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NATIONAL COORDINATING COMMITTEE FOR MULTIEMPLOYER PLANS

815 16th Street, N.W., Washington, DC 20006  Phone 202-737-5315  Fax 202-737-1308 

 

Mark H. Ayers Mark H. Ayers Mark H. Ayers 

Chairman 

Randy G. Randy G. Randy G. DeFrehn DeFrehn DeFrehn 

Executive Director 

 E-Mail: RDEFREHN@NCCMP.ORG

Submitted Electronically via Regulations .gov

August 16, 2010 

The Honorable Phyllis Borzi 

Assistant Secretary 

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Avenue, NW 

Room S-2524 

Washington, D.C. 20210 

Re: RIN 1210–AB42 

Dear Ms. Borzi: 

The National Coordinating Committee for Multiemployer Plans (the NCCMP) is pleased to 

provide these comments on the interim final rule implementing the grandfather requirements of 

the Patient Protection and Affordable Care Act published by the Departments of Labor, 

Treasury, and Health and Human Services (the “agencies”) on June 17, 2010. 

As you know, the NCCMP is the only national organization devoted exclusively to protecting the 

interests of the approximately twenty-six million workers, retirees, and their families who rely on 

multiemployer plans for retirement, health and other benefits. The NCCMP’s purpose is to 

assure an environment in which multiemployer plans can continue their vital role in providing 

benefits to working men and women. The NCCMP is a nonprofit, non-partisan organization, 

with members, plans, and plan sponsors in every major segment of the multiemployer plan 

universe, including in the airline, building and construction, entertainment, health care, 

hospitality, longshore, manufacturing, mining, retail food, service and trucking industries. 

Background 

The structure of multiemployer health plans is quite different from that of a single employer 

plan, resulting in the need to address specific concerns of multiemployer plans separately in the 

health reform regulations. In a typical single employer plan, the firm’s management determines 

health benefits and the amount spent on them. This financing model has historically been 

followed by larger single employer plans, even when the covered employees are represented by a 

union. Typically, the amount of employer contributions is not specified in the plan or any related 

documents; however, if there is collective bargaining, the obligation to provide group health plan 

benefits, and often the amount and nature of the benefits, is codified in the bargaining agreement. 
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In the multiemployer context, the role of collective bargaining is central, as multiemployer plans 

typically cannot exist absent a bargaining agreement.1 In these plans, employee representatives 

are equally represented in all plan decisions including eligibility, converage, plan design, 

administration, funding (insured, Administrative Services Only arrangements, partially insured 

or fully self-insured), selection of the plan’s delivery systems, and selection of plan service 

providers and advisors. Unlike a typical single employer program in which the employer 

generally has complete discretion, this joint labor-management organizational structure gives the 

employees an equal voice in all plan matters. 

Under this system, rather than simply negotiating benefits, it is common that a “wage package” 

is negotiated in the collective bargaining process , usually for terms of three to five years, 

consisting of an hourly wage and a fringe benefit component from which an allocation is made to 

various fringe benefit programs (typically health, pension, annuity, apprenticeship and perhaps 

industry development funds) that specifies contribution rates to each. Alternatively, and 

especially in the construction industry, the allocations may be determined outside the bargaining 

process by, or with input from the union and may be ratified by the union members. Typically, 

such contributions are made to the plan based on a unit of work (usually hours worked, but daily, 

weekly or monthly contributions or a percentage of compensation are not uncommon in certain 

industries). These contributions are remitted regularly, usually monthly, to the trust fund. If the 

contributions are not made, they are vigorously pursued through legal collection efforts that will 

also usually include recovery of interest and liquidated damages on the unpaid amounts. Funds 

also typically employ audit programs to provide both a real verification of contribution amounts 

that are due, and to provide a “sentinel” effect to encourage employers to make their 

contributions when they become due. 

Summary of Recommendations 

As discussed more fully below, we ask the agencies to: 

Consider the consequences of depriving collectively bargained, multiemployer plans of the 

time needed to secure adequate funding to implement the Act; 

Confirm that the addition of new contributing employers to a multiemployer plan would not 

result in the plan losing grandfathered status; 

Confirm that the agreement by one set of bargainers to change from one plan of benefits to 

another offered by the multiemployer plan will not result in loss of grandfather status for 

either the original benefit structure or the one into which the parties have bargained; 

Clarify the language of the regulations to avoid any implication that that changes in the 

formulas used to determine what employers contribute to a multiemployer plan would not 

result in the plan losing grandfathered status; 

Provide that changes in a multiemployer plan’s eligibility rules would not result in loss of 

grandfathered status; 

 

