Chair: 

Mr. John G. Kapanke 

SecretlirylTre •• untr: 

Robert H. Rydland, Esquire 

Board of PensiOns 

Evangelicalluthef'an Church in America 

800 Marquette Avenue, Suite 1050 

Mimeapolis, MN 55402·2892 

(612) 752-4117 • Fax (612) 334-5399 

Members: 

Dr. K. VCUlg Bae 

Association Of Unity ChlKches 

Mr. l. Wood Bedell 

Reformed Churdl in America 

Mr. J. Paul Bell Associate Reformed Presbyterian Church 

~~it:~:~'S~d~~in • 

Mr. John H. Bolt Ctvistian Reformed Church in North America 

Mr. David J. Brown 

Comrn.Jl1ity of Ctvist 

Mr. Gary D. C~II 

Presbyterian ChUrct'lln America 

Mr. Elford H. Clark 

International Church of the Foursquare Gospel 

Mr. Michael A. Downs· 

United Church of Christ 

Mr. Nevin Oulabaum C/'uch of the Brethren 

Or. Craig A. DUM Wesleyan ChLKdl 

Mr. Jon M. FLanaoan Wisconsin Evangelical Lutheran Synod 

Dr. Sumner M. Grant' 

American Baptist Churches 

Mr. James P. Hamlett" 

Ctvistian ChtXCh (Disciples of Christ) 

Dr. O. S. Hav.1I.ins· 

Southern Baptist Convention 

Mr. Dale Hili Free Methodist Church of North America 

~;;:Ji~sBOt~ 

~ef~;~!s1~~Jt..e Church of God 

Rev. Dr. Jeffrey J. Jeremiah 

Evangelical Presbyterian ChlKch 

Mr. Del l. Johnson General Conference of Seventh-Oay Adventists 

Mr. John G. Kapanke· 

Evangelical Lutheran Church in America 

tk. Mar10 J. Kauffman 

Mennonite Church 

.... R-' M. """'"' • Reform Pension BOard 

Mr. Ray Lewis National Association of Free Will Baptists 

Dr. Dean A. I,.undgren 

Evangelical Covenant Church 

Mr. Robert W. Maggs Jr .• 

Presbyterian Church (U.S.A.) 

Rev. Ross I. Morrison 

Evangelical Free Church of America 

Mr. John M. Preis ' Young Men's Christian Association 

Br. Michael F. Quirk, FSC' 

Christian Brothers Services 

Mr. Arthur D. RhOdes 

Church of God Benefits Board 

Mr. James F. Santi' Lutheran Church-Missourl Synod 

Mr. StUJl!len ScnJItz 

Baptist General Conference 

Mr. Mitchell J. Smllowitz 

Joint Retirement Board for Conservative Judaism 

Mr. Ray D. Stites Christian Churches Pension Plan 

Mr. T. Dennis Sullivan' 

Episcopal Church 

Mr. James P. Thomas, CPA 

ChlJfCt1es of God, General Conference 

Rev. Don L. Waller Churdl of the Nazarene 

Mr. Edward W. Wood International Pentecostal Holiness Cnurch 

• Steering Committee Members 

OJOllU 

CHURCH ALLIANCE 

Acting on Behalf of Church Benefits Programs 

August 10,2010 

Department of Health and Human Services 

Office of Consumer Infonnation and Insurance Oversight 

Attention: OCll0-9991- IFC 

P.O. Box 8016 

Baltimore, MD 21244-1850 

Counsel: 

David A. Starr, Esquire 

Williams & Jensen, P.C. 

701-8th SI. NW .• Suite 500 

Washington. D.C. 20001 

Tel (202) 659-8201 

Fax(202)496H)699 

e-mail: dastarr@wms-jen.com 

Re: Comments on Interim Final Rules for Group Health Plans and Health Insurance 

Coverage Relating to Status as a Grandfathered Health Plan under the PPACA 

Ladies and Gentlemen: 

This letter is being submitted on behalf of the Church Alliance as a public 

comment to the Interim Final Rules for Group Health Plans and Health 

Insurance Coverage Relating to Status as a Grandfathered Health Plan under 

the PPACA (the "Regulations") published by the Department of Health and 

Human Services (HHS), Department of Labor (DOL) and Department of the 

Treasury (IRS) (together, the "Departments") in the Federal Register on June 

17,2010.75 F.R. 34538-70, amending 26 C.F.R. Parts 54 and 602, 29 C.F.R. 

Part 2590 and 45 C.F.R. Part 147. 

The Church Alliance members, listed on the left of this letterhead, provide 

medical coverage to over one million participants (clergy and lay workers) 

serving over 155,000 churches, synagogues and affiliated organizations. For 

over 50 years, many denominational church plans, most of which offer a 

nationwide plan (often on a self-funded basis), have allowed often itinerant 

clergy families the comfort and security of career-long portable, comprehensive 

medical coverage, on an affordable basis through a plan that reflects their 

denomination's belief system. The members of the Church Alliance hope to 

continue to offer employment-based coverage to clergy and lay employees under 

the new health care refonn regime. 

