Office of Health Plan Standards
And Compliance Assistance
August 11, 2010

Page 5

Group health plans therefore should be given the opportunity to furnish the notice
under all methods authorized in 29 CFR 2520.104b-1(b)(1), including most specifically
publication in union newspapers or company publications. This latter method of
publication is effective and generally inexpensive, and is already in use for several other
notices that group health plans and pension plans governed by ERISA are required to
give annually, such as the notice required by the Women’s Health and Cancer Rights Act,
and the notice of availability of pension benefit statements required by Section 105(a) of
ERISA. In my clients’ experience, people actually read the union newspaper, but they
often throw away without reading notices they receive in the mail. 3

The final regulations should make clear that where a plan is required to provide
the notice, it may do so by using any method that conforms to 29 CFR 2520.104b-

1(b)(1).
I appreciate your consideration of these issues. Thank you.

Very truly yours,
CC xf ZA
\ a we 2

Joni S. Jacobs

IJSJ:oc

3 One of my clients once sent a legally-required notice to retirees in the same envelope in
which they received their monthly pension checks. Approximately half of the retirees not only
threw away the notice, but the entire envelope, including the pension check, and the client had to
reissue the pension checks.


Office of Health Plan Standards
And Compliance Assistance
August 11, 2010

Page 4

The funds’ ability to exclude, until 2014, adult child dependents who have other
employer-sponsored coverage available will help them absorb the costs of complying
with Section 2714, and give the sponsoring unions and employers time to renegotiate,
where possible, both employer and employee contribution rates before all adult child
dependents must be offered coverage, regardless of the availability of other employer-
sponsored heath coverage. It would help even more by clarifying that group health funds
may also exclude adult child dependents who can access their own employer-sponsored
health coverage through COBRA.

2. Acceptable methods of providing the notice should include all methods listed
in 29 CFR §2520.104b-1(b)(1).

29 CFR § 2590.715-2714(f) provides a transitional rule for adult child dependents
whose coverage ended, who were denied coverage, and who were not eligible for
coverage because they had “aged out” of the plan before Section 2714 takes effect for the
plan. Pursuant to Section 2590.715-2714(f)(2), the plan must provide written notice to all
such persons of their right to enroll in the plan.

There is no guidance in the regulations as to how this written notice must be
provided, other than that the notice may be included with other enrollment materials that
a plan distributes to employees, provided the notice is prominent. See Section 2590.715-
2714(f)(2)(ii). However, many plans, especially Taft-Hartley health plans, do not have
open enrollment periods, and thus they do not have open-enrollment materials. While
certainly the written notice can be provided with materials given to new participants upon
initial enrollment in the plan, doing so will not meet the requirement to provide such
notice to potentially eligible adult child dependents of existing participants under the
transitional rule.

The class of persons to whom such notice must be provided likely includes many
people who are unknown to plan administrators. While plans should have information
for former child dependents who “aged out,” as well child dependents for whom coverage
was denied, they may have no way to know how many, and which, adult child
dependents never sought to enroll because, for example, they were not eligible under the
prior plan rules. The only way to make sure that notice is provided to all such persons is
to notify every participant enrolled in the plan as of the date the Act takes effect of the
new opportunity to enroll eligible adult child dependents.

For some plans, the expense of a mailing to all active participants is substantial. I
work with plans that have more than 20,000 active participants. The cost of a first-class
mailing exceeds $20,000, once the postage, printing, materials and labor costs are
calculated.


Washington Cincinnati
ur ni erson. 1701 K Street NW, Suite 210 2406 Auburn Avenue
Washington, DC 20006 Cincinnati, OH 45219
PLLC 202.223.2620 Fax 202.223.8651 513.784.1280 Fax 877.748.1449
Boston wrww.murphyplle.com
111 Devonshire Street, 5th Floor
Boston, MA 02109

617.227.5720 Fax 617.227.5767
Reply to Washington

August 11, 2010

Office of Health Plan

Standards and Compliance Assistance
Employee Benefits Security Administration
Room N-5653

U.S. Department of Labor

200 Constitution Avenue, NW
Washington, DC 20210

Attn: RIN 1210-AB41

Re: |Comments on Interim Final Rules for Group Health Plans and Health
Insurance Issuers Relating to Dependent Coverage of Children to Age 26
Under the Patient Protection and Affordable Care Act
Issued May 13, 2010, Fed. Reg. Vol. 75, No. 92

To Whom It May Concern:

I represent and work with Taft-Hartley welfare benefit funds that provide welfare
benefits to tens of thousands of employees pursuant to collective bargaining agreements
in the retail grocery and other industries.

I write to raise some issues in connection with the recently issued regulations
enacting Section 2714 of the Public Health Service Act, as added by Section 1001 of the
Patient Protection and Affordable Care Act (“the Act”) that have been raised as I have
worked with my clients to implement and comply with this new law.

1. Clarification is needed as to whether COBRA coverage is included in “eligible
employer-sponsored health care,” and it should be included in the exclusion.

