or the Stanford Hospital if needed.

David also wanted to know if he should keep his 20 year old son on the family health insurance coverage even though his son lived on his own and had a job. Last but not least, he mentioned that his daughter was going to need braces and he wanted to get dental insurance to take care of that as well as regular checkups and cleanings.

In summary, he wanted a lower his premium costs, get comparable coverage and be able to keep all their doctors and hospitals.

Key Issues We Must Address

The important issues in the case were fairly obvious.

  1. Would David be able to qualify for subsidized coverage on Covered California?
  2. Determine what to do about 20 yr old son
  3. Was there Bronze or Silver ACA plans that could replace their current coverage?
  4. Make sure the doctors and hospitals are in-network for new policy
  5. Provide information on dental and orthodontia coverage
  6. When could a new plan start?
  7. Find lower cost health coverage

Here Are The Steps We Took To Create A Solution For David And Family

In the first phone conversation with David I had many questions to ask.

Could David Qualify For A Subsidy?

First up was to determine if he could qualify for subsidized overage on based on his income. If so this would make it easy to reduce his monthly cost for health insurance.

As it turned out, David’s adjusted gross income from his construction business was $57,500 and his wife did not work. With just David, his wife, and daughter they would qualify for $659/mo in subsidies.

What About The Son? Should He Be Included?

The second piece to determine was how much his son earned. If we included his son in the family application on, then the son’s income would be added to David’s. His son earns $18,500 so the total family income would be $76,000.

If we included the son in the family policy, the subsidy they would receive would be $813/mo. A $154/mo increase in subsidy.

The catch was that the son was no longer on the family tax return. They were allowed to keep him on their grandfathered coverage. But because the son was not a tax dependent, he could not be on their new family policy in 2016, based on the ACA subsidy rules.

What Type Of Coverage Could Replace Their Grandfathered Health Insurance?

Now the questions shifted to what type of policy should the family use to replace the grandfathered Blue Shield Savings 5200 HSA? David had a health savings account (HSA) set up at his bank in Redding, and was used to making deposits to pay for their medical expenses.

He also thought that they would be fine in a Bronze level health plan because they rarely went to see a doctor and did not take any medications.

Comparing the Grandfathered Blue Shield Savings 5200 to the Bronze HSA PPO plans on Covered California we see the following:

BenefitBlue Shield Savings 5200Bronze HSA
Deductible5200 indiv 10400 fam5200 indiv 10400 fam4500 indiv 9000 fam9000 indiv 18000 fam
Out-of-Pocket Max5200 indiv 10400 fam15000 indiv 30000 fam6500 indiv 13000 fam13500 indiv 27000 fam
Free Preventive CareYesYes
Maternity, Habilitative, Pediatric Dental & VisionNoYes

The comparison shows that the Bronze HSA is better than the Blue Shield Savings plan in the in-network deductible and out-network out-of-pocket maximum, along with offering some benefits that the grandfathered health policy does not provide. From an overall risk standpoint, the Blue Shield coverage is a little better because the in-network and out-of-pocket maximum is lower than the Bronze HSA.

What Networks Were Their Doctors And Hospitals In?

The fourth area we had to address was making sure the doctors and hospitals they wanted to continue seeing were in-network for their new coverage. That meant we had to do a quick set of doctor/hospital searches in the provider directory tools located on the SPF Insurance website.

In Redding California, there are only 3 companies that offer health insurance plans [Anthem Blue Cross, Blue Shield of California, and United HealthCare]. Each company provides a PPO network in Redding. The table below shows if each doctor and hospital is considered in-network.

Doctor/HospitalAnthem Blue Cross PPOBlue Shield PPOUnited HealthCare PPO
Dr. Gregory SkipitisYesYesNo
Dr. Andre Van MolYesYesYes
Dr. David CivalierYesYesYes
Dr. Hsiao-Ping HuYesYesYes
UC Davis HospitalYesYesYes
Stanford HospitalYesYesYes

From this we can see that we need to choose health plans from either Anthem Blue Cross or Blue Shield of California.

Time For Orthodontia Benefits (Braces)

The last item on David’s wish list was the orthodontia care for his daughter. I explained that most individual and family PPO dental plans have waiting periods of 1 year, and they provide limited coverage of up to $500/yr for orthodontia. Plus the pediatric dental benefits of the Bronze ACA policies would only cover “medically necessary” orthodontia, not cosmetic. The better option would be an HMO dental policy.

HMO dental plans don’t have a waiting period, so his daughter could begin orthodontia treatments at any time. Typically HMO dental plans require a co-payment of $1950 to $2700 for braces. The problem however, is that the family dentist only accepted PPO dental plans.

When Could A Change Take Place?

Because David called during the Open Enrollment Period, we would be able to submit an application and get a March 1st start date for their coverage on Covered CA. However, each year there is an Annual Renewal Period for Grandfathered plans. These annual renewal periods occur in January, February, March, April, and July.

The ACA created Special Enrollment Periods for people that want to leave their Grandfathered policies when they renew outside of the ACA open enrollment periods. Therefore, David could renew anytime within 60 days of his grandfathered renewal period.

Was There A Lower Cost ACA Plan?

At this point we ran a set of health insurance quotes and it was clear that the pricing of Anthem Blue Cross Bronze plans was at least $129/mo lower than the Blue Shield equivalent plans.

In fact, there was an HSA compatible plan from Anthem Blue Cross that would cover all 4 members and was priced at $886 without any subsidy.

With all the information collected at that point, I was ready to make my recommendations.

The Final Solution For the Allen Family

I recommended that David, his wife, and the daughter sign up for an Anthem Blue Cross Bronze HSA plan on With the $659 in subsidy assistance, his monthly premium would be just $101.14/mo. That’s over $800/mo less than he was paying with the grandfathered health insurance plan.

Using some of the savings from the reduced premiums, David committed to putting $300-$400 into his HSA account each month to pay for any future medical expenses.

Plus, his new HSA compatible health plan would allow him to use HSA monies to pay for his daughter’s orthodontia services. The tax savings on his payments for the braces will end up being greater than small amount he would save by putting his daughter on a PPO dental plan at $35//mo in order to get $500 in benefits.

For his son, we did a second application. With his income of $18,500 he qualified for $114/mo in subsidies and his monthly cost ended up being $11.67. He got the same Anthem Bronze HSA plan as his father.

In the end, the total cost to cover all 4 people (including the son) by using subsidized coverage from Covered CA, was just $112.81. If we had been able to include the son on David’s plan, the total cost would have been $262.44. Therefore, they ended up with a better solution by putting the son on his own policy.

Key Take-Aways From The Case Of The Grandfathered Health Insurance Plan

  • At some point ALL grandfathered health insurance plans will be too expensive, or the insurance company will terminate them (a couple companies cancelled plans with less than 500 members for 2016)
  • It is possible that new ACA plans may be lower cost than grandfathered insurance, even without subsidies
  • Many times new ACA plans will be better than the grandfathered insurance they replace

    Although the benefit comparison showed the two plans were similar, when we include in the premium-savings of the new ACA policy we can see that the new option is better.

  • Special Enrollment Periods will allow you to sign up for new ACA plans within 60 days of your Grandfathered Annual Renewal date

    It does not matter when the annual renewal date occurs. You have 60 days before and 60 days after the renewal date to change your health insurance.

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Descriptions of Blue Shield grandfathered plans

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