August 16, 2010 

U.S. Department of Labor 

Office of Health Plan Standards and Compliance Assistance 

Employee Benefits Security Administration 

Room N-5653 

Attn: RIN1210-AB42 

200 Constitution Avenue, NW 

Washington, D.C. 20210 

U.S. Department of Health and Human Services 

Office of Consumer Information and Insurance Oversight 

Attn: OCIIO-9991-IFC 

P.O. Box 8016 

Baltimore, MD 21244-1850 

U.S. Department of the Treasury 

Internal Revenue Service 

CC:PA:LPD:PR (Reg-118412) 

Room 5205 

P.O. Box 7604 

Ben Franklin Station 

Washington, D.C. 20004 

RE: 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. 

To Whom It May Concern: 

On behalf of the National Small Business Association (NSBA), the nation’s oldest small 

business advocacy group reaching more than 150,000 small businesses nationwide, I am 

pleased to submit comments on the interim final regulations implementing the rules for 

group health plans and health insurance coverage in the group and individual markets 

under the Patient Protection and Affordable Care Act [PPACA, P.L. 111-148] and Health 

Care and Education Reconciliation Act of 2010 [HCERA, P.L. 111-152. The interim 

final rules will have a substantial impact on the ability of small businesses to maintain 

affordable health coverage for themselves, their employees and families. 

Section 1251 of PPACA, as modified by section 10103 of PPACA and section 2301 of 

HCERA, provides that certain group health plans or health insurance issuer in which an 

individual was enrolled on March 23, 2010 are subject only to certain provisions of 

PPACA; that is, grandfathered health plans. The regulating agencies have tremendous 

latitude to determine the requirements for grandfathered plans to maintain their status. 

National Small Business Association 1156 15th St. N.W.,  Suite 1100  Washington, D.C. 20005  (202) 293-8830 

Toll Free: 800-345-NSBU  Fax: (202) 872-8543  www.nsba.biz 
Unfortunately, the proposed interim final rules follow a rigid path in defining the 

requirements that will have a negative impact on small businesses, their employees, and 

their families. 

On the one hand, parts of the proposed interim final rules are creditable. Prohibiting the 

elimination of benefits and changes in annual limits; the inclusion of good faith 

compliance language; allowing new employees and dependents into existing coverage 

plans; and, the prohibition of preexisting condition exclusions, rescissions and excessive 

waiting periods are all acceptable policy requirements under a reformed health insurance 

market. 

On the other hand, barring small businesses from changing insurance carriers or 

increasing cost sharing percentages of any level severely limit the ability of employers to 

maintain their grandfathered status. Other requirements to maintain grandfather status, 

such as limits on the increases for fixed amount cost sharing, are simply out of touch with 

the individual and small group insurance markets since most employers have little control 

over the plan designs offered in the small group and individual market. 

The interim final rules on grandfathered health plans attempt to reflect PPACA’s intent to 

balance the objective of preserving the ability to maintain existing coverage with the 

goals of expanding access to and improving the quality of health coverage. While small 

businesses and their employees could have the most to gain from reasonable 

grandfathered health plan rules, the proposed interim final rules are tremendously 

complex and too restrictive, and could ultimately undermine the ability of small 

businesses to continue to provide existing health coverage for their employees. 

There exists a significant amount of confusion among small-business owners about how 

the new health care law will impact their business. In more broad terms, small businesses 

were asked in NSBA’s Mid-Year Economic Report to rate their understanding of the new 

law, and only 21 percent said they have a clear understanding while 79 percent said they 

have a limited or no understanding at all of how their business will be impacted. Given 

that this survey is among NSBA members who are active in the association and have 

been offered a good deal of education on the new law, this level of understanding is 

likely lower among all U.S. small businesses. 

For these reasons, in combination with projected increased health care premiums for 

2011 and the lack of any potential options for small businesses and their employees until 

2014 , NSBA is fearful that many small businesses are likely to be priced out of the 

insurance market with no alternatives and subsequently may choose to drop health 

coverage altogether. 

NSBA suggests amending the interim final rules to allow for greater flexibility to 

maintain grandfathered status in the individual and small group markets and remove the 

inequity for individual and small group market plans vis-à-vis collectively bargained 

plans with respect to their ability to change insurance carriers without losing 

grandfathered status. 

National Small Business Association 1156 15th St. N.W.,  Suite 1100  Washington, D.C. 20005  (202) 293-8830 

Toll Free: 800-345-NSBU  Fax: (202) 872-8543  www.nsba.biz 
National Small Business Association 1156 15th St. N.W.,  Suite 1100  Washington, D.C. 20005  (202) 293-8830 

Toll Free: 800-345-NSBU  Fax: (202) 872-8543  www.nsba.biz 

Rationale for Greater Flexibility in the Individual and Small Group Markets 

NSBA surveys show small business owners continue to report dire consequences of 

rising health insurance costs in 2011. The overall trends are well documented; there is a 

direct correlation between the increase of health care premiums and the decrease in the 

number of small businesses offering health insurance over the past ten years. Moreover, 

the uncertainty from a sustained two-year economic recession and myriad new health 

care regulations exacerbate the already difficult fiscal planning most small businesses are 

facing. Sadly, the proposed interim final rules on grandfathered health plans offer no 

relief. 