Under the Act and the interim final regulations, for plan years beginning before
January 1, 2014, grandfathered group health care plans may exclude from coverage adult
child dependents who are eligible to enroll in employer-sponsored health plans other than
a group health plan of a parent. See 75 Fed. Reg. No. 92, p. 27124.



Office of Health Plan Standards
And Compliance Assistance
August 11, 2010

Page 2

There is confusion among plan administrators as to whether this exclusion applies
to adult child dependents who are eligible to obtain COBRA coverage through their own
employer-sponsored health plans, or who are on such COBRA coverage at the time
Section 2714 becomes effective for the group health plan. Clarification of this point
would be much appreciated. More specifically, the regulations should make clear that
group health plans may exclude adult child dependents who can access their own
employers’ health plans through COBRA.

Currently, until 2014, group health plans may exclude adult child dependents who
are eligible for their own employer-sponsored health coverage,' regardless of whether
they actually enroll in such coverage, and regardless of the cost to them of such coverage.
This provision appears to have been a vehicle that would allow group health plans to
phase in the costs of covering a new group of dependents, and the logic of this provision
should be extended to adult child dependents with access to their own employer-
sponsored health coverage through COBRA.

This is especially important for Taft-Hartley health funds, which typically have
their contribution rates bargained as part of an overall wage package for covered
employees and have contribution rates for employees, if any, far below those typically

* It is not entirely clear whether the exclusion also includes adult child dependents who have
access to their spouses’ employer-based health coverage. Section 1251(a)(4)(ii) of the Act states
that group health plans may exclude adult child dependents eligible to enroll in “an eligible
employer-sponsored health plan” as defined by Section 5000A(f)(2) of the Code (other than the
grandfathered plan in which the parent seeks to enroll the adult child dependent). Section
5000A(f)(2) of the Code defines eligible employer-sponsored plan as follows: “The term
‘eligible employer-sponsored plan’ means, with respect to any employee, a group health plan or
group health insurance coverage offered by an employer to the employee which is ...” (emphasis
added). It would seem that for any particular adult child dependent, only coverage offered to the
adult child dependent by his or her employer is “an eligible employer-sponsored health plan.”
However, the Departments wrote the regulation as follows: “ ... may exclude an adult child who
has not attained age 26 from coverage only if the adult child is eligible to enroll in an eligible
employer-sponsored plan (as defined in section 5000A(f)(2)) other than a group health plan of
a parent.” See, e.g., 29 CFR § 2590.715-2714(g). The bolded/italized phrase in the regulations
seems unnecessary if Section 5000A(f)(2) means the coverage must be offered by an employer to
the adult child dependent to be an eligible employer-sponsored plan for purposes of Section
1251(a)(4)(ii). Is the addition of this phrase an indication that the Departments read Section
5000A(f)(2) more broadly to include, for example, coverage of a person through a parent’s or
spouse’s employer-sponsored health plan? Clarification as to whether Section 1251(a)(4)(ii)
includes coverage through a spouse’s employer-sponsored health plan would be helpful as well.


Office of Health Plan Standards
And Compliance Assistance
August 11, 2010

Page 3

paid by non-union employees. These plans will experience a substantial financial cost in
covering this new group of dependents that they cannot offset over the life of the existing
collective bargaining agreement, which could threaten the overall financial integrity of
the fund.

For example, one fund I work with has a collectively-bargained $65.00/month
employee contribution rate for family coverage, which represents less than 10% of the
combined employer-employee contribution rate. By contrast, the Kaiser Family
Foundation estimates the average family coverage premium rates for 2008 to be 28% of
the total premium for employer-sponsored health coverage; it is even higher (32-33%) for
employees in the states covered by this Taft-Hartley fund. By this fund’s estimates, if all
eligible adult child dependents that it knows of enroll, the population of the plan will
increase by up to 24%. Of course, there could be many other eligible adult child
dependents that the fund does not know of because they never sought coverage for a
variety of reasons, including that they exceeded the plan’s age limits at the time their
parent became eligible for family coverage. The increase in covered lives under Section
2714 could be much higher than the fund anticipates.

Another fund I work with has no employee contribution at all for family coverage,
and there are approximately 1,200 eligible adult child dependents it knows of; if they all
enroll, the fund’s population will increase by 10%.

Given the comparatively low cost (if any) for employees to have all eligible
dependents covered by these funds, my clients fully expect large influxes of adult child
dependents when Section 2714 takes effect.’ Yet the funds cannot access other sources
of funding to offset the costs for providing health coverage to this potentially large group
of new dependents because the contribution rates for both employers and employees are
set by collective bargaining agreements that do not expire until long after the fund is
required to cover adult child dependents.

2 The estimates given in the interim final regulations of affected individuals likely to
seek coverage under their parents’ employer-sponsored care do not project to 2014, when
the exclusion for employer-sponsored coverage expires. Any estimates for 2014 and
beyond must account for the cost differential between the affected individual’s own
employer-sponsored health coverage and that of his/her parents, as well as recognize that
until the Act, these individuals simply could not be covered by their parents’ employer-
sponsored plans, and so it is difficult to predict behavior patterns in this new
environment. Estimates that fail to account for these factors will be speculative at best.