Office of Health Plan Standards
And Compliance Assistance

August 13, 2010

Page 5

But I would want to point out page 100 of the Senate bill”. You know,
why were the unions so happy to jump on this? You know, unions are
beginning to look at their health insurance policies as—some of them are—
as a massive debt, and they'd like to get rid of it, and we know that they'd
be unable to do this under the bill. But people will be glad to know, people
who are in unions who are retired and have union health insurance, they’ ll
be glad to know that they won't lose their union-negotiated health care, at
least not until the date on which the last of the collective bargaining
agreements relating to the coverage terminates.

So pcople will be able to keep, if you’re in a union, or, Madam Speaker,
people are in a union or they have retired and they have union health care,
they can be assured they do not lose their health care—at least not until
the date on which the last of the collective bargaining agreements
relating to the coverage terminates. And then, of course, once a new union
contract has to be negotiated, all bets are off.

So that should provide some comfort if there is a year or two left ona
collective bargaining agreement, then, they can he comforted. They have
got that insurance if they like it, and they can keep it until the collective
bargaining agreement terminates.

156 Cong. Rec., H!513 (daily ed. March 16, 2010) (statement of Rep. Gohmert,
emphasis added). Rep. Gohmert used the terms “health insurance” and “health care”
interchangeably, indicating that he understood Section 1251(d) to apply to aif union-
negotiated health care—not just fully-insured union-negotiated health care. (His remarks
also indicate that he believed Section 1251(d) granted a deferred effective date to
collectively-bargained health carc, which as explained above, is the most straightforward
reading of it.)

Further, reading Section 1251(d) to apply only to fully-insured plans leads to
absurd and unfair results. Because fully-insured plans pay premiums, rather than benefit
claims, the costs of operating the plans are more stable and such plans have more
flexibility to respond to new legislation that imposcs additional costs and burdens on the
plan. Insurance policies typically set a premium rate for one year, followed by specified
percentage increases to the rate for any subsequent years of the policy, and contain
provisions that allow the premium rates to be renegotiated when new legal obligations
materially change the performance obligations of the insurer. Where the policy does not

2

Page 100 of the Senate bill published by the GPO, the only version that would have been
available at the time of these remarks, included Section 1251(d).


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And Compliance Assistance
August 13, 2010

Page 8

willing to accept a modest increase in the coinsurance, the plan sponsor cannot make this
change without losing the grandfathered status for the part-time plan, which it is not
willing to do until there is a clearer picture of what that will mean as [ar as increased
administrative burdens and costs, and whether it could obtain a waiver of the annual limit
restrictions for this coverage under still-to-be-issued regulations. Therefore, this plan
sponsor is considering terminating part-time coverage, all because it is not able to
continue to offer the coverage it has offered to this point. The plan sponsor is not worried
about its ability to continue to attract qualified part-time employees without offering
health benefits, because unemployment is so high and few of its competitors offer much
in the way of health insurance to part-time employees. ‘The plan sponsor’s dilemma may
have been alleviated had the regulations on how and when grandfathered status is lost
been drafted so as to give more flexibility to redesign the plan in order to respond to the
few provisions of the Act that apply to the existing plan without becoming subject to all
the other applicable provisions of the Act.

Ata minimum, grandfathered status should not be lost unless significant changes
to the plan are made, with the standard for what is “significant” being a change that
affects more than a specified percentage of participants, deceases their access to health
care by more than a specilied percentage, or increases their overall costs of being covered
by more than a specified percentage above medical inflation. On this last point, the
determination of whether the cmployee’s cost of being covered has increased too much
should be based on the aggregate of all changes to monthly premiums, coinsurance and
copayments, rather than a change in any single cost-sharing item.

I appreciate your consideration of these issues. Thank you.

Very truly yours,

Joni S. Jacobs

JSJ:oc


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And Compliance Assistance
August 13, 2010

Page 4

care laws.' Yet despite language indicating a deferred effective date, as reflected by the
phrase “shall not apply until,” the Departments have ignored Congress’s intent and
imposed the costs and burdens of complying with the Act on collectively-bargained plans
coverage before the underlying collective bargaining agreements expire and can be
renegotiated. This makes no sense and is manifestly unfair.

