August 12, 2010 

Jim Mayhew 

Office of Consumer Information and 

 Insurance Oversight 

Department of Health and Human Services 

Hubert H. Humphrey Building, Room 445-G 

200 Independence Avenue, SW 

Washington, DC 20201 

Attention: OCIIO-9991-IFC 

 

Dear Mr. Mayhew: 

The American Medical Association (AMA) appreciates this opportunity to comment on the 

Interim Final Rule and Proposed Rule (Rule) (75 FR 34538 et seq) concerning Group Health 

Plans and Health Insurance Coverage Relating to Status as a Grandfathered Health Plan Under 

the Patient Protection and Affordable Care Act (ACA). The ACA inaugurated a new paradigm 

by not only extending health care coverage and benefits to millions of individuals who were 

previously uninsured, but also by eliminating a system that encouraged health insurance issuers 

and plans to provide coverage and benefits to healthy patients and not to those most in need of 

coverage and benefits—patients with chronic and acute medical conditions. 

The Rule represents an excellent attempt to strike a balance between ensuring continuity of 

coverage through grandfathered status and enhanced consumer protections through new plans in 

a manner consistent with the ACA. The AMA believes, however, that without the incorporation 

of additional triggering events, many individuals’ access to care will be hindered, if not denied—

a result inconsistent with ACA’s underlying intent. As a general matter, the AMA believes that 

any materially adverse change in the benefits, or the rights to enforce those benefits, should 

result in a plan’s loss of its status as a “grandfathered plan.” 

The subsequent discussion identifies additional changes to the Rule that the AMA believes will 

render the Rule fully consistent with the intent of the ACA. 

The Rule should state that a change from insured to self-insured status triggers loss of 

grandfathered status 

A grandfathered plan’s conversion from insured to self-insured status is a material adverse 

change that should result in the loss of grandfathered status. Over the course of the past twenty 
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August 12, 2010 

Page 2 

years, all states and the District of Columbia have adopted “patient protection” statutes and 

regulations designed to ensure that health insurers and plans do not engage in practices that 

might hinder patient access to care and that require health insurers and plans to deal fairly with 

all patients and providers. Such protections include, but are not limited to, state requirements 

enumerated under ACA section 1324 (Level Playing Field), i.e., state laws relating to: 

(1) guaranteed renewal; (2) rating; (3) preexisting conditions; (4) non-discrimination; (5) quality 

improvement and reporting; (6) fraud and abuse; (7) solvency and financial requirements; (8) 

market conduct; (9) prompt payment; (10) appeals and grievances; (11) privacy and 

confidentiality; (12) licensure; and (13) benefit plan material or information. Assuming a 

grandfathered plan is insured, it must conform to these requirements and structure its rights and 

obligations accordingly. 

However, because of the preemptive effect of the Employee Retirement Income Security Act 

(ERISA), a self-insured plan need not comply with those aspects of state laws that ERISA 

preempts and the plan is also immune from state insurance commissioners’ enforcement powers. 

Unless a grandfathered plan, which was originally insured, voluntarily agrees to continue to 

comply with previously applicable state obligations subsequent to assuming self-insured status, 

which is an unlikely prospect, the plan will no longer be required to structure itself and operate in 

conformity with these state-based rights and obligations. The inapplicability of state 

requirements is likely to result in the re-emergence of market conduct and business practices 

which, while perhaps not altogether eliminating previously-provided benefits that would trigger 

the application of the Rule as initially drafted, will assuredly result in a reduction of enrollees’ 

ability to access, and providers’ ability to provide, those benefits. The ACA provisions that do 

not apply to grandfathered plans include all the following: 

 

Sec. 2713. Coverage Of Preventive Health Services. 

Sec. 2715a. Provision Of Additional Information. 

Sec. 2716 Prohibition On Discrimination In Favor Of Highly Compensated Individuals. 

Sec. 2717 Ensuring The Quality Of Care. 

Sec. 2719 Appeals Process. 

Sec. 2719a. Patient Protections. 

Sec. 2793. Health Insurance Consumer Information. 

Sec. 2794 Ensuring That Consumers Get Value For Their Dollars. 

