Comment to Interim Final Regulations
August 10, 2010
Page 4

We appreciate this opportunity to provide the foregoing comments regarding
the interim final regulations. Should you have any questions, please do not hesitate to

contact me by phone at (803) 540-2018 or by email at sgodom@nexsenpruet.com.

Very truly yours,
IN PRUET, LLC

ie G. Odom, Esq.,
ember

SGO/BBM

NPCOL1:2047468.4-LT-(BMELLEN) 021730-00047


NEXSEN|PRUET

Charleston
Charlotte
Columbia
Greensboro
Greenville
Hilton Head
Myrtle Beach

Raleigh

1230 Main Street

Suite 700 (29201)

PO Drawer 2426
Columbia, SC 29202
www.nexsenpruet.com

Suzanne G. Odom
Member
Admitted in SC

August 10, 2010

VIA ELECTRONIC MAIL

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-AB42

Re: — RIN 1210-AB42; OCIIO-991-IFC

Interim Final Rules for Group Health Plans and Health Insurance
Coverage Relating to Status as a Grandfathered Health Plan Under
the Patient Protection and Affordable Care Act

Dear Sir or Madam:

We submit this response to the request for comments on the interim final
regulations implementing the rules for group health plans and health insurance
coverage in the group and individual markets under provisions of the Patient
Protection and Affordable Care Act (“PPAACA”) regarding status as a grandfathered
health plan. The request was published by the Internal Revenue Service, Department
of the Treasury; Employee Benefits Security Administration, Department of Labor;
Office of Consumer Information and Insurance Oversight, Department of Health and
Human Services (the “Departments”) in the Federal Register, Vol. 75, No. 116, on
June 17, 2010.

Specifically, the Departments requested comments on whether the following
changes should result in cessation of grandfathered health plan status for a plan or
health insurance coverage: (1) changes to plan structure; (2) changes in a network
plan’s provider network; (3) changes to a prescription drug formulary; (4) or any
other substantial change to the overall benefit design.

T 803.540.2018
F 803.727.1487

E sgodom@nexsenpruet.com

Nexsen Pruet, LLC

Attorneys and Counselors at Law

NPCOL1:2047468.4-LT-(BMELLEN) 021730-00047


Comment to Interim Final Regulations
August 10, 2010
Page 2

The interim final regulations implement rules governing when a grandfathered
health plan, a group health plan or group or individual health insurance coverage with
individuals enrolled on March 23, 2010, loses grandfathered status as a result of
changes to the operation or administration of the plan. The determination under the
tules of the interim final regulations is made separately with respect to each benefit
package available under a group health plan or health insurance coverage.

Pursuant to the interim final regulations, if an employer or employee
organization enters into a new policy, certificate, or contract of insurance after March
23, 2010, then that policy, certificate or contract of insurance is not a grandfathered
health plan with respect to the individuals in the group health plan. The interim final
regulations provide that the determination under the rules thereof is made separately
with respect to each benefit package made available under a group health plan or
health insurance coverage.

Additionally, grandfathered status is lost if a plan sponsor or issuer: eliminates
all or substantially all benefits to diagnose or treat a particular condition, increases
cost-sharing requirements or copayments above a certain threshold amount, or
decreases annual limits for coverage from that available on March 23, 2010. For
example, a plan’s elimination of all benefits for cystic fibrosis would cause the plan
to cease to qualify as a grandfathered health plan.

The interim final regulations further provide that the elimination of all or
substantially all benefits to diagnose or treat a particular condition includes the
elimination of benefits for any necessary element to diagnose or treat a condition. An
example in the interim final regulations illustrates that if a plan provides benefits for a
particular mental health condition, the treatment for which is a combination of
counseling and prescription drugs, the plan would cease to be a grandfathered health
plan if it eliminates benefits for counseling, an element that is necessary to treat the
condition, because the plan would be considered to have eliminated substantially all
benefits for the treatment of the mental condition under the interim final regulations.

In response to the interim final regulations, the following requests for
clarification are submitted regarding changes to plan administration:

1. Division of Plan into Separate Plans

Clarification is requested as to whether a division of a plan into separate plans
would cause a loss of grandfathered status, where the aggregate cost-sharing and
provided benefits of the separately administered plans would remain proportionately
the same as before the division. For example, it is unclear under the interim final
regulations whether a self-insured group health plan that administers medical, dental,
vision and prescription drug benefits separately under single plan could segregate the
benefits into separate plans without causing a loss of grandfathered status.

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Comment to Interim Final Regulations
August 10, 2010
Page 3

We believe the better interpretation or application of the PPAACA is that such
a change to the overall benefit design would not cause a loss of grandfathered status.
This is especially the case where, in the aggregate, the costs and benefits provided
under the plan remain the same before and after the division and thus the division of
the plan into separate plans is one only in form and not in substance.

2. Itemized Premium Charges

Similarly, the rules under the interim final regulations are unclear as to
whether premiums may be itemized to specific benefits provided under a single plan
without causing a loss of grandfathered status. For example, it is unclear under the
interim final regulations whether a self-insured group health plan would lose
grandfathered status if it changed its premium structure from one in which a single
premium was charged for all of the available coverage types (e.g., health, vision,
dental or prescription drug coverage) to one in which a separate premium is charged
(and a separate benefit election is offered) for each coverage type provided under the
same plan, where the overall premium remains the same. We believe that
grandfathered status should not be lost merely because premiums charged for various
benefits under a single plan are itemized, rather than charged in the aggregate.

3. Restructuring Tiered Benefits

Alternatively, it is unclear whether grandfathered status would be lost if a self-
insured group health plan recategorized tiers of coverage, for example, from former
tiers for single and family to new categories for employee only, employee + spouse,
employee + dependents (other than spouse), and employee + family. The plan would
be recategorized to more closely match the cost, but the same benefits would accrue
to persons covered by the plan before and after the tier restructuring. Therefore,
grandfathered status should not be lost where the same benefits are provided without
an increase in cost or change in cost-sharing in violation of the rules under the interim
final regulations.

4. Addition of Preauthorization Requirement

In addition, it is unclear whether grandfathered status would be lost if a group
health plan is amended to change the claim administration procedures for certain
benefits under the plan. In particular, it is unclear under the interim final regulations
whether adding a preauthorization requirement for other covered benefits under the
plan (preauthorization previously was required for some, but not all benefits) would
constitute an elimination of benefits and thus cause the plan to cease to be a
grandfathered health plan. We believe that such a procedural change should not
constitute the elimination of benefits that would result in a loss of grandfathered
status because coverage for the diagnosis or treatment remains the same. All that
would be changing is the timing for reviewing the claim to determine if it is a covered
expense.

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