Finally, the deferred effective date for collectively-bargained coverage should
apply to all collectively-bargained coverage, not just fully-insured collectively-bargained
coverage. The Departments have noted that Section 1251(d) refers only to “health
insurance coverage” and not to group health plans, and thus have determined that
Congress did not mean to include self-insured collectively-bargained plans. See 75
Fed.Reg. No. 116, p. 34542. Thus, they drafted the regulations to apply only to fully
insured collectively-bargained coverage. See, ¢.g., 29 CFR § 2590.715-1251(1)

As many commentators have noted, the language of Section 1251(d) differs
significantly from other deferred effective date provisions Congress has enacted for
collectively-bargained plans in the past. However, it does not make sense to read “health
insurance coverage” to reflect an actual intent to exclude self-funded collectively-
bargained plans. The only time Section 1251(d) was discussed on the floor of either the
Senate or the House, it was clearly intended to apply to all collectively-bargained health
coverage:

, In issuing regulations governing the provision of preventive care pursuant to Section

2713 of the Public Health Service Act, added by Section 1001 of the Act, the Departments
resolved ambiguous statutory language without hesitating to consider unstated policy
considerations:

Section 2713(b)(1) refers to an interval between “the date on which a
recommendation described in subsection (a)(1) or (a)(2) or a guideline under
subsection (4)(3) is issued and the plan year with respect to which the requirement
descried in subsection (a) is effective with respect to the service described in such
recommendation or guideline. While the first part of this statement does not
mention guidelines under subscction (a)(4), if would make no sense to treat the
services covered under (a)(4) any differently than those in (a)(1), (a)(2) and (a}(3).
... there is no plausible policy rationate for treating them differently.

75 Fed. Reg. No. 137, p. 41729, ft. 4 (emphasis supplied), Here, it makes no sense and there is
no plausible policy rationale to treat Section 1251(d) as doing anything other than giving a
deferred effective date for collectively-bargained plans as has been traditionally enacted by
Congress in other legislation aflecting group health plans.


Office of Health Plan Standards
And Compliance Assistance
August 13, 2010

Page 6

contain such a provision, the insurer, not the plan, bears the costs of complying with new
legislation. In either case, even where contribution rates are locked in during the life of
the underlying collective bargaining agreements, there is less risk that new legislation
will threaten the financial security of a fully-insured collcctively-bargained plan.

By contrast, self-insured collectively-bargained plans have less flexibility to
respond to new legislation, and face a greater risk that such legislation will financially
devastate the plan. The increased costs and burdens imposed by new legislation are
borne solely by them until the underlying collective bargaining agreements can be
renegotiated—they cannot be shifted to contributing employers by increasing
contribution rates, and they cannot be shifted to employees by reducing benefit levels or
increasing coinsurance, co-pays and other cost-shifting mechanisms. The reserves of the
plans are quickly drained, risking insolvency and termination of the plan all together. If
anything, self-insured collectively-bargained plans are more in need of deferred effective
dates than fully-insured collectively-bargained plans.

If the goal of the Act was to extend health coverage to more Americans, while
allowing everyone Lo keep the coverage they currently have, it makes no sense to
interpret Section 1251(d) in a way that it threatens existing coverage for millions of
employees covered by self-insured collectively-bargained plans.°

I respectfully request that the Departments redraft the regulations, especially 29
CFR § 2590.715-1251(1) and the corresponding regulation in the LRS and DHHS
regulations, so as lo implement what Congress intended and what makes the most sense
policy-wisc: a deferred effective date for all collectively-bargained coverage, whether
self-insured or fully-insured.

2. Section 2590.715-1251(g) is overbroad and needlessly complex.

It cannot be gainsaid that in extolling the virtues of the Act, various members of
Congress, the White House, and even the regulators themselves, made repeated
statements indicating that Americans who were happy with their coverage would be able

3 According to The Kaiser Family Foundation and Health Research & Educational Trust,

57% of employees receive their health coverage through sell-insured plans in 2009. Employer
Health Benefits Annual Survey, Section 10, Plan Funding (KFE/HRET 2009). According to the
U.S. Department of Health and Human Services, Agency for Health Care Research and Quality’s
Medical Expenditure Panel Survey of 2009, where there is a union presence employers are far
more likely to offer health coverage through self-funded plans rather than fully-insured plans
(70.7% vs. 29.3%). This data indicates that a large percentage of employces get their health care
coverage through self-insured collectively-bargaincd plans.