Sec. 2702. Guaranteed Availability Of Coverage. 

Sec. 2703. Guaranteed Renewability Of Coverage. 

Sec. 2705. Prohibiting Discrimination Against Individual. 

Sec. 2706. Non-Discrimination In Health Care. 

Sec. 2707. Comprehensive Health Insurance Coverage. 

Sec. 2709 Coverage For Individuals Participating In Approved Clinical Trials. 

For example, many states ensure that enrollees have direct access to specific kinds of specialists, 

e.g., gynecologists. These requirements do not apply to self-insured plans, and the detrimental 

effect of their inapplicability on benefit access will only be offset if conversion to self-insured 

status triggers a loss of grandfathered status, since only then will ACA sections like 2719a on 
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August 12, 2010 

Page 3 

Patient Protections apply. ACA conferred grandfathered status on coverage and plans as a 

means of assuring that enrollees could retain their pre-ACA coverage subsequent to ACA’s 

enactment and implementation. In many cases, the content of this coverage was contingent on 

rights and responsibilities defined by applicable state laws and regulations, particularly patient 

protection requirements. Rendering those laws and regulations inapplicable by means of a 

conversion from insured to self-insured status is likely to negatively affect that coverage. 

A reduction in, or refusal to appropriately expand, provider networks should trigger loss of 

grandfathered status 

A reduction in, or the refusal to expand, the number, specialties or geographic locations of the 

network providers utilized by a group health plan or health insurance issuer can significantly 

hinder enrollees’ ability to access the benefits that they are entitled to receive under the terms of 

their plan or coverage. Enrollees pay health insurance premiums with the understanding that 

they will be able to obtain the services of network physicians and health care providers at 

discounted rates to which those contracted physicians and health care providers have agreed. If a 

network lacks a class of specialists who can provide a purported benefit, the benefit will in most 

cases be illusory, since many enrollees will either be unable or unwilling to pay the increased 

costs necessary to access the services of non-contracted specialists. Even if a network contains a 

class of needed physicians, a reduction in the number of those physicians, or a refusal to expand 

the number of contracted providers in that class, can create a formidable barrier to access. For 

example, although a plan or health insurance issuer may purport to provide a particular benefit, 

an inadequate number of physicians who can provide that benefit can greatly hinder access due 

to inordinately long wait times before the physician can actually examine and/or treat the 

enrollee or because patients are only able to access physicians by traversing long distances. 

ACA’s grandfathering provisions are grounded on the assumption that enrollees wish to retain 

their pre-ACA coverage because they were satisfied with the access that such coverage provided 

to them. These access issues are most acutely felt by patients with chronic or acute medical 

conditions—those for whom health insurance is most important. Because a reduction in, or a 

refusal to increase, the number of network physicians and health care providers can adversely 

affect the access to health care that ACA was intended to achieve, such a reduction or refusal 

should trigger a loss of grandfathered status. 

A reduction in medications available through a drug formulary should trigger loss of 

grandfathered status 

Similarly, a reduction in the numbers or types of drugs included in a prescription drug formulary, 

or the inclusion of additional cost-sharing obligation imposed with respect to certain drugs, is a 

material adverse change that should result in a loss of grandfathered status. These types of 

changes are most acutely felt by those enrollees suffering with chronic or acute medical 

conditions, and for whom health insurance coverage is most important. While the AMA 

certainly supports the use of less expensive generic medications when those medications meet 

patients’ needs, many patients, e.g., those with chronic conditions like epilepsy or psychiatric 
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August 12, 2010 

Page 4 

disorders, have been stabilized on a particular medication after many extensive trials using other 

drugs. It is devastating for these types of patients to lose access to such drugs, which are the 

types of essential benefits to which ACA is designed to ensure access. 

Other materially adverse changes 

The promise of the ACA is a health insurance system focused on optimizing patient health and 

welfare, rather than maximizing the number of healthy patients in a health plan. A benefit or 

provider network change that materially jeopardizes the ability of patients with acute or chronic 

conditions to continue to access pre-ACA health benefits should result in a loss of grandfathered 

status. 

Thank you very much for considering these comments. 

Sincerely, 

Michael D. Maves, MD, MBA