1310 G Street, N.W. 

Washington, D.C. 20005 

202.626.4780 

Fax 202.626.4833 

August 16, 2010 

The Honorable Kathleen Sebelius 

Secretary 

U.S. Department of Health and Human Services 

The Honorable Hilda Solis 

Secretary 

U.S. Department of Labor 

The Honorable Timothy Geithner 

Secretary 

U.S. Department of the Treasury 

Attention: OCIIO-9991-IFC 

Room 445-G, Hubert H. Humphrey Building 

200 Independence Avenue, S.W. 

Washington, DC 20201 

Submitted via the Federal Regulations Web Portal, http://www.regulations.gov

Re: Comments on the Interim Final Rule Relating to “Grandfather” Status 

under the Affordable Care Act 

Dear Secretaries Sebelius, Solis, and Geithner: 

The Blue Cross and Blue Shield Association (“BCBSA”) appreciates the 

opportunity to provide comments to the Departments of Health and Human 

Services, Labor, and the Treasury (“the Departments”) regarding the Interim 

Final Rule for Group Health Plans and Health Insurance Coverage Relating to 

Status as a Grandfathered Health Plan Under the Patient Protection and 

Affordable Care Act (“Affordable Care Act” or “ACA”) (the “Rule”). 75 Fed. Reg. 

34538 (June 17, 2010). BCBSA represents the 39 independent Blue Cross and 

Blue Shield Plans (“Plans”) that provide health coverage to nearly 100 million – 

one in three – Americans. 

We are pleased to offer our comments in response to the Departments’ request 

for comments on the Rule as issued in the Federal Register on June 17, 2010. 
August 16, 2010 

Page 2 of 15 

Our comments include specific recommendations for changes to the Rule, as 

well as requests for clarification on particular areas of the Rule. 

In particular, we recommend the Departments provide greater flexibility to Plans 

so that certain activities – whether done in the regular course of business or 

required by federal or state law – do not cause the loss of grandfather status. 

BCBSA is concerned that some aspects of the Rule are restrictive with respect to 

changes in benefits and cost-sharing that will cause a group health plan or 

insurance policy to lose its grandfathered status. The Rule could also subject 

issuers to penalties for non-compliance with the ACA for actions that an 

employer or other plan sponsor may take without notifying the issuer. 

To address this issue, BCBSA recommends that the Departments modify the 

Rule to provide group health plans and issuers with greater flexibility and 

certainty as to benefit plan or coverage changes that may trigger a loss of 

grandfather status. This could be done by either eliminating or modifying the 

Rule’s provision regarding a decrease in employer contributions by more than 

five percent as triggering a loss of grandfather status given that an issuer may 

not know whether an employer has decreased its contribution rate below the 

level in effect on March 23, 2010. 

BCBSA also recommends that the Departments modify the Rule to allow the 

following actions without impacting grandfather status: 

• Changes to benefits or cost-sharing that are adopted pursuant to 

law, even if such changes would otherwise implicate the Rule’s 

restrictions on changes to benefits or cost-sharing; 

• Voluntary decisions by an individual policyholder to increase costsharing or reduce benefit coverage; 

• Issuance of a new policy by an issuer (or its affiliate) to the same 

policyholder for legitimate business reasons, where the benefits 

under the new policy are substantially the same as the benefits under 

the prior policy; 

• Adjustments to enrollee cost-sharing (including deductibles, 

copayments, and coinsurance) where the actuarial value of the plan or 

policy with respect to the plan (or insurer) and participant share of the 

cost would remain within five percent of the original value as of the date 

of the ACA’s enactment, and permitting changes to cost-sharing for 

non-essential benefits; 

• Changes from coinsurance to copayments, given that such a 

transition would be a benefit improvement for enrollees; 
August 16, 2010 

Page 3 of 15 

• Changes to prescription drug benefits and pharmacy networks; 

• Changes to plan or policy terms, such as dependent eligibility and 

medical treatment settings, where meaningful coverage for the benefit 

or condition is maintained; and 

• Changes to wellness programs’ provider or incentives. 