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Reply to Washington

August 13, 2010

Office of Health Plan

Standards and Compliance Assistance
Employee Benefits Security Administration
Room N-5653

U.S. Department of Labor

200 Constitution Avenuc, NW
Washington, DC 20210

Attn: RIN 1210-AB42

Re: Comments on Interim Final Rules for Group [Tealth Plans and Iealth
Insurance Issucrs Relating to Status as a Grandfathered Health Plan Under
the Patient Protection and Affordable Care Act
Issued June 17, 2010, Fed. Reg, Vol. 75. No. 116

‘Yo Whom It May Concern:
1 represent and work with Taft-Hartley welfare benefit funds that provide welfare
benefits to tens of thousands of employees pursuant to collective bargaining agreements

in the retail grocery and other industries.

I write to comment on the recently issued regulations enacting Section 1251 of the
Patient Protection and Affordable Care Act (“the Act”).

1, Section 2590.715-1251(f) should reflect the deferred effective date for
collectivcly-bargained health coverage intend by Congress in Section 1251(d).

Section 1251, entitled, “Preservation of Right to Maintain Existing Coverage,”
was included in the first draft of the Senate health care reform bill. Throughout the
legislative process, Subparagraphs (b), (c), (d) and (e) remained cxactly the same—their
language was never changed. Only Subparagraph (a) was changed, first to add
subsection (3) via the amendments to the Senate bill, and second to add subsection (4) via
the House reconciliation bill.


Oftice of Health Plan Standards
And Compliance Assistance
August 13, 2010

Page 7

to keep it under the new law. Section 1251 reflects Congress's intent to exempt existing
health plans from the Act, with limited exceptions, and is silent on whether, or in what
circumstances, a plan in existence on the date of cnactment would ever become subject to
the other provisions of the Act.

Yet the Departments have adopted a complex regulatory scheme for determining
how and when “grandfathered status” is lost. ‘The need to monitor whether such status
has been lost, in and of itself, will significantly increase the administrative expenses ol a
plan, especially a plan that (like most) offers different benefit levels for various groups of
employees (for example, full-time versus part-time coverage, or single versus family
coverage). Changes to the benefits offered or costs of the plan to employees alone can
cause loss of grandfathered status, even if those changes are not significant.’ The
practical result will be that most, if not all, health plans will become subject to the full
Act in a few years. This contradicts the many public statements of Administration
officials that the Act would allow Americans to kecp the coverage they already had.
Indeed, a recent study by Hewitt Associates indicates that nine out of 10 compunies
expect to lose grandfathered status for their plans by 2014. Fifty-one percent of sclf-
insured plans expect to lose it in 2011, and another 21 percent of self-insured plans
expect to lose it in 2012.

A lurther, perhaps unintended consequence, of this complex regulatory scheme
will be that many existing health plans could terminate rather than take on the costs and
burdens of complying with the Act. Por example, one self-insured plan I work with is
considering dropping coverage lor part-time employees all together. Under the
regulations as drafted, a plan loses its grandlathered status if it increases an individual's
coinsurance requirement, no matter how modest the increase [29 CFR § 2590.715-
1251(g)¢1)(ii)], yet under other regulations issued by the Departments, plans that
currently set lifetime or annual limits on benefits may no longer apply them. (See, ¢.g.,
29 CFR § 2590.714-211,)

‘This particular plan currently offers limited health benefits to part-time employees
with a modest monthly premium, a fairly standard 80-20 coinsurance, and standard
copayments, but with an annual limit of $50,000. In the last plan year, less than 1% of
participants exceeded the annual limit. ‘he plan sponsor does not believe it can afford to
absorb the cost of providing unlimited coverage to part-time employees without being
able to shift at least some of the increased cost to employees. Even if the employees were

* For example, climination of coverage for a specific condition, no matter how obscure or how
little utilized such coverage hus been in the past, will cause a loss of grandfathered status. See
Section 2590.715-1251(g)\(1)(i).


Office of Health Plan Standards
And Compliance Assistance
August 13, 2010

Page 2

Subparagraph 125 1(a), entitled “No Changes ‘lo Existing Coverage,” provides that
nothing in the Act requires a person to drop the health insurance coverage or group health
plan he had at the date of enactment, and that the provisions of Subtitle A and C do not
apply to group health plans and health insurance coverage in existence at the time of
enactment, except as set forth in subsections (3) and (4). Subsections (3) and (4)
delineate which specific provisions of the Act apply, and when, to “grandfathered health
plans,” as defined in subparagraph 1251(e).

