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U.S. Department of Labor Day IS M ALM &
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3. Clarify the transition relief for plans which implemented disqualifying changes
during the period from March 23 — June 14, and provide additional relief for
changes made in that period.

The transition rule in the proposed regulations is meant to assist plans which implemented
disqualifying changes (i.e. changes which would cause a health plan to lose grandfathered status)
during the period between enactment and the date the proposed regulations were first available to the
public. Depending on how it is interpreted, the transition rule may not give adequate time for some
plans to act to preserve grandfathered status.

As indicated earlier in this letter. it would be better if the regulations did not penalize employers at all
for relatively minor plan changes after enactment. At a minimum, there should be more protection for
employers which implemented changes prior to June 14 unless the changes were so drastic as to be
unreasonable. This would eliminate the need for many plans to go through an expensive remedial
process of calculating amounts necessary for refund (if a change in co-pay exceeded the limits of the
proposed regulations, for example).

Clarification is also needed. What does it mean to revoke or modify a change as of the effective date
of the first plan year starting on or after September 23, 2010? Do employee refunds actually have:
processed by that date’? Does each affected employee have to be notified of the precise amount of the
adjustment? This is a virtually impossible task for those unlucky plans with fiscal years starting te
October, November, December, and even January. It would be more reasonable to require: (1) that a
blanket notice be issued to all participants no later than December 31. 2010. and (2) that refunds:
should be processed no later than the end of the first PPACA plan year.

In conclusion, we hope you will consider these comments when you finalize the regulations. We
appreciate that you were working under tight deadlines, and we ask that you consider the extraordinary
pressure this law places on employers which would like to provide good health insurance but which do
not have unlimited resources to do that.

Very truly yours.

% Lume uno

George L.. Chimento

GLC:mal
Enclosure


Davis MALM &
DAGOSTINE PC

ATTORNEYS AT Law

George L. Chimento

August 16, 2010
VIA E-MAIL: ¢-ohpscal251.ehsa@dol.gov
U.S. Department of Labor

200 Constitution Ave.. NW
Washington, DC 20210

Re: RIN 1210-AB42 / grandfathered health plans

Dear Sir or Madam:

We appreciate the opportunity to comment on the proposed regulations relating to the status of a group
health plan as a grandfathered health plan under the Patient Protection and Affordable Care Act
(PPACA”). These comments are based on direct communications with employers which sponsor
health plans. many of them self-insured. in various industries. Limployers are concerned that the
proposed regulations add unnecessarily to the costs which they share with their insured employees
They note that each additional dollar that is spent for additional mandates will be diverted from
business and household needs.

We request that the final regulations:

1. Adopt a less stringent approach to defining the events which cause a health plan to lose
grandfathered status.

2. Make clear that changes which were announced prior to March 23. 2010 and subsequently
implemented will not jeopardize grandfathered status, even if not yet contained in a formal plan
amendment.

3. Clarify the special transition relief for plans which implemented disqualifying changes durine

the period from March 23 = June 14. and provide additional relief for changes made in that period

Our reasons for these requested changes appear below.

1. The final regulations should be less strict in defining events which cause a plan to lose
grandfathered status,

The view of regulators seems to be that the incremental cost to provide non-grandlathered benetits 1s.
not that much compared with the entire cost of a plan, and is therefore inconsequential. Regulators

direct 017-389-3847 sleet fo O17-305- 3147
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U.S. Department of Labor Davis MALM c
August 16, 2010 DAGOSTINE PC
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have been candid that they expect most plans to lose grandfathered status within the next few years
due to the structure of these proposed regulations. We disagree with this a /a carte analysis which
disregards the totality of plan costs. Adding another 2% or more for additional benefits if a plan is not
grandfathered just makes health insurance less affordable.' And a regulatory decision to disqualify
plans from grandfathering for even modest changes is at odds with the statute and with the public
statements which were made during the long campaign prior to its enactment.

Section 1251(a)(2) of PPACA = Preservation of Right to Maintain E
clear:

isting Coverage — is brief and

“CONTINUATION OF COV GE, With respect to a group health plan or health
insurance coverage in which an individual was enrolled on the date of enactment ot
this Act, this subtitle and subtitle A (and the amendments made by such subtitles) shall
not apply to such plan or coverage, regardless of whether the individual renews such
coverage after such date of enactment.”