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 The Labor Management Relations Act (LMRA) of 1947 (often referred to as the “Taft-Hartley Act”) requires equal 

participation by employers in the management and operations of these trusts and that they be operated pursuant to a 

written agreement. In limited circumstances, employees of a labor organization may participate in a multiemployer 

plan as may certain non-bargained employees who may participate in such a plan pursuant to a written “participation 

agreement” and subject to a limit of not more than 10% of the participants in such a plan. 
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Clarify that changing from insured to self-insured, changing or reducing the number of 

networks without a significant change in benefit coverage, or changing formularies would 

not, by themselves, result in loss of grandfathered status;

Clarify that when grandfathered status is lost, the effective date is the first day of the first 

plan year following the event that caused the loss of that status;

Confirm that changing insurance issuers during the period that an insured collectively 

bargained plan is grandfathered does not affect the plan’s grandfathered status; 

Clarify that multiemployer plans with self-insured dental or vision benefits may treat these 

benefits as excepted benefits for purposes of determining whether the Act applies to them; 

and 

Provide further guidance as to what constitutes a “benefit package.” 

Delayed Effective Date for Collectively Bargained Plans 

The regulations adopt a bright-line test for when collectively bargained plans must implement 

the Title I requirements (i.e., no delayed effective date) and when and under what circumstances 

they retain “grandfathered” status. While we understand that the Departments are constrained by 

the statutory language of the Act, it should be understood that interpreting the laws to provide for 

no delayed effective date for some provisions of the law (e.g., age 26, annual and lifetime limits, 

etc.) and no grandfather plan exception unless the plan is insured, has extensive and possibly 

devastating consequences for the participants and beneficiaries who receive coverage under 

multiemployer plans. 

Joint labor-management, multiemployer health and welfare trust funds are simply pools of 

workers’ money held in trust under federal law to provide the workers and their dependents with 

medical, hospital and other health benefits coverage as well as other vital employee benefits. 

These trust funds are funded by collectively bargained “employer” contributions for which 

covered workers explicitly trade off wages, dollar-for-dollar, through the collective bargaining 

process. The workers pay the full cost of their and their dependents’ coverage. All costs – 

including benefits and administrative expenses – are paid from the pool of workers’ money. 

If the trust fund’s costs increase, despite the trustees’ best efforts at cost-containment, the burden

falls directly on the workers in the form of lower wages and/or reduced benefits. Increases in the 

costs of benefits typically create a need for higher collectively bargained contribution rates, 

which reduce wages or preclude wage rate increases. If contribution rates cannot be increased or 

increased sufficiently, the board of trustees may have to reduce benefits or tighten eligibility 

rules. 

Faced with persistent, systemic health care cost inflation over the past 20 years, our health and 

welfare funds have endeavored to develop innovative means for cost containment, including 

preferred provider arrangements, promoting preventive care and wellness, engaging in disease 

management, and forming group purchasing coalitions to maximize bargaining power. These 

serious efforts have made a difference. But, they have not been enough to contain costs 

sufficiently because most of the causes of inflation in health care costs are beyond the funds’ 

control, including: costs attributable to preventable medical errors; unrestrained proliferation of 

medical technology; the inefficiencies of the fee-for-service system; the failure of the system to 
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adequately coordinate care of individuals with multiple chronic conditions; and unfair cost 

shifting by irresponsible employers and by government programs. 

Our health and welfare trust funds are not insurance companies motivated by profit; to the 

contrary, the funds are non-profit, tax-exempt trusts. The trust funds are not single employer 

health plans whose terms and conditions are unilaterally set by company executives and that can 

draw on the company’s treasury whenever they need money; rather, they are pools of workers’ 

money governed by joint labor-management board of trustees who are legally required to operate 

the fund for the sole and exclusive benefit of the participants (covered workers) and their 

beneficiaries (dependents) in accordance with both the LMRA and ERISA’s strict fiduciary 

standards. 

By not allowing lead-time to comply with the mandates, and by limiting access to the 

collectively bargained deferred effective date for compliance to insured plans the Act and, 

perhaps to a lesser extent, the proposed regulations, have placed an additional cost burden onto 

those trusts which provide benefits on a self-insured basis. This will require the trustees to adjust 

the plan in other ways to accommodate the cost increases required by the Act. For example, 

plans that need to remove lifetime limits may need to increase deductibles in order to pay for 

those costs. Plans required to cover dependents up to age 26 may need to tighten other eligibility 

rules in order to cover those costs. There is no employer to provide money to offset these costs 

because the trust is funded through collective bargaining agreements, and there has been 

insufficient time to renegotiate those agreements to reflect the new costs of both the claims costs 

and administration of the plan. 

