Don Woodard, CLU
Blake Woodard, CLU

Suite 600

August 16, 2010

Ms. Phyllis C. Borzi
Office of Health Plan Standards and Compliance Assistance
Employee Benefits Security Administration

Room N-5653 " A
U.S. Department of Labor Via eS AG dole SCAI251.
200 Constitution Ave NW 8

Washington, DC 20210

Attention: RIN 1210-AB42
Grandfathered Health Plan Rules

Dear Ms. Borzi:

The proposed Grandfathered Health Plan Rules (“Rules”) contain a serious error in Sec.
147.140(a)(ii) in their requirement that an employer who fully insures its health plan must
maintain insured health coverage through the same insurer in order to preserve its
grandfathered status. A health plan under ERISA is not the same as a health insurance
policy. A health plan is a plan (which may or may not be written) sponsored by an
employer to provide health benefits to one’s employees and their dependents.

In cases where such a fully-insured health plan has more than 100 participants, an
employer is required to assign the plan an ERISA plan number (501, 502, etc.) and file a
form 5500. The plan is not the insurance policy, and if the employer changes health
insurers, it would not file a final 5500 for the previous insurance policy and assign a new
ERISA plan number and file an initial 5500 for the new insurance policy. The plan has
not changed; only its funding method has changed.

This flaw in Sec. 147,140(a)(ii) puts smaller employers, who typically fully insure their
health plans with group health insurance policies, at a serious disadvantage to larger
employers, who typically self-insure their plans and then purchase stop-loss coverage. A
self-insured plan could change its stop-loss insurer with no resulting loss in its
grandfathered status. Large employers will therefore be more likely than small
employers to receive the benefits of grandfathered health plan status.

The PPACA makes no such distinction between fully-insured and self-insured plans
when discussing grandfathered health plan status. Sec. 147.140(a)(ii) not only
discriminates against small employers, but also works against PPACA’s goal of

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Attention: RIN 1210-AB42
Grandfathered Health Plan Rules

Blake Woodard’s comments to the DOL
August 16, 2010

Page 2

controlling health costs and encouraging competition in the health care and health
insurance markets by discouraging small employers from shopping around to find the
best value for themselves and their plan participants.

For example, an employer who insures with Insurer X is presented with a 25% rate
increase. It finds that by moving its plan with identical benefits to Insurer Y, it can
reduce the rate increase to 10%, saving itself and its employees money. However, by
moving its plan to Insurer Y, it loses its grandfathered status under Sec. 147.140(a)(ii),
even though the benefits have not changed. Some small employers have gone to the
effort to document their health insurance plans with plan documents separate from their
fully-insured health insurance policies, and for them the unfairness of Sec. 147.140(a)(ii)
is even greater.

In summary, Sec. 147.140(a)(ii) is inconsistent with (1) ERISA, (2) PPACA’s goals of
encouraging competition in the healthcare and health insurance marketplace, and (3)
President Obama’s oft-stated principle that “you can keep your existing health
insurance.”

Ms. Borzi, I respectfully request that you eliminate the requirement that employers who
sponsor fully-insured health plans maintain their current insured funding arrangements to
preserve grandfathered status.

Sincerely,

Blake Woodard