The Church Alliance commends the Departments for speedily issuing the 

Regulations and other guidance under the Patient Protection and Affordable 

Care Act (PPACA). Although the Regulations address many employer and 

group health plan concerns, they leave a number of important questions 

unanswered, particularly as they relate to their impact on church plans. 
Department of Health and Human Services 

Office of Consumer Information and Insurance Oversight 

August 10, 2010 

Page 2 

The PPACA amends provisions of the Public Health Service Act (PHSA) relating to group health 

plans. The PPACA adds §9815(a)(l) to the Internal Revenue Code of 1986 (Code), which makes 

certain provisions of the PHSA applicable to insured and self-insured group health plans, including 

church plans. Section 1251 of the PPACA specifies that certain plans existing on March 23, 2010 

(i.e., "Grandfathered Plans") are subject to only select provisions of the PPACA and PHSA. 

The application of Federal and State benefit laws to denominational church plans presents different 

challenges than it would to a typical single or multi-employer group health plan. Each denomination 

has a unique polity (governance structure) established to reflect its theological beliefs. The 

governance structures of the Church Alliance members range from purely hierarchical churches to 

independent churches or denominations that are congregational in nature. Each denomination has a 

different level of authority and control over its individual churches as employers. As a result, in some 

denominations the church plan sponsor has the ability to mandate employer coverage decisions; in 

other denominations, the national plan can only control the plan design and administration but not the 

eligibility and participation rules or employer contributions toward employees' cost of coverage. A 

very high percentage of the churches and other employers participating in denominational church 

plans are small employers under the Act. 

The Church Alliance has particular concerns with a few provisions of the Regulations and asks that 

the Departments consider the following suggestions: 

Adding New Employers to a Church Plan 

Denominational church plans, which function in much the same manner as multiple employer plans, 

offer benefits to thousands of employers affiliated with the church plan's denomination. If one or 

more of these affiliated churches, conferences or agencies, not currently participating in the 

denominational plan, elects to cover its employees under the denominational plan after March 23, 

20 I 0, it is unclear whether the denominational church plan would forfeit its Grandfathered Plan 

status. 

The general description in the preamble that "changes other than the changes [prohibited in the 

Regulations 1 will not cause a plan or coverage to cease to be a grandfathered health plan" suggests 

that new employers joining a church plan would not cause the church plan to lose its Grandfathered 

Plan status. Given the unique nature of church plans, we ask that the Departments clearly indicate in 

the Regulations that new employers are allowed to join grandfathered church plans without causing 

the plans to forfeit their Grandfathered Plan status to the extent that the number of new employers is 

not abusive relative to the number of employers participating as of March 23, 2010. 

Employers in Church Plans Changing Benefit Options 

In many church plans, participating employers are given a choice among several benefit packages, 

e.g., a PPO, HMO or high deductible plan option. While the denominational benefit board may 

control the design and premium cost of these benefit packages, generally each participating employer 

has the discretion to choose among them to best tailor its coverage to the needs of its employees and 

budget. Many denominations lack the authority to mandate the benefits practices of local churches 

and other affiliated employers. 
Department of Health and Human Services 

Office of Consumer Infonnation and Insurance Oversight 

August 10, 2010 

Page 3 

The Church Alliance asks that the Departments allow church plans to retain this practice for 

participating employers, which existed before March 23,2010. We suggest that the Regulations 

permit an employer in a church plan to move its employees among the various grandfathered benefit 

packages as pennitted before March 23, 2010, provided that no employer does so more often than 

annually, and provided that the church plan does not alter the benefit packages in such a way that the 

packages would no longer be grandfathered. This rule could be subject to an anti-abuse and 

materiality rule, so that changes among packages would be pennitted even if the resulting change for 

covered employees might exceed maximum cost-sharing change limits described in the Regulations, 

as long as changes within the plan's benefit package itself do not exceed such limits. Church plans 

would monitor these changes and advise participating employers when such changes might be 

considered abusive. 

Cost-sharing at the Employer Level in Church Plans 

In many church plans, the denominational benefit board has no control over the employer's (or other 

governing entity's) decisions with respect to the employees' share of the premiums (or contributions 

or dues). The Church Alliance is concerned that, under the Regulations, if an individual employer 

increases its employees' share of the premium, without the knowledge of or even against the 

instruction of the denominational benefit board administering the church plan, the entire plan will 

lose its Grandfathered Plan status. Such a result would not only cause hardship to the church plan and 

the benefits board, but also, unfairly, to many other participating employers, who do not reduce their 

contributions toward employees' coverage. The Church Alliance suggests that the Departments 

incorporate a rule into the Regulations to permit church plans to retain Grandfathered Plan status if 

participating employers reduce their contributions toward the cost of employees' coverage. 

Specifically, we ask that the Regulations allow church plans to retain their practices with respect to 

employer contributions that existed before March 23, 2010. If a church plan had no control over or 

knowledge of participating employers' contribution rates before March 23, 2010, changes to such 

contribution rates after March 23, 2010 should not cause a church plan to lose its status as a 

Grandfathered Plan. Therefore, the Regulations should allow church health care plans to continue to 

maintain their existing employer contribution rate practices that were in place on March 23, 2010 and 

remain a Grandfathered Plan. 

