Colleen M. Mcintosh Medco Health Solutions, Inc.
Vice President - Assistant General Counsel 100 Parsons Pond Drive
Franklin Lakes, NJ 07417

medco: a

colleen_meintosh@medco.com

August 16, 2010

The Honorable Kathleen Sebelius

Secretary, Department of Health
and Human Services

Attention: OCIIO-9991 -IFC

P.O. Box 8016

Baltimore, Maryland 21244-1850

Submitted via electronic mail
RE: Comments to OCIIO-9991-IFC — Interim Final Rules re: Grandfathered Health Plans
Dear Secretary Sebelius,

Medco would like to provide commentary on a few areas of the rule regarding pharmacy benefits
and from a large employer’s perspective to explain why certain practices and changes to a plan
are consistent with the intent of the rule and should not result in the loss of grandfathered status.

We appreciate the opportunity to provide comments regarding the Department’s recently
released interim final rule for “Group Health Plans and Health Insurance Coverage Relating to
Status as a Grandfathered Health Plan under the Patient Protection and Affordable Care Act”
(hereinafter referred to as the “Rule”).! Thank you for your willingness to consider our views on
this matter. Medco looks forward to working with the Department to help ensure the success of
this and many other components of the recently enacted health care reform law.

As the nation’s leading pharmacy benefits management company, Medco provides clinically
driven pharmacy services designed to improve the quality of care and lower total health care
costs for private and public employers, health plans, labor unions, government agencies of all
sizes and for individuals served by Medicare Part D Prescription Drug Plans.

First, we note that we are in agreement with the August 16" comments submitted by the
Pharmaceutical Care Management Association, of which Medco is a member, and appreciate
your consideration of that comment letter. We would like to add some additional thoughts and
address two issues that concern employers more broadly. Our comments, described in detail
below, are as follows: (1) The use of appropriate therapy management programs such as a
change in the delivery channel for appropriate medication and step therapy should not result in

"75 Fed, Reg. 34538, ef seq. (June 17, 2010).


the loss of grandfathered status; and (2)(i) plans should not lose grandfathered status when fewer
options are made available to employees during open enrollment and (ii) plans should not lose
grandfathered status if an insured option is replaced with a self-insured option with the same plan
design.

I. Therapy Management
A. Change in the Delivery Channel

The interim final rule is silent as to changes in pharmacy channel selection. Changes in channel
selection are a very common part of managing a plan’s pharmacy benefit. Using mail order or
preferred pharmacies can reduce costs for both the payor and the patient.

Indeed, a central focus of the new health care reform law is the idea of bending the cost-curve of
health care. Medco is a leading innovator of reducing the cost of health care. We do this in a
number of ways, including through a protocol-driven, evidenced-based pharmacy practice that
addresses the needs of patients with complex and chronic conditions. Our clients and their
members benefit from the enhanced pharmacy care offered through our specialty pharmacies and
our therapeutic resource centers. Encouraging the use of these pharmacy services has resulted in
better outcomes and a reduction of total healthcare costs. Plans should have the ability to
encourage or require, where appropriate, cost-effective and care enhanced channels of drug
delivery for participants without concern for losing grandfathered status. Provided coverage for
the condition has not been eliminated, the channel through which the coverage is accessed
should not impact a plan’s grandfathered status.

Medco believes that changes in pharmacy channel selection should not result in the loss of a
plan’s grandfathered status.

B. Use of Coverage Management Rules

Coverage management rules are another way for plans to manage the costs of coverage while
insuring that clinically appropriate therapies are available. For example, step therapy programs
generally require the use of a first generation or preferred drug before a newer or non-preferred
drug is covered. These programs encourage patients to use clinically effective and less costly
drugs before trying more costly drugs. Provided clinically effective coverage for the condition
continues under the plan, the use of coverage management programs should not impact a plan’s
grandfathered status.

Il. Plan Option Related Issues

A. Removal of One or More Plan Options
Many plan sponsors periodically change health plan offerings for a number of reasons including
cost, network access, and member satisfaction. In addition, options may be eliminated because

they are no longer offered (such as where a health insurer stops offering an HMO in a geographic
area).


In the ordinary course, plan options are eliminated or added during the annual open enrollment
period when participants have the opportunity to choose from among the available options. We
believe that the elimination of an option during the open enrollment period should be treated
under section (b)(3) Example 1 (where the participants have a choice) and the remaining options
can retain their grandfathered status. We do not believe that Example 2 should apply (where the
participants are forced into a different option) and we request clarification of this point.
Otherwise, employers who make no plan design changes could nonetheless lose grandfathered
status for continuing options because, for example, an HMO is no longer offered in their
geographic area. To be clear, however, we note that any new option added would not be
grandfathered.

Medco believes that plans should not lose grandfathered status when fewer existing plan options
are made available to employees provided the changes are made in connection with an open
enrollment opportunity.

Change from Insured Plan to Self-Insured Plan

Section (a)(ii) of the interim final rule requires that plans renew insurance policies in order to
maintain grandfathered status. There are many reasons a plan may choose not to renew its
insurance. For example, a plan sponsor may choose to replace an insured product with a self
insured product offered by the same insurer. This type of change is typically made because it
results in reduced costs for the plan sponsor, the plan and the plan participants.

We believe that the funding vehicle (insurance or self insured) should not be the focus of the
analysis. Rather, the plan design should be analyzed under the rules regarding coverage for
conditions and changes to the cost sharing arrangements contained in the interim final rules. If
the change is viewed as a plan amendment and the change satisfies the rule, then the plan should
not lose grandfathered status merely because it changed its funding vehicle.

Medco believes that self-insuring an offering with the same plan design as the previously offered
through an insured product should not cause the cessation of grandfathered status.

ok ok ok

Again, we appreciate your willingness to consider our comments on the above mentioned interim
final rule and look forward to working with the Department to promote the successful
implementation of this new program.

Sincerely yours,

(pt Wee Se AL

Colleen M. McIntosh
Vice President-Assistant General Counsel
Office of General Counsel