We also recommend that the Departments clarify that the “notice of grandfather 

status” required by the Rule may be provided annually as part of the group health 

plan or issuer’s summary plan description or enrollment materials, rather than in 

“any” communication regarding plan or policy benefits. 

BCBSA’s specific comments on these issues are set forth below. 

I. Decrease in Employer Contributions

Issue 

The Rule provides that a group health plan or health insurance coverage ceases 

to be a grandfathered plan if an employer (or employee organization) decreases 

its contribution rate “towards the cost of any tier of coverage for any class of 

similarly situated individuals...by more than 5 percentage points below the 

contribution rate for the coverage period that includes March 23, 2010.” 45 

C.F.R. § 147.140(g)(1)(v). The Rule does not address, however, whether – or 

the manner in which – this provision may apply with respect to an issuer of a 

grandfathered group health policy where the issuer has no knowledge as to 

whether a plan sponsor has decreased its contribution rate toward coverage. 

Issuers of group health plan coverage usually do not know when an employer 

changes its contribution rate. Rather, employers allocate the cost of coverage 

between themselves and their employees, and remit one monthly premium to the 

issuer without advising the issuer as to the allocation formula. And employers do 

not notify issuers of changes to the allocation formula. 

In the absence of clarification by the Departments, an issuer could be deemed 

non-compliant with ACA – and therefore subject to penalties under section 2723 

(as renumbered by the ACA) of the Public Health Service Act (“PHSA”) – for 

continuing to provide a grandfathered policy to an employer that has decreased 

its contribution rate by more than five percent, even if the issuer was not notified 

of such decrease. 
August 16, 2010 

Page 4 of 15 

Recommendation 

BCBSA recommends that the Rule provide that an issuer will not be deemed 

non-compliant with the ACA if it continues to offer a grandfathered policy to an 

employer or employee organization that has decreased its contribution rate 

toward any tier of coverage by more than five percent, where the issuer requires 

(through contract or otherwise) that the employer disclose the employer 

contribution rate and provide advance notice to the issuer of any change to such 

contribution rate, but the employer fails to do so. 

II. Changes Required By Law 

Issue 

The preamble to the grandfather Rule provides that “group health plans and 

health insurance issuers will not cease to be considered grandfathered if the plan 

sponsor or issuer makes changes to comply with Federal or State legal 

requirements[.]” 75 Fed. Reg. at 34544. However, the Rule is not specific 

regarding how changes to comply with law that involve reduced benefits or 

increased cost-sharing (including coinsurance) will be treated under the Rule, 

where the group health plan or issuer could otherwise comply with law by not 

making a change that implicates the Rule, or whether such changes would be 

covered under the good faith compliance period. 

An example of the confusion caused by the Rule is the way in which many group 

health plans and issuers adopted benefit changes between March 23 and June 

14, 2010, for purposes of complying with the Mental Health Parity and Addiction 

Equity Act (“MHPAEA”) and its accompanying regulations (which were applicable 

as of July 1, 2010). These changes included modification of cost-sharing 

requirements for mental health/substance abuse and medical/surgical benefits, 

which were adopted to satisfy the MHPAEA regulation’s “predominant/ 

substantially all” test, but which could otherwise exceed the parameters 

established by the Rule, which was not publically available until June 14, 2010. 

Further, it is entirely possible that Congress or a state could enact legislation in 

the future that – similar to MHPAEA – provides plan sponsors and issuers with 

options as to how to comply with the law. 

