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June 28, 2010

By U.S. Mail

US. Department of Labor

Office of Health Plan Standards and Compliance Assistance
Employee Benefits Security Administration

Room N-5653

Attn: RIN1210-AB42

200 Constitution Avenue N.W.

Washington D.C. 20210

Office of Consumer Information and Insurance Oversight
Department of Health and Human Services

Attn: OCIIO-9991-IFC

P.O. Box 8016

Baltimore, MD 21244-1850

Internal Revenue Service
CC:PA:LPD:PR (Reg-118412-10)
Room 5205

P.O. Box 7604

Ben Franklin Station

Washington D.C. 20604

Re: Further Comments on Interim Final Rule Regarding
Status of Grandfathered Plans

To Whom It May Concern:

On June 21, 2010, we submitted a comment on the Department’s interpretation and
application of the delayed effective date provisions in Act Section 1251(d) to Taft-Hartley plans.
We now wish to comment on the impact of the “maintenance of grandfathered status” provisions in
the new regulations on a Taft-Hartley plan’s compliance with the Mental Health Parity and
Addiction Equity Act of 2008 (“Parity Act”).


Department of Labor

Department of Health and Human Services
Internal Revenue Service

June 28, 2010

Page 2

As you know, the regulations specify that grandfathered status will be lost if a plan makes
certain adverse changes in its benefit programs. For example, grandfathered status will be forfeited
if a plan increases a participant’s cost-sharing percentage, or increases the amount of a deductible.
The examples given (in particular, the one concerning inpatient surgery) illustrate that the
prohibitions can be benefit-specific. In other words, an increase in the coinsurance percentage or the
deductible would trigger a loss of grandfathered status whether the change applied to all benefits or
to just a particular class of services.

As you also know, the Parity Act requires a plan that provides mental health and substance
abuse benefits to amend that program so that it does not have less favorable terms and conditions
than those applicable to the plan’s medical benefit program. The Parity Act provides a delayed
effective date for Taft-Hartley plans.” Accordingly, many Taft-Hartley plans have not yet adopted
amendments required by the Parity Act, and will be making those amendments later this year or in
following years.

In the Taft-Hartley plans that we represent, mental health and substance abuse benefits are
provided through a “gatekeeper” program. The gatekeeper is an entity that maintains a network of
mental health and substance abuse treatment providers. To receive benefits under the program a
participant must contact the gatekeeper to arrange for services from a network provider. The
gatekeeper determines the type and amount of services that the participant may receive.

If the participant uses the services of the gatekeeper, the plan pays 100% of the contracted
rate charged by the network provider. There is no deductible. If the participant does not use the
gatekeeper, no benefits are payable by the plan, even if the participant receives services from a
provider who is part of the gatekeeper’s network.

To comply with the Parity Act, the plans’ mental health programs will be amended so that
all mental health and substance abuse services will be treated in the same way as hospital and
medical services. Accordingly, there will no longer be a gatekeeper (although the plans will still
contract with the gatekeeper’s provider network).

As with the medical programs, a participant under the amended mental health programs will
be able to visit both network providers and non-network providers. Also as with the medical
programs, if the visit is to a network provider the plans will pay 80% of the contracted service fee.

"Section 512(e)(2) of P.L. 110-343 states that for Taft-Hartley plans the Parity Act becomes
effective for plan years beginning after the later of (a) the expiration of the last collective bargaining
agreement that was in effect when the Parity Act was adopted, or (b) January 1, 2010.


Department of Labor

Department of Health and Human Services
Internal Revenue Service

June 28, 2010

Page 3

For non-network providers, the plans will pay 50% of the usual and customary fee for the service
received.

Further, the annual deductible for medical benefits will now include mental health and
substance abuse benefits. In other words, there will be a single deductible that covers both programs.

However, as the regulations are currently written, the foregoing amendments to the plans’
mental health programs would cause the plans to lose grandfathered status.” The participants’
coinsurance amount for network providers will increase from 0% to 20%, and there will be a
deductible where none currently exists.

The amendments needed to comply with the Parity Act will increase the cost of the mental
health programs currently maintained by the Taft-Hartley plans that we represent. This is because
any savings resulting from the increase in the coinsurance percentage or inclusion in the deductible
will not offset the increased utilization that is expected to result from the elimination of the
gatekeeper feature. It would indeed be ironic if these amendments not only increased the cost of the
plans, but also caused them to lose grandfathered status.

We believe that the rules regarding maintenance of grandfathered status are intended to apply
only to changes which are voluntarily adopted, and not to changes which are required by other
federal legislation. Accordingly, we request that the regulations be revised to provide that
grandfathered status will not be lost by the adoption of amendments which are designed to comply
with the Parity Act.

Of ST. JORIN, WALLACE, BRENNAN & FOLAN LLP

IRS/sf

6493... Depts3.6-28-10 2nd Itr.wpd.

‘This assumes that the Departments continue to hold that the delayed effective date in
Section 1251(b) does not apply to self-funded Taft-Hartley plans, and that all Taft-Hartley plans are
subject to the provisions of the Act that are applicable to grandfathered plans. In our previous
comment we argued that the benefit changes required by the Act should not apply to Taft-Hartley
plans until after the expiration of the last collective bargaining agreement that was in effect before
March 23, 2010.