August 13, 2010 

Office of Consumer Information and Insurance Oversight 

Department of Health and Human Services 

Re: RIN0991-AB68,OCIIO-991-IFC 

Internal Revenue Service 

Department of Treasury 

Re: RIN 1545-BJ51 

Office of Health Plan Standards and Compliance Assistance 

Department of Labor 

Re: RIN 1210-AB42 

Submitted electronically via regulations.gov 

RE: OCIIO-991-IFC, Interim Final Rules for Group Health Plans and Insurance Coverage 

relating to Status as a Grandfathered Health Plan under the Patient Protection and Affordable 

Care Act 

To Whom It May Concern: 

On behalf of Independent Sector, we appreciate the opportunity to submit these comments 

regarding our concerns and suggestions for improvement to the Interim Final Rules for Group 

Health Plans and Insurance Coverage relating to Status as a Grandfathered Health Plan under 

the Patient Protection and Affordable Care Act. 

Independent Sector is the preeminent national organization that brings together all segments 

of the nonprofit and philanthropic community -- nonprofits, foundations, and corporate giving 

programs of all sizes and missions from across the country. We serve as the premier meeting 

ground for leaders of America's charitable and philanthropic sector to advance our vision of a 

just and inclusive society of active citizens, effective institutions, and vibrant communities. Our 

nonpartisan coalition enjoys a broad constituency of 540 organizations that collectively 

represent tens of thousands of charitable groups in every state across the nation. 

Nonprofit organizations and foundations in the United States employ an estimated 12.9 

million individuals. A great number of these organizations and a vast majority of our own 

members have worked diligently to ensure that their employees have access to health care 

insurance. The vast majority of nonprofits are very small with fewer than 25 employees, and 

they currently do not have the bargaining power to negotiate the lower insurance premium 

rates available to larger employers. Many of these organizations will benefit from the 

expanded options that will be available beginning in 2014 through the Exchange, and a 

number of smaller organizations may also benefit from the small-employer tax credit that will 

help tax-exempt organizations with less than 25 full-time equivalent employees offset the 

costs of providing insurance. However, the small-employer credit begins to gradually phaseout at the 10 employee threshold, limiting the full benefit only to the smallest organizations. 
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Nonprofits and foundations are particularly sensitive to changes in the economy as many nonprofits rely on 

donations and pledges to meet their annual budgets. During economic downturns, charitable giving tends to 

decline at the same time the demand for services from charitable organizations increases. 1 As health benefit 

costs have continued to increase and budgets are decreasing, nonprofit organizations can be faced with the 

undesirable choice of continuing to provide health coverage to the employees who are essential to fulfilling 

their missions, or eliminating jobs and making other cuts in their services. In order to find the balance that will 

allow them to sustain the workforce needed to achieve their charitable purposes, nonprofits need to have 

flexibility to adjust cost-sharing and coverage to control costs. We are particularly concerned about the 

ability of small and mid-sized nonprofits to retain their grandfathered plan status. Prices in the small group 

insurance market are already high and small employers lack bargaining power to control premium increases, 

Under the interim final regulations, grandfathered health plans are prohibited from significantly reducing 

benefits, raising co-insurance charges, copayments, or deductibles, or lowering employer contributions. 

Nonprofits that cannot comply with the restrictions required to remain grandfathered or pay the higher cost 

associated with non-grandfathered plans are concerned they will be forced to drop employee health benefits 

before alternative coverage is available in 2014. We are very concerned that the restrictive and inflexible 

nature of the interim final regulations will limit the ability of nonprofits to make necessary cost-saving changes 

and retain their grandfathered plan status. To prevent the unnecessary loss of coverage, we encourage the 

Departments to adopt more flexible standards in the final rule. 

Specifically, we would encourage the Departments to adopt a waiver for small and mid-sized nonprofit 

employers (up to 100 employees) that would permit them to retain their grandfathered plan status until

2014. This waiver would allow small nonprofits to continue to make necessary plan changes in order to 

preserve existing health coverage until 2014 when the Exchanges go into effect. 

Second, we encourage the Department to permit plan sponsors with insured coverage to change insurers 

without losing their grandfathered plan status. The regulations currently permit self-funded plans to change 

their third party administrator without losing grandfathered status. It is only fair to permit insured plans to 

change their insurer. Locking employers into one insurer would prevent them from shopping for better rates 

and coverage or expose them to the cost increases associated with the loss of grandfathered plan status. 

Thank you for allowing us to express our views on this important issue. We stand ready to be a resource to 

you and would welcome the opportunity to discuss this matter further. 

Respectfully submitted, 

Diana Aviv 

President and CEO 

 

1

Briefing on the Economy and Charitable Giving, The Center on Philanthropy at Indiana University, 

December 2008.