Recommendations 

The final rules should provide that any change in a group health plan or policy 

designed to comply with federal or state laws should not result in loss of 

grandfather status. The concept that group health plans or policies lose 

grandfather status due to changes in terms is based on the idea that if an 

employer or individual want different health benefits, the amended health benefits 

should be subject to the provisions of the ACA. However, where group health 
August 16, 2010 

Page 5 of 15 

plan or policy changes are required by law, employers or individuals did not 

make choices that should subject them to ACA requirements, so compliance with 

new laws should not cause loss of grandfather status. 

BCBSA also recommends that the grace period be extended from an end date of 

June 14 (the date of publication of the Rule) to September 23, 2010, during 

which members may return to a grandfathered plan if they unknowingly changed 

to a non-grandfathered plan. This approach is necessary because the rules were 

issued mid-June with comments due mid-August, but the implications of 

grandfathering are only now coming into focus. 

This language should be included in the actual text of the rules, not only in the 

preamble. Some courts hold that language included in the preamble is not 

entitled to deference by the courts1

, so including these provisions in the actual 

rule text will assure the Departments’ views are accorded proper deference by 

the courts. 

III. Disclosure of Grandfather Status

Issue 

As currently drafted, the Rule provides that a group health plan or issuer “must 

include a statement, in any plan materials provided to a participant or 

beneficiary...describing the benefits provided under the plan or health insurance 

coverage, that the plan or coverage believes it is a grandfathered health plan[.]” 

45 C.F.R. § 147.140(a)(2) (emphasis added). A literal reading of this provision 

would require group health plans and issuers to include the notice in each and 

every communication that it sends to participants, including explanation of benefit 

statements (“EOBs”), subrogation notices, and routine communications to 

participants. 

Recommendation 

The Rule should clarify that a group health plan or issuer’s disclosure obligation 

is satisfied by inclusion of the grandfather plan notice in the summary plan 

description (“SPD”) and/or annual enrollment or renewal materials. Given that 

the preamble to the Rule expresses the Departments’ view that the notice 

requirement would impose only a “one-time cost to group health plans and 

insurance issuers of preparing and distributing the grandfathered health plan 

disclosure,” and a “one-time hour burden” with preparing and reviewing the 

notice for inclusion in the “plan document,” 75 Fed. Reg. at 34554-56, this 

 

1

 See Langbecker v. Elec. Data Sys. Corp., 476 F.3d 299, 311 n. 22 (5th Cir. 2007) (no deference 

to footnote in preamble to regulations because it “...constitutes at best a comment on the 

regulations, and is not itself a regulation”). 
August 16, 2010 

Page 6 of 15 

clarification is appropriate to avoid a requirement that group health plans and 

issuers include the notice on any document they issue. 

The Departments should also clarify that the grandfather notice is not required to 

be included in the group health plan document or insurance policy itself, given 

that such a requirement could force issuers to re-file all of their policy and 

certificate forms with state insurance departments to incorporate the form notice, 

which is overly burdensome for both issuers and state regulators. Accordingly, 

the Rule should require only a stand-alone notice of grandfather status, which 

could be included in an SPD or enrollment or renewal materials. 

IV. Voluntary Decisions by Individual Policyholders to “Buy-Down” 

Coverage Should Not Trigger a Loss of Grandfather Status 

Issue 

It is common for policyholders in the individual market to voluntarily request that 

the issuer increase the policyholder’s deductible or other forms of cost-sharing 

(such as coinsurance, copayments and out-of-pocket maximums), or to decrease 

benefits by eliminating coverage for certain conditions. Policyholders initiate 

these requests for reduced coverage (which are commonly known as “buydowns”) to reduce their premiums, and they usually do so as a result of a 

significant change in the policyholder’s financial situation, such as the loss of a 

job. 

The Rule provides that a group health plan or policy will lose grandfathered 

status if, among other things, there is: 

a. The elimination of all (or substantially all) benefits to diagnose or treat a 

particular condition; 

b. Any increase in coinsurance above the level in effect on March 23, 2010; 

c. An increase in deductible, out-of-pocket maximum, or other fixed-amount 

cost-sharing that is more than medical inflation plus 15 percent (measured 

from March 23, 2010); or 

d. An increase in copayment in an amount greater than $5 increased by 

medical inflation, or medical inflation plus 15 percent (measured from 

March 23, 2010). 