Addition of New Employers to the Multiemployer Plan

Multiemployer plans frequently operate pursuant to dozens or even thousands of collective 

bargaining agreements (CBA) at any one time. Each CBA includes a provision requiring 

contributions into the trust fund by the signatory employer. The duration of each CBA will vary 

according to the terms and conditions of the contract. Similarly, unions are constantly 

negotiating with both existing and new employers to contribute to their multiemployer plan, 

typically because it is the most cost-effective way to provide acceptable health coverage for their 

employees. These employers come into the multiemployer plan at whatever point they agree to 

do so, which may or may not coincide with the start of a plan year. When a new employer joins a 

multiemployer plan, there is no impact on the benefits provided to participants and beneficiaries 

who are already in the plan. The plan simply expands its membership to another group of 

individuals, for whom contributions will now be made by their employer. Most multiemployer 

plans have a minimum standards policy, which requires that contributing employers meet a 

certain contribution level (e.g., $x per hour), in order for their employees to be eligible for 

benefits under the plan. Some plans have multiple benefit levels (e.g., $x purchases plan A; $y 

purchases plan B). However, the trustees establish the benefits and the contributing employer is 

merely acceding to the terms of the trust in order to provide health benefits, through the 

multiemployer plan, to its covered employees. 

We urge the Departments to clarify that when multiemployer plans add a new contributing 

employer to the plan, and provide benefits to these participants and beneficiaries, the plan does 
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not lose its status as a grandfathered plan. This is no more than a feature of the statutory and 

regulatory provisions that permit plans to retain their grandfather status when new employees 

enter the plan. The way new groups of employees enter a multiemployer plan is for their 

employer to agree to contribute for them. It should not matter whether their employer had 

previously agreed to contribute for a different group of employees, perhaps at another facility or 

working for a related corporation, or is new to the plan itself. 

Bona Fide Reasons 

Subsection (b)(2)(ii)(C) of the anti-abuse provision of the grandfathered regulations indicates 

that plans lose grandfathered status, if, inter alia, there is no “bona fide employment-based 

reason” to transfer employees from one plan to another. The regulations specify that changing 

the terms or cost of coverage is not a bona fide employment-based reason. It would be helpful for 

group health plans, especially those that offer multiple benefit packages or tiers of benefits, to 

have a better understanding of what constitutes a valid bona fide employment-based reason for 

transferring employees between plans. Clarification with regard to this provision will help reduce 

speculation and uncertainty over the effect on grandfathering when employees are transferred 

between a plan’s various benefit packages or tiers of benefits. 

Therefore, we respectfully request that that the Departments clarify that a decision by the 

collective bargaining parties (employer and union) to switch benefit packages offered by a 

multiemployer plan not result in the loss of grandfathered status for either benefit package. As 

noted above, health coverage is but one part of a larger compensation package negotiated by the 

employer and union. Unlike the situation with a non-bargained plan, where the employees have 

little to no input in selecting health coverage, and the decision is typically the unilateral decision

of an employer, coverage in a multiemployer plan is the subject of bargaining between the union 

and the employer, giving the employees a real voice in the selection of health coverage. We 

believe that clarification should be provided which would ensure that the protection of “bonafide employment-based reasons” under subsection (b)(2)(ii)(C) would apply to cases involving 

common transactions of multi-employer plans which, if left unaddressed, could have the 

unintended effect of causing involved “transferee” plans to lose “grandfathered” status. Without 

clarification from the agencies that bona fide good faith collective bargaining over health plan 

terms constitutes a “bona –fide employment-based reason” for a transfer, a transferee multiemployer plan may be reluctant to accept new employee groups for fear of loss of grandfathered 

status, a condition which could have the undesirable effect of locking employees in plans which 

may not prove advantageous. 

Also as noted above, mulitemployer plans typically offer a range of benefit packages that have 

different contribution rates associated with them. Decisions to select a particular benefit package, 

or to change between packages, are not made by the plan or by the plan sponsor (a jointly 

administered Board of Trustees), but rather by the bargaining parties. In many situations, an 

employer and union wish to remain in the multiemployer plan, but wish to change benefit 

packages. As in the case with adding new employers, the plan would like to maintain 

participation because maintaining participation levels allows the plan to provide benefits 

efficiently due to economies of scale. Unlike a single employer plan, the savings generated by a 

multiemployer plan do not inure to the benefit of the employer. Rather, the funds remain in trust 
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for the sole and exclusive benefits for all of the plan's participants and beneficiaries. Further, 

unlike a single employer plan where the consequences of changing benefits (loss of 

grandfathered status) can be fairly placed upon that employer because of its unilateral control 

over the decision, a multiemployer plan does not require an employer to change benefits. 

Similarly, the other participating employers should not have the fate of their plan’s grandfathered 

status be determined by decision of other, unrelated bargaining parties to switch benefit 

packages. 