From an optimistic perspective, a recent administration white paper suggests how 

PPACA will benefit small businesses, including mandated free preventive care to gain 

healthier workers; eliminating the “hidden insurance tax” from the uninsured; 

implementing health care cost-containment; lowering administrative costs and providing 

more choices and competition through health insurance exchanges; instituting temporary 

small business tax credits; and, the including a free-rider provision for employers over 50 

employees.1

 

Unfortunately, nearly none of these provisions will have an immediate impact on small 

businesses. According to the Director of the Congressional Budget Office, Douglas 

Elmendorf, “the evidence suggests that for most preventive services expanded utilization 

leads to higher, not lower, medical spending overall,” which is likely to translate into 

increased premiums.2 The individual mandate and free-rider requirements – provisions 

that aim to cover more of the uninsured and marginalize the “hidden tax” – do not take 

effect until 2014. Partial relief of the cost-shift from the uninsured may be realized 

through the Medicaid expansion, but that is unclear at present and unlikely to be reflected 

in near-term health care premiums. The majority of health care costs containment 

initiatives via health care delivery system reforms, the Independent Medicare Advisory 

Board, myriad pilots and demonstration projects, and comparative effectiveness research 

are all back-loaded and any cost saving benefits will not be realized for years. Other 

projected benefits – greater choices, competition and reduced administrative expenses – 

will not be realized or measured until state’s get their health insurance exchanges running 

in 2014. 

Realistically, the only reform having an immediate impact on small businesses is the 

small business tax credits. However, according to CBO Director Douglas Elmendorf’s 

analysis, “a relatively small share (about 12 percent)” of people in the small group market 

would be eligible for the tax credits.”3

 Additionally, in NSBA’s 2010 Mid-Year 

 

1

 The White House, Stable Cost-Secure Choices-Quality Care: How Health Insurance Reform Will Help 

Small Business. 

http://www.whitehouse.gov/assets/documents/Pages_from_Health_Insurance_Reform_PDF-8.pdf 2

 U.S. Congress, Congressional Budget Office. Letter from Director Douglas Elmendorf to Rep. Nathan 

Deal. August 7, 2009. http://www.cbo.gov/ftpdocs/104xx/doc10492/08-07-Prevention.pdf 3

 U.S. Congress, Congressional Budget Office. Letter from Director Douglas Elmendorf to Sen. Evan 

Bayh. November 30,l 2009. http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf 
Economic Report of small business owners, when asked if their business will qualify for 

the small-business health care tax credit, only 10 percent said yes. 

While small businesses are left working through an economic recession, dealing with 

increasing health care premiums, and coping with insufficient options until 2014, the sole 

component of PPACA that could provide affordable health coverage for small businesses 

and transition small businesses to the projected benefits in 2014 -- grandfathered health 

plan status – has turned out to be logistically unfeasible. The interim final regulations 

estimate that approximately 51 percent of all employer plans will lose their grandfathered 

status by the end of 2013. A range of estimates provided in the regulations all suggest 

that small employers would be hit harder than larger employers and individuals buying 

insurance in the individual market will have the hardest time maintaining their 

grandfathered status. The high-end estimates suggest that 80 percent of employer plans 

may lose their grandfathered status by the end of 2013. 

With being forced to choose between increased health care premiums with limited health 

plan flexibility or having to drop coverage, NSBA is fearful that some small businesses 

will choose the later. There is nothing in PPACA or HCERA that precludes regulators 

from providing exceptional flexibility to individual and small group market plans. 

This can be achieved through a broad spectrum of changes, including the most 

straightforward and sensible path of exempting the plans in the individual and small 

group market from grandfathered health plan rules until 2014. Other changes can be 

made as well to make incremental improvements, such as increasing the allowable 

changes to the percentage and fixed amount cost-sharing triggers and employer 

contribution levels. 

Individual and Small Group Plan Equity with Collectively Bargained Plans

One glaring inequity in the interim final rules exists with respect to collectively bargained 

health plans. As an exception to other grandfathering requirements, changing the 

insurance carrier during the period of a collective bargaining agreement will not cause 

that health plan to lose grandfathered status. However, if a small business chooses to 

change health insurance carriers, then their grandfathered status will be lost. 

Since small businesses shop their health plan coverage frequently, not allowing for a 

change in their insurance carriers severely undermines their ability to find affordable 

health coverage. The policy rationale for this inequity is dubious. Requirements for 

collectively bargained plans should also apply to the individual and small group markets 

to allow for small businesses to shop for identical insurance plans. 

Conclusion 

In order to incentivize small businesses to provide health insurance to their employees 

and families, proposed interim final rules must be amended to empower small businesses 

with supportive grandfather health plan rules. 

National Small Business Association 1156 15th St. N.W.,  Suite 1100  Washington, D.C. 20005  (202) 293-8830 

Toll Free: 800-345-NSBU  Fax: (202) 872-8543  www.nsba.biz 
If small businesses are to continue to be the driving force in our nation’s economy, 

government officials must provide them with the resources and flexibility to succeed. By 

amending the proposed interim final rules to provide greater flexibility in maintaining 

existing coverage in the individual and small group market, and removing the inequity for 

individual and small group market plans vis-à-vis collectively bargained plans with 

respect to their ability to change insurance issuers without losing grandfathered status, 

more small business will be in the position to offer health care insurance to their 

employees. 

Thank you for the opportunity to provide comments on the interim final rules for group 

health plans and health insurance coverage relating to status as a grandfathered health 

plan under PPACA. Please feel free to contact me with further questions. 

Sincerely, 

Todd O. McCracken 

President 

National Small Business Association 1156 15th St. N.W.,  Suite 1100  Washington, D.C. 20005  (202) 293-8830 

Toll Free: 800-345-NSBU  Fax: (202) 872-8543  www.nsba.biz