45 C.F.R. § 147.140(g)(1)(i)-(iv). The Rule, however, does not address whether 

a benefit modification that is voluntarily initiated by a policyholder in the individual 

market, which would otherwise exceed the parameters established by the Rule, 

triggers a loss of grandfather status. A common example is when an individual 
August 16, 2010 

Page 7 of 15 

market policyholder drops a coverage that is no longer needed or appropriate, for 

example, maternity coverage for a woman who no longer wishes to have this 

coverage. 

Recommendation 

BCBSA recommends that the Departments modify the Rule to specify that 

grandfathered individual insurance coverage will not lose such status where the 

policyholder voluntarily initiates an increase in his or her cost-sharing (such as 

increasing the deductible, copayments, coinsurance or out-of-pocket maximum), 

or otherwise decreases benefits by eliminating coverage for certain conditions 

that are optional to such coverage. 

There are substantial policy reasons for issuing this clarification. Among other 

things, the change in coverage is voluntarily initiated by the individual 

policyholder who is covered by the insurance (i.e., it is not initiated by an insurer 

or an employer). Often, these changes are initiated for purposes of maintaining 

coverage at a lesser premium following the loss of a job or some other similar 

event. If a voluntary reduction in coverage triggers the loss of grandfather status, 

it would force the policyholder to either: (a) buy a new policy that is subject to the 

full array of the ACA’s insurance market reforms – which is likely to be higher in 

premiums than the grandfathered policy – at a time when the individual is facing 

considerable financial uncertainty and is trying to reduce his or her premiums; or 

(b) drop coverage altogether, which is contrary to the ACA’s goal of expanding 

coverage. If they drop coverage, these policyholders will not be eligible for the 

Pre-Existing Condition Insurance Plan established by the ACA for at least six 

months following their loss of coverage, given that individual coverage is 

“creditable coverage.” See ACA § 1101(d)(2). Moreover, these policyholders will 

not be eligible for federal subsidies available through the Exchanges until 2014. 

V. Issuance of Substantially Identical Coverage from an Issuer or its 

Affiliate 

Issue 

Issuers commonly issue new policies or certificates to the same policyholders 

(i.e., that are substantially the same as a previously issued policy or certificate) 

for legitimate business reasons. For example, an issuer may transfer a book of 

business to a newly established subsidiary. Or, an issuer may seek to 

consolidate duplicate policy forms into a smaller number of nearly identical policy 

forms for administrative purposes. In these circumstances, a new policy or 

certificate may be issued to the policyholder that details the name as the issuer 

(or its affiliate), a new policy or certificate number, and certain other “ministerial” 

matters (such as the address to which notices should be sent, etc.), but the 
August 16, 2010 

Page 8 of 15 

benefits under the new policy or certificate are virtually identical to the benefits 

offered under the transitioned policy. 

The Rule defines a “grandfathered health plan” as “coverage provided by a group 

health plan, or a group or individual health insurance issuer, in which an 

individual was enrolled on March 23, 2010 (for so long as it maintains that status 

under the rules [of the Rule].” 45 C.F.R. § 147.140(a). And the Rule further 

provides that “if an employer or employee organization enters into a new policy, 

certificate, or contract of insurance after March 23, 2010 (because, for example, 

any previous policy, certificate, or contract of insurance is not being renewed), 

then that policy, certificate, or contract of insurance is not a grandfathered health 

plan with respect to the individuals in that group health plan.” 45 C.F.R. § 

147.140(a)(ii). The Rule does not address, however, whether grandfathered 

status may be maintained where a new policy or certificate of insurance is issued 

for legitimate business reasons and where the coverage is issued by the same 

insurer (or an affiliate), to the same policyholder, and where the coverage is 

substantially the same. 