The regulations as presently drafted indicate that grandfathering status is measured 

independently with respect to each benefit package. The decision by an employer and union to 

switch from one benefit package offered by a multiemployer plan to another benefit package in 

the same plan does not change either benefit package. Thus, the clarification we are proposing is 

consistent with the regulations as proposed to date. Although one may suggest that under such 

circumstances, a benefit package would lose it’s grandfather status with respect to that employer 

or bargaining unit only, such a construction would would be nearly impossible to administer and 

would eliminate the efficiencies and economies of scale provided through the multiemployer 

structure. Therefore, the following questions remain: 1. If the bargaining parties’ negotiation of 

an alternative benefit package provided by the same multiemployer plan would trigger the loss of 

grandfather status, would the original benefit package lose it, or the new benefit package. 2. 

Would all of the other employers and unions participating in that package, and the plan itself, 

have the plan's status as a grandfathered plan determined by the decision of one employer and 

union outside their control, to switch benefit packages? 

Alternatively, would the plan need to discontinue doing business with the employer and union 

proposing to switch benefit packages (at a loss to all the participants and beneficiaries due to the 

inefficiencies caused by the drop in participation levels) in order to maintain grandfathered 

status? Absent the employer’s decision to offer a replacement plan (for which there is no 

mandate) such an outcome is contratry to the intent of the Act to expand coverage. 

A similar concern is raised in the area of mergers between multi-employer health care plans. 

Frequently, a merger of plans may be occasioned by a merger between local unions, a transaction 

which would seem to represent a “bona-fide employment based reasons for a transfer.” In other 

cases, the plan sponsor joint board of trustees of the “transferee” plan determines that it can no 

longer administer a plan of benefits or that the administration of the plan could more efficiently 

be carried out by a larger plan. In those cases a merger is undertaken between the multi-employer 

plans which usually results in a “transferor” plan becoming part of an ordinarily larger 

“transferee” plan. Generally an employer is not involved in these transactions between multiemployer plan sponsors and only becomes involved when the employer and union negotiate a 

collective bargaining amendment substituting the transferee plan for the transferor plan in the 

agreement. These transactions are not motivated by an employer’s cost cutting desires, but 

without clarification that plan mergers of multi-employer plans represent “bona-fide 

employment-based reasons” for a transfer, could result in reluctance on the part of surviving 

“transferee” plans to absorb “transferor” plans in merger transactions for fear of losing 

grandfathered plan status. This result could significantly lessen the health care choices available 

to unionized employees. 
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In sum, having an entire plan or a benefit package lose grandfathered status as a consequence of 

having an employer and union bargain to switch benefit packages, or due to a merger of plans, is 

detrimental to the plan and its participants and beneficiaries. Switching benefit packages offered 

by a multiemployer plan is the result of bargaining between the union and employer, with the 

union protecting the interests of the employees of its bargaining unit for which it is legally the 

bargaining agent. Allowing such changes allows the plan to maintain its participation level which 

benefits all of the participants and beneficiaries. For these reasons, the regulators should clarify 

that switching benefit packages in a multiemployer plan does not cause the loss of grandfathered 

status. We would ask that the agencies clarify that addition of employees to transferee plans 

pursuant to either arms length collective bargaining over employee plan coverage or mergers 

between multi-employer plans represent “bona-fide employment based reasons” for a transfer 

under subsection (b)(2)(ii)(C) of the regulations. 

Employer Contribution Changes 

Subsection (g) of the regulations lays out the principle that a reduction in the share of the 

premium or cost of coverage that is paid by the employer is a change that triggers a loss of the 

grandfather protection. Paragraph (3)(iii)(B) of that subsection states: 

The term contribution rate based on a formula means, for plans that, on March 

23, 2010, made contributions based on a formula (such as hours worked or tons of 

coal mined), the formula. 

This statement is mystifying and, as it stands, is causing confusion and could cause problems for 

multiemployer plans. What is important in connection with this general point, based on the 

policy of the grandfather regulations, is whether the plan is still one that participants would want 

to keep, given that they now have to pay a greater share of the cost of their coverage. It should 

not matter how the employer contribution obligation to the fund is determined, or whether the 

employers are still required to contribute the same amount, if the participants’ rights are not 

affected. 

