Grandmothering Law

California Senate Bill 1446 for Small Businesses Renewing 4th Quarter 2014

The California Senate Bill 1446 has recently passed (July 7th, 2014; effective immediately), allowing small businesses renewing group health plans in the 4th quarter of this year to continue with their policies for another year even though these policies may not comply with the Affordable Care Act (ACA).

If your company is up for renewal in the fourth quarter of this year, it is very likely that the 2013 plan you signed up for in the fourth quarter of the previous year is not compliant with the new regulations on health care starting in 2014. The recent California Senate bill was has allowed some leeway for companies to transition to the new policies by giving businesses that currently have ACA non-compliant plans to continue with these plans for one more year. If this bill was not passed, these policies would be forced to be cancelled and businesses would need to select from the new, ACA compliant plans.

Bill 1446 only applies to small businesses of 50 or less employees. People who have attained their health coverage on the Individual and Family Market will be required to transition to ACA compliant plans at their next renewal.

This bill by no means forces to employers to stick with their 2014 plans; it only gives them the option to continue with the plan for another year. If the employer would like to transition to an ACA compliant plan, he or she may certainly do that. In fact, the California Senate Bill 1446 does not address rate changes, so there may very well be substantial price increases for these ACA non-compliant plans at renewal.

If these grandmothered plans do significantly increase in price at renewal, we may likely see that many small business owners in Southern California transfer to ACA compliant plans for the sake of obtaining more affordable plans with stronger benefits.


The following provides some details about the grandmothered policies:

Grandmothered plans are exempt from:

  • Single risk pool requirements
  • Guarantee issue
  • Age rating limitations
  • Prohibitions against rejecting applications
  • Limits on deductibles and out of pocket expenses
  • Providing essential health benefits (EHBs)
  • Coverage categorized by metal tiers and actuarial values: Platinum (90%), Gold (80%), Silver (70%), and Bronze (60%)

These grandmothered policies must comply with the following:

  • 60 day waiting period maximum
  • Preventative care must be provided with no co-pays or deductibles
  • Elimination of gender discriminated premiums
  • Maternity care
  • No life-time benefit caps
  • Autism coverage

These plans will:

  • Get a Risk Adjustment Factor (RAF) between .90 and 1.10
  • Use pre-ACA age bands
  • Have the pre-ACA maximum 9 rating areas


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