Recommendation 

BCBSA recommends that the Departments modify the Rule to clarify that where 

a new policy or certificate is issued by an issuer (or its affiliate) for legitimate 

business reasons, and pursuant to which the issuer (or affiliate) continues to 

cover the same policyholder and to offer the same benefits (or benefits that are 

within the parameters established by the Rule), the policy or certificate is treated 

as effectively continuing the same coverage that was in force on March 23, 2010, 

and retains its status as a grandfathered health plan. In these circumstances, 

the same policyholder is covered by an entity that is the same issuer (or affiliate) 

and the benefits available under the policy or certificate are identical or 

substantially identical (as permitted by the Rule) to the coverage that was in 

effect on March 23, 2010. We note that, in other circumstances, regulators have 

recognized that similar changes should not disqualify an insurance policy from 

eligibility for grandfather status. See, e.g., Dep’t of Labor (“DOL”) Adv. Op. 2000-

12A (October 4, 2000) (amendments to group annuity contracts to accommodate 

changes in a plan sponsor’s corporate structure are not material, and will not 

disqualify such policies from their status as “transition policies” under DOL 

regulation issued pursuant to ERISA § 401(c)(1)). 

VI. The Rule Should Permit Greater Flexibility With Respect to CostSharing 

Issue 

The Rule limits a plan sponsor or issuer’s ability to modify cost-sharing provisions 

in the group health plan or coverage without triggering a loss of grandfather 
August 16, 2010 

Page 9 of 15 

status. Specifically, the Rule provides, in pertinent part, that a group health plan 

or policy will lose its grandfathered status if the sponsor or issuer makes any of 

the following changes to cost-sharing: 

a. Increases coinsurance (or another percentage cost-sharing 

requirement) above the level at which it set on March 23, 2010; 

b. Increases fixed-amount cost-sharing requirements other than 

copayments, such as a deductible or an out-of-pocket limit, by a total 

percentage (measured from March 23, 2010) that is more than the sum 

of medical inflation plus 15 percent; or 

c. Increases copayments above the level in effect on March 23, 2010, by 

an amount that exceeds the greatest of (i) the sum of medical inflation 

plus 15 percent, or (ii) $5 increased by medical inflation. 

45 C.F.R. § 147.140(g)(1)(ii)-(iv). In the Preamble to the Rule, the Departments 

note that: 

[M]any plan sponsors and issuers make changes to the terms of 

plans or health insurance coverage on an annual basis: Premiums 

fluctuate, provider networks and drug formularies change, employer 

and employee contributions and cost-sharing change, and covered 

items and services may vary. Without some ability to make some 

adjustments while retaining grandfather status, the ability of 

individuals to maintain their current coverage would be frustrated, 

because most plans or health insurance coverage would quickly 

cease to be regarded as the same group health plan or health 

insurance coverage in existence on March 23, 2010. 

75 Fed. Reg. at 34546. Notwithstanding this recognition, however, the Rule 

adopts unnecessarily restrictive limits to cost-sharing that severely limit a plan 

sponsor’s ability to control costs, and which do not accurately reflect the factors 

that plan sponsors and issuers take into account when considering benefit design 

issues. 

Among other things, the Rule’s limits on changes to cost-sharing are all based 

upon the rate of medical inflation. The rate of medical inflation, however, does 

not take into account the full scope medical cost trend, or benefit, utilization, new 

technologies and demographic changes that may significantly increase a group 

health plan’s costs above the rate of medical inflation – especially when 

measured from March 23, 2010, as the Rule requires, rather than annually.2

 

2

 The Rule requires that changes to cost-sharing be measured from March 23, 2010, rather than 

annually, given that “the effect of a one-time allowance (15 percent of the original, date-ofenactment level plus medical inflation) would diminish over time insofar as it would represent a 
August 16, 2010 