Some unions and employers negotiating over multiemployer-plan contributions might change the 

basis on which contributions are determined to meet immendiate funding needs, shore-up the 

plan’s reserves, or they may determine that their reserves are adequate and divert some of the 

money previously earmarked for the health fund to the pension plan, often to meet obligations 

under the Pension Fund’s Funding Improvement or Rehabilitation Plan. Indeed, as noted above, 

many bargaining agreements, particularly in the construction and trucking industries, reserve a 

portion of the negotiated economic package that the union is authorized to direct, from year to 

year, to whichever form of compensation is appropriate in that year – wages, health 

contributions, pensions, etc. If that unallocated money went 50-50 to the health and the 

retirement plans in year 1, and then goes 100% to the retirement plan in year 2, would that be a 

cutback that could cause the health plan to lose its grandfather status irrespective of whether such 

change had any effect on the participants’ benefits? 

Even if there is a direct cutback in the formula for employer contributions to the welfare fund, 

we do not see why that would be relevant as long as the employees’ share of the coverage costs 
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does not go up. What if it does not result in any changes to benefits under the health plan, or if 

the changes are minimal and within the margins authorized by the regulation? What if the 

reduction in employer contributions only results in cutbacks to other welfare benefits, such as 

life insurance or hour-bank credits, but not health benefits? Indeed, what if it results from 

achieving the Act’s primary goal, which is the reduction in overall health care costs? One could 

spin out a long list of variables that should be harmless from the perspective of the grandfather 

rule. 

The confusion here is, we submit, due to the unfortunate choice of examples to illustrate the 

point the regulation is trying to make. The important distinction is between a formula used under 

the plan to allocate the cost of plan coverage between the employers and the participants, and a 

formula used in a collective bargaining agreement to assess employer contribution rates. 

Although the language from the regulation that is quoted above does refer to "plans that ... made 

contributions based on a formula", that is the kind of language that is often inaccurately used to 

refer to multiemployer plans, e.g., “the plan increases contributions ...”. Since the regulations 

illustrate the point with language commonly used to describe multiemployer-plan employercontribution formulas, practitioners have read this and wondered whether – or concluded – that a 

plan's grandfathered status would be affected by a change in employer contribution rates. 

We do not know precisely what the regulation drafters had in mind when they included a change 

in the formula under which a plan contributes to the cost of employees’ health insurance that is 

not already covered by its prior language. If the reference to “hours worked” as a determinant of 

employees’ contribution obligations is intended to refer to distinctions between part-time and 

full-time employees, the rule would be easier to understand if the regulation stated that. 

Parenthetically, if the formula for determining the plan’s share of the cost of health coverage is 

relevant to a plan’s grandfather status, the rule stated in the regulations appears to be overbroad. 

The current language appears to trigger a loss of grandfathered status even if the formula were 

altered to reduce the employees’ share of the cost. Perhaps the more appropriate rule would be to 

refer back to the rules describing various types of benefit reductions that would cause a loss of 

grandfathered status. The rule could be that grandfathered status is lost by adoption of a change 

in a formula that results in an increase in employees’ costs for coverage (greater than 

permissible) under the plan as described in those subsections of the regulation. 

In addition, many multiemployer plans are funded entirely with employer contributions. In such 

a case a reduction in the amount of employer contributions would not increase the portion of the 

cost of the benefit contributed by employees – the employer would still contribute 100% of the 

cost of coverage. In such a case, the reduction in the amount or rate of employer contribution 

should not affect grandfathered status. 

In any event, the NCCMP urges that the regulation be revised to make clear that changes in the 

formula for or the amount of employer contribution rates to a multiemployer health and welfare 

plan are not, by themselves, relevant to the plan's grandfathered status. Stated simply, if the 

participant is not exposed to additional out of pocket costs (beyond those minimal changes 

authorized by the regulation), we believe it is irrelevant whether the “formula” under which 
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the employer contribution is made (i.e. the portion of compensation allocated to the 

multiemployer health fund) changes in either direction.

Change in Eligibility Rules 

We note that the list of items that would result in loss of grandfathered status does not include 

events that are eligibility changes. We encourage the Departments to clarify that a change in 

eligibility rules does not result in a loss of grandfathered status. This is consistent with the 

rationale for the grandfather rule, which is that participants should be able to retain the coverage 

that they currently have. However, the rule does not affect how an individual attains eligibility 

for coverage. 

Specifically, plans have been concerned that a change in a multiemployer plan’s eligibility rules 

could result in loss of grandfathered status. For example, a multiemployer plan may require that 

a covered employee work 100 hours in one month to attain eligibility for coverage in the next 

coverage period. In light of the current economic pressures and lack of work, some plans are 

increasing eligibility requirements. For example, in the situation above, the plan could change 

the eligibility requirement from 100 hours/month to 120 hours/ month. The change should not 

result in a loss of grandfathered status. 

Similarly, some multiemployer plans have found it necessary to revise eligibility rules for retiree 

coverage due to the lack of income because of the lack of work. Other plans may determine that 

it is necessary to terminate retiree eligibility altogether, or to spin retirees off into a separate plan. 