Adding New Participants Other Than Employees 

The Regulations indicate that new employees and their families may be added to a plan without 

losing Grandfathered Plan status. However, the Regulations appear to be silent about whether a plan 

can remain a Grandfathered Plan if it adds a new category of other eligible participants. For instance, 

some denominational plans cover seminary students; and others may at some point add such 

coverage, or expand such coverage to new entities that cover seminarians. Some denominations cover 

domestic partners; and some denominations have actions pending before their national assemblies or 

conventions to add such coverage in the future. It is unclear whether the addition of fonnerly 

uncovered seminarians or the addition of domestic partner coverage to the eligible family members 

allowed in a church plan would cause a plan to lose its Grandfathered Plan status. 
Department of Health and Human Services 

Office of Consumer Information and Insurance Oversight 

August 10, 2010 

Page 4 

The preamble to the Regulations states that "changes other than the changes described in 26 CFR 

54.9815-125IT(g)(I), 29 CFR 2590.715-125 l(g)(I), and 45 CFR 147. 140(g) (1) will not cause a plan 

or coverage to cease to be a grandfathered health plan. Examples include changes to premiums, 

changes to comply with Federal or State legal requirements, changes to voluntarily comply with 

provisions of the Affordable Care Act, and changing third party administrators, provided these 

changes are made without exceeding the standards established by paragraph (g)(I)." 75 F.R. 34544. 

It would seem contrary to the general purpose of the PP ACA if the rules governing Grandfathered 

Plan status would prohibit expansion of employer-based coverage or hinder innovation. Nonetheless, 

the Church Alliance suggests that the Regulations expressly state, or describe additional examples 

that make clear, that the expansion of benefits to more eligible groups would not obviate 

Grandfathered Plan status. 

Self-insured Plans as Minimum Essential Coverage 

Finally, the Church Alliance has a concern that is not unique to church plans. As a result of the 

Regulations, many employers, including church plans and their employers, are considering the 

consequences oflosing Grandfathered Plan status. It appears that the PPACA is unclear with respect 

to whether employers sponsoring or participating in non-grandfathered self-insured plans would be 

subject to the excise tax in 2014 and later for failing to provide the required minimum essential 

coverage. 

Section 1513 of the PP ACA, through the addition of §4980H of the Code, imposes an excise tax for 

employers that fail to offer their full-time employees minimum essential coverage through an 

"eligible employer-sponsored plan" as defined in §5000A(f)(2) of the Code, which was added by 

§ 1501 of the PPACA. An eligible employer-sponsored plan for purposes of the employer excise tax is 

defined in §5000A(f)(2) to "include a group health plan or group health insurance coverage offered by 

an employer to the employee which is a governmental plan or any other plan or coverage offered in 

the small or large group market within a State." It also includes a Grandfathered Plan. 

The reference to "the small or large group market," if read to modifY the term group health plan, 

would suggest that the coverage must be provided through a policy of insurance, and that a selfinsured plan would not satisfY the definition of minimum essential coverage. Sections 2791(e)(2) and 

2791(e)(5) of the PHSA define the small and large group markets, respectively, as relating to health 

insurance; they do not appear to include self-insured plans. An interpretation of this provision that 

precluded non-grandfathered self-insured plans from qualifYing as minimum essential coverage 

would subject many employers, whose self-insured plans lose Grandfathered Plan status over time (or 

employers that forgo the record-keeping and design constraint requirements of the Regulations and 

treat their plans as non-grand fathered), to the excise penalty tax for failing to offer minimum essential 

coverage. 

"Minimum essential coverage" under §5000A(f)(I), which relates to the individual mandate, is 

defined more broadly, and includes (i) governmental coverage, e.g., Medicare or Medicaid, (ii) 

individual health plan coverage, (iii) coverage in a Grandfathered Plan, (iv) coverage in an "eligible 
Department of Health and Human Services 

Office of Consumer Information and Insurance Oversight 

August 10,2010 

Page 5 

employer-sponsored plan", and (v) other coverage recognized by the Secretary ofHHS. We believe it 

is essential that the Departments exercise their discretion under §5000A(f)(l)(E)(v) of the Code to 

expressly recognize non-grandfathered self-insured group health plans, including church plans, as 

minimum essential coverage under the PPACA. We believe that failing to do so may unnecessarily 

subject many employees covered in non-grandfathered self-insured plans, including some church 

plans, to penalties for not having minimum essential coverage. 

Equally importantly, we believe it is also necessary and urgent for the Departments to recognize nongrandfathered self-insured group health plans as "eligible employer-sponsored plans" under 

§5000A(f)(2) for purposes of the employer excise tax. Without such recognition, employers who 

provide long-standing, secure and comprehensive coverage to their employees through self-insured 

group health plans, including church plans, which are not or cease to be Grandfathered Plans, could 

be subject to excise tax penalties. 

Thank you for your consideration of our views on this important issue to church employers and 

employees. If you have questions, please feel free to contact our representative, David Starr of 

Williams & Jensen, P.C., at (202) 659-8201 or dastarr@wms-jen.com. 

John G. Kapanke, Chair