Page 10 of 15 

Recommendations 

BCBSA recommends that the Departments modify the Rule to eliminate the 

prohibition on any changes to coinsurance, and the prohibition on changes to 

deductibles, out-of-pocket maximums, or copayments that exceed the 

parameters set forth in the Rule. Instead, the Departments should permit 

changes to a policy or group health plan’s cost-sharing provisions (i.e.,

copayments, deductibles, co-insurance) without the loss of grandfather status by 

a greater amount that would ensure that normal changes made by group health 

plans and issuers to mitigate premium increases, perhaps by using historical 

averages for benefit trends rather than CPI+15. In addition to changes in costsharing, we request that the guidance permit some changes to a policy’s benefits 

that would not substantially alter the benefits provided under the coverage on a 

year-over-year basis. 

The Departments rejected an actuarial equivalence standard for purposes of the 

Rule, on the grounds that such a standard could permit a group health plan or 

issuer “[to] make fundamental changes to the benefit design,” and because “the 

complexity involved in defining and determining actuarial value” would require the 

Departments to promulgate very detailed prescriptive rules.” 75 Fed. Reg. at 

34547. 

In developing a final regulation, the Departments should consider a standard that 

better reflects historical benefit cost trends, and the factors that should comprise 

such a standard. There is a significant need to correct for the difference between 

CPI and the benefit cost inflation if grandfathering is to have value. BCBSA 

would be pleased to work with the Departments in developing such a standard. 

We also recommend that the Departments modify the Rule to expressly permit 

group health plans and issuers to move from coinsurance to copayments for 

specific benefits or services without loss of grandfather status, given that 

participants generally view such a modification as a significant benefit 

improvement. 

Additionally, the Departments should amend the Rule to provide that changes to 

cost-sharing with respect to non-essential benefits will not trigger a loss of 

grandfather status. In enacting the ACA, Congress was clearly focused on 

ensuring that participants had access to coverage for essential benefits, as 

defined by ACA § 1302. Given that non-essential benefits were not a subject of 

Congressional concern due to the incidental nature of such benefits, there is no 

reason for the Departments to treat cost-sharing changes as to non-essential 

benefits as implicating the group health plan’s or coverage’s grandfather status. 

 diminishing fraction of the total level of cost-sharing with the cumulative effects of medical 

inflation over time.” 75 Fed. Reg. at 34546.
August 16, 2010 

Page 11 of 15 

VII. Changes to Prescription Drug Formularies and Benefits Should Not 

Cause a Loss of Grandfather Status

Issue 

In the Rule, the Departments invite comments as to whether changes to a group 

health plan’s or coverage’s prescription drug formulary should trigger a loss of 

grandfather status, and, if so, “what magnitude of changes would have to be 

made” to trigger such a loss. 75 Fed. Reg. at 34544. 

Recommendations 

BCBSA respectfully submits that changes to a prescription drug formulary should 

not trigger a loss of grandfather status. 

Restricting a plan sponsor’s or issuer’s ability to make changes to its prescription 

drug formulary – or to its prescription drug benefit program in general – would 

severely restrict the sponsor or issuer’s ability to control a key component of 

rising health care costs with no appreciable benefit to group health plan 

participants or to insured individuals. Pharmacy benefits are particularly dynamic 

and must be modified to reflect constant changes in the industry, including 

changes to formularies for safety purposes as well as to accommodate changes 

in brand to generic drug status, and the needs of group health plan participants 

or of insured individuals. For example, new drugs are continuously introduced to 

the market, other drugs may be removed from the market, and lower-cost generic 

equivalents regularly become available. There is no reason why formulary 

changes to reflect the addition of new drugs, the removal of certain drugs, or the 

availability of generic or therapeutic equivalents should trigger a loss of 

grandfather status. 