These eligibility rule changes regarding retirees should also not result in loss of grandfathered 

status by the plan. 

Finally, changes to the definition of eligible dependents should not result in a loss of grandfather 

status. Due to the Age-26 coverage rule, many plans are evaluating eligibility rules and coverage 

policies for dependent children. A plan should not lose grandfathered status due to a 

modification of its dependent eligibility rules. 

Response to Specific Questions Raised in the Regulations 

The Departments asked whether several changes should result in cessation of grandfathered 

status. These include changes in plan structure (e.g., switching from a health reimbursement 

arrangement to major medical coverage or from an insured product to a self-insured product); 

changes in a network plan’s provider network; or changes to a prescription drug formulary. We 

do not believe that any of these changes should result in a loss of grandfathered status. 

Multiemployer plans are often self-insured (at least in part), and may often offer a health 

reimbursement arrangement together with medical coverage. The plan will sometimes implement 

a health reimbursement arrangement or change a benefit delivery system from an insured one to 

a self-insured one. In many cases, the plan will go to great lengths to assure that the benefits in 

the two plans remain the same. This benefit equalization can be done when moving delivery 

systems, although it does require substantial effort by the plan. Generally, however, plan 
10 

sponsors are willing to make this effort to assure that the delivery mechanism chosen by the plan 

sponsor does not adversely affect the benefits available to the individuals in the plan. 

Consequently, we recommend that mere changes in delivery systems, such as implementing an 

HRA, moving from insured to self-insured, changing third party administrators or pharmacy 

benefit managers, etc. should not, by themselves, result in a loss of grandfathered status. If the 

change results in a benefit modification, then the modification can be tested under existing 

grandfathered rule requirements, but the benefit delivery system should not result in a per se

change. 

While comments were not specifically requested on this issue, we also challenge the regulation’s 

position that simply changing insurance companies (in the regulation, this is referred to as 

“entering into a new policy, certificate, or contract of insurance”) causes a loss of grandfathered 

status. In that regard, this has the unfortunate side effect of insulating the incumbent insurer from 

healthy competition, if it knows it will be extremely costly to the plan to change to a different 

carrier. In addition, a carrier change can be made with little or no change in benefits – the only 

difference would be the name on the individual’s insurance card. We agree with the comments in 

the preamble that simply renewing an insurance contract would not result in a loss of 

grandfathered status. 

With respect to changes in a provider network or a prescription drug formulary, we suggest that 

it would be impractical, if not impossible, to require that the plan lose grandfathered status when 

these changes occur because (1) the changes are happening continuously during the plan year, 

and (2) the plan sponsor often has no control over the changes. Most multiemployer plans that 

are self-insured retain a provider network and a pharmacy benefit manager to provide benefit 

administration services. The plan may contract for a general scope of services that outlines a 

specific kind of network or a certain level of formulary (e.g., expansive v. narrow) but the plan 

generally does not have any method by which to monitor routine changes in the networks or 

formularies. Consequently, the plan would not be able to control, or even know, when it would 

or would not retain grandfathered status. Obviously, fundamental restructuring of a formulary 

which would result in a clear reduction in benefits such as the elimination of an entire therapeutic 

category of drugs (i.e statins), simply because that category is high cost or high volume and not 

because of any evidenced based practice or safety indicators, would be a change in benefits about 

which the plan trustees would typically be notified and have the opportunity to act. However, we 

urge the Department to make it clear that modifications in response to medical effectiveness 

studies or as a result of the normal evolution of generally accepted care standards are acceptable. 

We also urge the Departments to conclude that a plan’s deliberate decision to switch from one 

preferred provider organization to another (with resulting change in some aspects of the provider 

network), to consolidate networks of a similar structure (reducing the number of PPOs from 

three to two, without a significant change in benefit design) or from one pharmacy benefit 

manager to another would not cause a loss of grandfathered status. 

We also note that the Departments have encouraged the use of value-based plan designs in the 

regulations concerning preventive care. Many multiemployer plans monitor network size as a 

way in which to control the quality and cost of health benefits. A network may expand or 
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contract as a method by which the plan sponsors attempt to control the quality of health care 

provided to participants and beneficiaries; however, the nature of the services available to the 

participants and beneficiaries does not change. They are still eligible for the same care. 

Similarly, plans may change incentives to utilize providers based on the need to provide a more 

narrow or expansive network in order to deliver services more effectively. These changes in 

participant incentives to utilize network providers should also not result in a loss of 

grandfathered status. 