Contrary to the proposed regulations. the statute does not say that amendments or changes to a plan
cause it to lose grandfathered coverage. Congress has had plenty of experience in drafting ERISA and
Code statutes where amendments to a plan cause it to lose protected status. This statute does not
provide that. Instead, it says that a plan which was in existence prior to enactment does not have to be
changed, except for changes which apply to all plans regardless of grandfathering.

The proposed regulations do what Congress did not. Even minor changes. such as a change in
insurance carrier, modest adjustments to co-pays. ift in premium sharing of more than 5% since
March 23. 2010, and any shift in co-insurance. trigger a full menu of non-grandfathered mandates We
respectfully request that the final regulations get closer to the statute’s clear language. Plans which
were in existence prior to enactment should be allowed to continue without losing grandfathered status
unless there is a major change in covered procedures, or a major shift in cost-sharing. The hair-trigger
adjustments in the proposed regulations are not authorized by the statute.

However. if it is deemed appropriate to have some bright line rules. they should not deprive a plan
from changing insurers. or from converting to self-insured status. or from raising the cost of co-pays
and deductibles beyond the meager allotment in the proposed regulations. Most importantly. plans:
should be allowed to increase the premium share of employees by more than five (5) percentage points
from the level in effect on March 23, 2010. Changes such as these, which have probably occurred
many times in a plan’s existence. should not deprive a plan of grandfathered status without some
suggestion in the statute that this is what Congress intended. The debates preceding enactment, the
statute, and its scant legislative history contain no suggestion that minor changes in cost structure
would trigger loss of grandfather status.

1 . .
Bear in mind the substantial additional costs which all plans — grandfathered or not- must incur under the

amended Public Health Services Act (“PHS*). including PHS Act Sections 2708. 2711. 2712. 2714. 2715, 2718


U.S. Department of Labor Davis MALM &
August 16, 2010 DAGOSTINE PC
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In addition to the legal argument that these proposed regulations exceeds the authority of the rule-
making agencies. there is also the common sense argument that unfunded mandates created by
regulatory authorities do not help employers or employees. Increasing an employee's share of costs
may actually be the only way for a plan to preserve a benefit package. The alternative. for self-insured
employers which need to cope ina bad economy, may be to concede to grandfathering. and then to
remove coverage which is not mandated by federal law and which is exempt from state mandates.
such as mental health coverage. Do employees win in that scenario? There is no credible evidence that
insured employees have been asking for the additional protections of non-grandlathered status.
especially if they have to bear some or all of the cost. In sum, the proposed regulations remove the
promised right that PPACA would not take away coverage under existing plans.

2. Changes which were announced prior to March 23, 2010 should not jeopardize grandfathered
status. provided that plan amendments are executed promptly.

ILis not unusual for plan sponsors to announce changes in premium and cost sharing prior to mah.
changes to a plan document.” This form of notification is usually by clear written notice. and prior to
the actual reduction from employee paychecks (in the case of premium sharing) and prior to the
additional billing (in the case of coinsurance. co-pays, and deductibles).

Unfortunately. the proposed regulations require that an amendment to a plan must also have been
adopted by March 23. 2010. We suggest an additional paragraph D to that portion of the regulation
which deals with determining whether such changes may be considered to be plan provisions as ot
March 23. 2010. As amended, the provision would read:

The following changes are considered to be plan provisions as of March 23. 2010

A) — Changes effective after March 23, 2010 pursuant to a legally binding contract
entered into on or before March 23, 2010:

B) — Changes effective alter March 23, 2010 pursuant to a filing on or before
March 23, 2010 with a State insurance department; or

C) Changes effective after March 23, 2010 pursuant to written amendments to a
plan that were adopted on or before March 2

D) — Changes communicated in writing to participating employees prior to
March 23, 2010, provided that the plan is amended no later than the first day
of the plan year commencing on or after September 23, 2010.

This modification of the proposed regulation would allow all parties to proceed uiider pla desi
that were clearly in effect as of March 23, 2010. but simply not vet reduced to the terms of a plan
amendment.

|. there are probably thousands of health plans which do not even have a “plan document, but simply provige
benefit booklets, certificates of coverage, and the like.