We also recommend that changes to a group health plan’s or coverage’s 

pharmacy network should not trigger a loss of grandfather status. Group health 

plans or issuers may be required to change pharmacy networks if a large 

pharmacy provider discontinues its participation in the network, which requires 

the group health plan or issuer to look for an alternate network that can provide 

geographically convenient access to group health plan participants or insured 

individuals. Or, a group health plan or issuer may change networks as a result of 

securing more favorable reimbursement rates with a new network. In negotiating 

changes in a pharmacy network, group health plans and issuers have an 

inherent incentive to ensure that participants have convenient geographic access 

to contracted pharmacies, given that a failure to provide such access would 

defeat the group health plan’s or issuer’s attempt to steer a greater percentage of 

participants to contracted providers. 
August 16, 2010 

Page 12 of 15 

Further, many group health plans and issuers also use independent pharmacies 

that may relocate or close, triggering a network change under the Rule. These 

kinds of routine adjustments should not cause loss of grandfather status. 

Accordingly, the Departments should recognize in the Rule that any change to a 

pharmacy network will not cause a loss of grandfather status. 

VIII. Changes to Provider Networks Should Not Trigger Loss of 

Grandfather Status 

Issue 

The Departments also requested comments as to whether changes to a group 

health plan’s or issuer’s provider network should trigger a loss of grandfather 

status, and, if so, “what magnitude of changes would have to be made” to trigger 

such a loss. 75 Fed. Reg. at 34544. 

Recommendations 

BCBSA respectfully submits that changes to a provider network should not cause 

the loss of grandfather status. 

Plan sponsors and issuers work diligently to maintain stable provider networks 

that provide participants with convenient access to physicians and hospitals and 

other providers. Nevertheless, some change in the composition of a network is 

inevitable, given that institutional providers merge, modify the services they 

provide, or exit particular markets. Likewise, physicians and other professionals 

may close their practices, retire, relocate, or die. These routine changes in 

provider networks are commonplace, and do not have a significant impact on a 

participant’s access to health care providers or services. Accordingly, routine 

changes to provider networks, such as provider turnover, should not cause a 

group health plan or coverage to lose grandfather status. 

A group health plan or coverage should not lose grandfather status based on a 

change in network providers. As noted above in connection with pharmacy 

benefits, group health plans and issuers may modify provider networks for a 

number of reasons: a geographically significant provider may discontinue its 

participation in the network, forcing the group health plan or issuer to seek an 

alternate provider that can provide services to participants; or a group health plan 

or issuer may negotiate more favorable reimbursement rates with a new provider 

network that will result in cost-savings for the group health plan or issuer (and 

participants, in the form of lower premiums and cost-sharing). But as is the case 

with pharmacy networks, group health plans and issuers have an inherent 

incentive and obligation to assure that participants have convenient access to 

network providers, given that a failure to provide such access would defeat the 
August 16, 2010 

Page 13 of 15 

group health plan’s or issuer’s attempt to steer a greater percentage of 

participants to network providers. 

Accordingly, BCBSA submits that any changes to a provider network should not 

trigger a loss of grandfather status, where the network change does not alter the 

policy or group health plan’s benefit design. 

IX. Changes to Plan or Policy Terms that Do Not Eliminate Benefits 

Should Not Trigger a Loss of Grandfather Status

Issue 

The Departments invited comments on changes to group health plan or 

insurance coverage that would cause a loss of grandfather status. 75 Fed. Reg. 

at 34544. 

Recommendations 

BCBSA recommends that the Departments modify the Rule to clarify that 

changes to a group health plan’s or coverage’s eligibility criteria or plan or policy 

terms that do not eliminate all or substantially all benefits to treat a particular 

condition will not cause the group health plan or coverage to lose grandfather 

status. For example, it is common for group health plans and issuers to alter 

their dependent eligibility criteria under group or individual health plans, including 

the addition of a “tier” structure (i.e., moving from “employee” to “employee +1” 

“employee + 2”, etc.). 