Timing of Loss of Grandfathered Status 

The regulations provide for a delay in the loss of grandfathered status for insured collectively 

bargained plans until the expiration of the last collective bargaining agreement ratified prior to 

March 23, 2010. The regulations do not state when grandfathered status is lost. We encourage 

the Departments to provide guidance that if a group health plan loses its grandfathered status 

when the collective bargaining agreement expires, the plan must comply with the new 

requirements applicable to non-grandfathered plans at the beginning of the next plan year. 

The best way to illustrate this concern is by example. Suppose a collectively bargained plan has 

collective bargaining agreements (ratified prior to March 23, 2010), the last of which terminates 

on September 30, 2011. The plan is tested to determine whether it retains its grandfathered status 

when the agreement terminates, on September 30, 2011. If the plan fails the test (for example, 

there has been an increase in coinsurance in the interim) on September 30, 2011, it will not be 

able to immediately implement the new rules applicable to non-grandfathered plans. The new 

requirements are extensive and cannot be implemented overnight. The only reasonable manner in 

which to allow the plan to implement the new requirements is to provide that the plan becomes a 

non-grandfathered plan on the first day of the first plan year beginning on or after the loss of 

grandfathered status. 

Changing Issuers Before Termination of Last Collective Bargaining Agreement 

Under the regulations, insured collectively bargained plans will not lose their grandfathered 

status until at least the termination of the last collective bargaining agreement ratified before 

March 23, 2010. The preamble to the regulations states that, for insured collectively bargained 

plans, a change in issuers during the period of the agreement, by itself, would not cause a plan to 

lose its grandfathered status at the termination of the agreement. However, a change in issuers 

after the termination of that agreement terminates would trigger loss of grandfathered status. (75 

Fed. Reg. at 34542) 

A close reading of the interplay between subsection (f) (and its Examples 1 and 2) and 

subsection (a)(1)(ii) supports the preamble’s statement, but it would be helpful if the 

Departments stated this more explicitly in the regulations themselves. As many collective 

bargaining agreements last three to five years, it is important to know if a plan’s trustees are 

locked into staying with a particular issuer for the duration of the last agreement or may change 

issuers without losing grandfathered status when that last CBA terminates. While we recognize 

that the regulations provide that grandfathered status would be lost if the change in issuers 
12 

resulted in benefit changes of the types listed in subsection (g), the change in issuers in and of 

itself should not carry that result. It would also be helpful if the Departments clarified whether 

the same rule applies when the trustees add a new insured benefit option under the plan during 

the period of the agreement (e.g., adding a new PPO plan to the mix of coverage options 

available under the plan). 

Limited-Scope Dental and Vision Plans 

The grandfather regulations provide that the exceptions of ERISA section 732 and Code section 

9831 for very small plans (including certain retiree-only health plans), and for excepted benefits, 

remain in effect. Thus, ERISA section 715 and Code section 9815, as added by the Affordable 

Care Act, do not apply to such plans or excepted benefits. We urge the Departments to provide 

guidance clarifying that multiemployer plans with self-insured dental or vision benefits may treat 

these benefits as excepted benefits. 

Multiemployer plans generally provide extensive dental and vision benefits to participants and 

beneficiaries. Often, these benefits are self-insured and self-administered. The benefits are often 

paid based on a schedule of benefits, which is listed in the plan’s document and Summary Plan 

Description. In some cases, the plan is administered by a dental or vision service provider on an 

administrative services only (ASO) basis, but plan benefits are still designed by the board of 

trustees. 

In most cases, multiemployer plan participants do not contribute separately toward the cost of 

dental or vision coverage, and therefore do not make separate elections regarding that coverage, 

as employees in single-employer plans tend to do. The benefits provided by a multiemployer 

plan are generally determined by the plan’s Board of Trustees, not by a contributing employer. 

The employers’ responsibility is to provide contributions to the plan in accordance with the 

applicable collective bargaining agreement. The employers do not determine benefits or hold 

open enrollment periods during which participants choose from an array of benefit options. 

Multiemployer plans have typically considered dental and vision benefits as separate benefit 

programs, even if they are administered by the plan. The rules for such benefits are substantially 

different from the medical benefit rules, and often include limitations, exclusions or 

annual/lifetime limitations. The HIPAA statute (ERISA section 732 and Code section 9831) 

provides that dental and vision benefits are excepted benefits if they are provided under a 

separate policy, certificate, or contract of insurance, or are otherwise not an integral part of a 

group health plan. The HIPAA regulations interpret the phrase “not an integral part of the plan” 

to require that a self-insured dental or vision plan be separately elected and paid for in order to 

qualify for the exclusion from the group health plan mandates.2

 

Multiemployer plans that offer a self-insured dental or vision benefit will almost never qualify 

for the limited-scope exception under the Affordable Care Act if the dental or vision plan must 

be separately elected and paid for. Consequently, a self-insured benefit offered by a singleemployer plan could be considered an excepted benefit if it is separately elected and paid for by 