By contrast, Subparagraph 1251(d), entitled “Effect on Collective Bargaining
Agreements,” provides in relevant part:

In the case of health insurance coverage maintained pursuant to one or
more collective bargaining agrecments between employee representatives
and one or more employers that was ratified before the date of enactment of
this Act, the provisions of this subtitle [Subtitle C] and subtitle A (and the
amendments made by such subtitles) shall not apply until the date on
which the last of the collective bargaining agreements to the coverage
terminates.

(Emphasis supplied.)

The Departments have interpreted the above language to mean that there is no
deferred eflective date for collectively-bargained coverage: instcad, the provisions of
Section 1251(a) apply Lo collectively-bargained coverage the same as for all other
grandfathered plans, with the only effect of a collective bargaining agreement’s
expiration date being to provide a date on which a determination must be made as to
whether the collectively-bargained coverage’s grandfathered status has been lost due to
changes made in the interim. Under this reading, despite the express language that the
Act “shall not apply until” the last existing collective bargaining agreement terminates,
the Departments have interpreted Section 1251(d) to mean that the Act does apply before
the last collective bargaining agreement terminates. This interpretation is manifestly
contrary to the language of the statute.

The Departments’ interpretation is based on their determination that collectively-
bargained coverage is included in the definition of “grandfathered health plans.” See 75
Fed. Reg. No. 116, p. 34543. That is undoubtedly the case, but it does not end the
inquiry. Rather, the Departments must go further to determine the meaning of the
language in Section 1251(d) that the Act shall not apply to collectively-bargained
coverage until after the last collective bargaining agreement terminates.


Office of Health Plan Standards
And Compliance Assistance
August 13, 2010

Page 3

The most logical, straight-forward way to read Section .1251(d) in harmony with
the other provisions of Section 1251 and giving effect to the language of them all, is to
interpret Scction 1251(d) as carving out a subset of grandfathered health coverage that is
collectively bargained, and setting an effective date for this subset that differs from that
contained in subparagraph (a). That is, once the last underlying collective bargaining
agrecment terminates, those provisions of the Act otherwise applicable to grandfathered
coverage also apply to collectively-bargained grandfathcred coverage; if after the last
underlying collective bargaining agreement terminates the collectively-bargained
coverage loses its grandfathered status, then the Act applies to it as it does for all other
non-grandfathered coverage. This interpretation of Section 125i(d) is just as reasonable
as the onc given to it by the Departments, and far more plausible in light of the policy
considerations discussed below.

‘The Departments have based their interpretation on the fuct that other, rejected,
versions of the health care reform law expressly provided for a deferred effective date for
collectively-barguined coverage, whereas in their view, Section 1251(d) does not. See 75
Fed. Reg. No. 116, p. 34542-43. But what can the phrase “shall not apply until” in
Section 125 1(d) reasonably mean other than a deferred effective date? While Section
1251(d)’s language may differ from other rejccted versions of the health care reform law,
the Departments’ interpretation distorts that key phrase into nearly meaningless
surplusage.

Further, the Departments’ interpretation leads to illogical and absurd results and
manifest unfairness. Traditionally when enacting changes to health care laws, Congress
has provided deferred effective dates for collectively-bargained health coverage. The
reason for this is inherent in the nature of collectively-bargained coverage, which
gencrally have limited flexibility to respond to the new law during the life of the
underlying collective bargaining agreements. These benefit plans are locked into
particular benetlil schemes and funding sources during the life of the underlying collective
bargaining agreements, and generally cannot adjust their terms and funding sources until
those agreements are renegotiated to account for the costs and burdens associated with
the new legal scheme. For this reason, Congress provided deferred effective dates for
collectively-bargaincd health coverage when enacting ERISA. IITPAA, and most recently
MHPAEA.

With the Act, Congress made sweeping changes to how existing health coverage
must operate, and there is no logical reason to think that Section 1251(d) was not
intended to enact a deferred effective date for collectively-bargained coverage as
Congress has traditionally done when enacting other, less sweeping changes to health