X. Changes to Plan or Policy Wellness Programs Should Not Cause the 

Loss of Grandfather Status

Issue 

The Rule does not address whether changes to a wellness program will trigger 

the loss of grandfather status. Given that the incentives and benefits offered by 

wellness programs may frequently change to address medical conditions and 

lifestyles of group health plan participants or insured individuals, an expansive 

interpretation of the Rule could lead to the conclusion that a change to a wellness 

program’s incentives or benefits may trigger the loss of grandfather status for the 

entire group health plan or coverage. Such an interpretation of the Rule would 

be contrary to clear Congressional intent. Wellness programs are dynamic 

programs that are subject to revisions, as plan sponsors and issuers modify such 

programs to increase participation, and incentivize behavioral changes (such as 

increasing the number of non-smokers). Wellness programs are often offered by 
August 16, 2010 

Page 14 of 15 

specific companies and frequently are offered outside of a group health plan or 

group health insurance coverage. 

Under HIPAA, wellness programs are permitted to provide rewards based on 

health status, provided that the reward is limited to 20 percent of the cost of 

coverage. For example, a wellness program may provide an additional vacation 

day or deductible credit of a limited amount for employees who do not smoke or 

who have favorable cholesterol levels. These programs must comply with a 

number of other requirements, including providing the same reward to those who 

cannot meet the standard for medical reasons. The HIPAA regulations expressly 

use premium and deductible differences as examples of permitted rewards. 

These rewards tend to be temporary in nature (e.g., they are provided for as long 

as the employee remains smoke-free, or may be modified to further incentivize 

changes in behavior). Given the ever changing nature of wellness program 

providers and incentives, changes to such programs do not appear to fit within 

the more permanent, substantive changes contemplated by the Rule. 

The Rule provides that “[t]he elimination of all or substantially all benefits to 

diagnose or treat a particular condition causes a group health plan or health 

insurance coverage to cease to be a grandfathered health plan. For this 

purpose, the elimination of benefits for any necessary element to diagnose or 

treat a condition is considered the elimination of all or substantially all benefits to 

diagnose or treat a particular condition.” 45 C.F.R. § 147.140(g)(1)(i). The Rule 

also provides that a change in deductible or out-of-pocket maximum that is 

greater than medical inflation plus 15 percent (measured from March 23, 2010), 

or a change in copayment that is greater than (a) medical inflation plus 15 

percent or (b) $5 plus medical inflation (measured from March 23, 2010) will 

cause the group health plan or coverage to lose grandfather status. 

Recommendations 

BCBSA recommends that the Rule recognize the unique features of wellness 

programs and clarify that changes to wellness program providers or incentives 

will not trigger a loss of grandfather status. In enacting the ACA, Congress 

encouraged plan sponsors and issuers to offer wellness programs. For example, 

the ACA raises the cap on the allowed value of a wellness program reward from 

20 percent to 30 percent of the cost of employee coverage, and it gives 

discretion to the Departments to increase the reward value up to 50 percent. 

PHSA § 2705(j)(3)(A). The ACA also established reporting requirements for 

certain group health plans and insurers that implement wellness and health 

promotion activities (PHSA § 2717), and it established a grant program to assist 

employers in establishing and evaluating workplace wellness programs. ACA § 

10408. 

BCBSA also recommends that changes to utilization review programs (e.g.,

preauthorization) – when there is no change in benefits – should not cause a loss 

of grandfather status. These programs are dynamic and are designed to 
August 16, 2010 

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manage utilization of health care services. This should include changes to both 

in and out of network benefits if there is no change to contracts. 

* * * 

We appreciate your consideration of our comments and recommendations on the 

Rule. We look forward to continuing to work with the Departments on 

implementation issues related to the ACA. If you have any questions, please 

contact Kris Haltmeyer at (202) 626-4814 or at kris.haltmeyer@bcbsa.com. 

Sincerely, 

Alissa Fox 

Senior Vice President 

Blue Cross Blue Shield Association