 

2

 See 29 CFR § 2590.732(c)(3). 
an employee, while the same self

considered an excepted benefit, solely because the employees do not have to pay out of pocket 

for that coverage under multiemployer plans. The regulations’ narrow def

scope benefit has produced extensive confusion, making it difficult to determine whether a 

particular dental or vision benefit qualifies. In addition, dental and vision service providers have 

been reluctant to interpret the rule for

products. For example, some multiemployer plans have been told that their dental service 

provider considers all dental plans to be excepted benefits and will not implement separate rules 

for a self-insured dental plan as opposed to an insured one. 

Benefit Package Definition 

Subsection (a)(1)(i) of the grandfather regulations states that “[t]he rules of this section apply 

separately to each benefit package made available under a group health plan.” While

regulations contain several examples of plans with multiple benefit packages, the regulations do 

not define or describe what a benefit package actually is. Multiemployer plans typically offer 

many types of benefits that are insured or administered by 

the fund itself. Some may offer different benefit plans based on the negotiated contribution rates. 

If participants are offered medical coverage through one carrier, hospital coverage through a 

separate carrier, and prescription drug coverage administered by a pharmacy benefit manager, is 

that one benefit package consisting of medical, hospital and prescription drug benefits, or is that 

three benefit options because each is administered or insured by a different entity?

particularly important, as trustees may need to adjust copayments for only one type of benefit 

e.g., the prescription drug benefit 

a loss of grandfathered status for the medical co

 

Conclusion 

Thank you for the opportunity to provide com

to provide any additional information that you might find useful.

13 

mployee, while the same self-insured benefit offered by a multiemployer plan could not be 

considered an excepted benefit, solely because the employees do not have to pay out of pocket 

for that coverage under multiemployer plans. The regulations’ narrow definition of a limited

scope benefit has produced extensive confusion, making it difficult to determine whether a 

particular dental or vision benefit qualifies. In addition, dental and vision service providers have 

been reluctant to interpret the rule for an ASO arrangement differently from their insured 

products. For example, some multiemployer plans have been told that their dental service 

provider considers all dental plans to be excepted benefits and will not implement separate rules 

dental plan as opposed to an insured one. 

Subsection (a)(1)(i) of the grandfather regulations states that “[t]he rules of this section apply 

separately to each benefit package made available under a group health plan.” While

regulations contain several examples of plans with multiple benefit packages, the regulations do 

not define or describe what a benefit package actually is. Multiemployer plans typically offer 

many types of benefits that are insured or administered by different entities or administered by 

the fund itself. Some may offer different benefit plans based on the negotiated contribution rates. 

If participants are offered medical coverage through one carrier, hospital coverage through a 

escription drug coverage administered by a pharmacy benefit manager, is 

that one benefit package consisting of medical, hospital and prescription drug benefits, or is that 

three benefit options because each is administered or insured by a different entity?

particularly important, as trustees may need to adjust copayments for only one type of benefit 

e.g., the prescription drug benefit – but need to know if changing only that benefit could result in 

a loss of grandfathered status for the medical coverage as well as the hospital coverage. 

Thank you for the opportunity to provide comments on this important issue. We will be pleased 

to provide any additional information that you might find useful.

Sincerely, 

Randy G. DeFrehn 

Executive Director 

insured benefit offered by a multiemployer plan could not be 

considered an excepted benefit, solely because the employees do not have to pay out of pocket 

inition of a limitedscope benefit has produced extensive confusion, making it difficult to determine whether a 

particular dental or vision benefit qualifies. In addition, dental and vision service providers have 

an ASO arrangement differently from their insured 

products. For example, some multiemployer plans have been told that their dental service 

provider considers all dental plans to be excepted benefits and will not implement separate rules 

Subsection (a)(1)(i) of the grandfather regulations states that “[t]he rules of this section apply 

separately to each benefit package made available under a group health plan.” While the 

regulations contain several examples of plans with multiple benefit packages, the regulations do 

not define or describe what a benefit package actually is. Multiemployer plans typically offer 

different entities or administered by 

the fund itself. Some may offer different benefit plans based on the negotiated contribution rates. 

If participants are offered medical coverage through one carrier, hospital coverage through a 

escription drug coverage administered by a pharmacy benefit manager, is 

that one benefit package consisting of medical, hospital and prescription drug benefits, or is that 

three benefit options because each is administered or insured by a different entity? This is 

particularly important, as trustees may need to adjust copayments for only one type of benefit – 

but need to know if changing only that benefit could result in 

verage as well as the hospital coverage. 

We will be pleased