Conclusion

For the reasons set forth above, we respectfully request that you consider our comments in
formulating final regulations. We thank you in advance for your time and consideration in these
regards.

Daniel Vukmer
Vice President & General Counsel


UPMC HEALTH PLAN

August 16, 2010

Office of Consumer Information and Insurance Oversight
Department of Health and Human Services

Attention: OCIIO-9991-IFC

P.O. Box 8016

Baltimore, MD 21244-1850

Re: Interim Final Rules for Group Health Plans and Health Insurance Coverage relating to Status as a
Grandfathered Health Plan Under the Patient Protection and Affordable Care Act

Dear Sir/Madam:

UPMC Health Plan is pleased to submit the following comments in response to the Interim Final Rule on
Status as a Grandfathered Health Plan, implementing Section 1251 of the Patient Protection and
Affordable Care Act (“PPACA” or “the Act”).

Introduction

The purpose of the Interim Final Rule regarding grandfathered plans (“IFR”) is “to ease the transition of
the healthcare industry into the reforms established by the Act by allowing for gradual implementation
of reforms through a reasonable grandfathering rule....” As stated in the IFR’s preamble, by providing
that some but not all rules apply to grandfathered coverage, the statute seeks to balance the goals of
preserving the right to maintain existing coverage with those of expanding access to and improving the
quality of health coverage. Accordingly, consideration as to which changes should result in a loss of
grandfathered status must be carefully considered with these basic principles in mind.

1. Change in Carrier

The purpose of Section 1251 is to preserve the ability of individuals to maintain their existing
coverage while pursuing the goal of ensuring access to affordable essential coverage and improving
quality. We do not believe that a change in insurance carrier should by itself force a Plan to forfeit is
grandfathered status; changing carriers and maintaining existing coverage are not mutually exclusive.
We believe that, if a Plan is dissatisfied with its existing carrier for reasons of cost, customer service,
quality, or countless other reasons, it should be permitted to change carriers and maintain grandfather
status, provided that the benefit design, level of coverage and quality remains the same (or improves).
It is our fervent belief that the quality of the benefits and not the means by which covered individuals
access that coverage is what should be protected. A rule to the contrary could run afoul of PPACA’s
stated goal to improve the quality of services offered to individuals; it would arguably force a Plan to
stay with a sub-standard carrier simply to maintain grandfather status. We do not believe that this is
the intent of the Act.

Moreover, while we agree that covered-individuals should be permitted to maintain the health benefits
with which they are satisfied as contemplated by the Act, we do not believe concurrently locking those


individuals to their current carriers is the intent of the Act. Plans should be permitted to seek out those
carriers that offer the most cost effective, clinically sound, and actuarially similar coverage for their
covered-individuals. We believe that allowing carrier change will allow grandfathered Plans much-
needed flexibility in their choice of coverage without destroying the principal purposes of the
grandfathering provision in general.

Finally, we note that, for the reasons set forth above, changes to plan structure (e.g. fully insured to a
self-funded arrangement) that do not result in a reduction of benefits to covered individuals should
likewise not result in a loss of grandfathered status.

2. Network Changes

While we acknowledge the importance of maintaining prescribed boundaries within which
grandfathered Plans may makes changes, we do not believe that a Plan’s provider network is an
appropriate target for limits, and certainly not for strict limits.

Provider networks are generally vetted and reviewed by the State for adequate access, and changes are
most often made in response to Fraud, Waste and Abuse concerns or to increase access. Certainly a
strict prohibition against network changes would severely threaten a Plan’s ability to reduce costly
fraud and abuse, which would run squarely foul of the Act’s primary goals. It may also harm rather
than help covered individuals, as, presumably, even network changes made to expand a network’s
breadth or quality could trigger loss of grandfather status; limiting loss of grandfather status to those
actions taken by Plans for reasons other than expanding or improving the network would place
overseers in the difficult position of having to judge which changes were improving and which harming
network quality.

Astrict prohibition against network change will run afoul of the stated purpose of PPACA in other ways.
It has been well documented that changes to the manner in which health care is delivered in the United
States are necessary. It is expected that, both directly and indirectly, PPACA will reform (and perhaps
revolutionize) the manner in which care is provided, including through accountable care organizations.
Changes of this nature will be severely thwarted by any prohibition against network change; this is
clearly contrary to the very intent of the Act.

Even conditioning loss of grandfather status only to “material changes” to a provider network is of
concern and is arguably unnecessary. First, mechanisms already exist at the State levels to discourage
such changes; Plans must maintain network adequacy or risk loss of ongoing licensure. Moreover, one
would assume that only material changes made for reasons other than to improve network adequacy
would be targeted. This, of course, would present potentially unworkable administrative and practical
challenges and beg the question “who decides” the reason for which a change is made? Federal
monitoring of provider networks would be administratively cumbersome and, given the ability of States
to intervene in network matters, duplicative. For all these reasons we request that the Departments
refrain from conditioning grandfather status on network change.

3. Formulary Changes

Similar to our position above with regard to provider networks, we do not believe that a drug
formulary is an appropriate target upon which to condition grandfather status. Drug formulary
management is a critical tool in managing clinical efficacy as well as costs for any Plan that offers
prescription drug benefits. We acknowledge the importance of protecting consumers from any
attempt by a Plan to arbitrarily use formulary management as a means by which to cut meaningful
benefits purely for money-saving purposes. That said, we believe that conditioning grandfather status


ona strictly static formulary would be harmful to all stakeholders. New and better drugs (brand and
generic) enter the market on an ongoing basis and evidence-based information relative to post-launch
drug use, surveillance and efficacy is ever evolving. Prohibiting formulary-change may harm more than
help covered-individuals by reducing the quality and clinical adequacy of the drugs contained thereon.

Moreover, limiting loss of grandfather status only to formulary-changes made for reasons other than to
improve the scope or quality of drugs offered would present significant administrative and practical
challenges. Accordingly, we hope that the Departments will refrain from conditioning grandfather
status on the absence of formulary change.

4. Benefit Changes

The IFR provides that loss of grandfather status will result from “the elimination of benefits for
any necessary element to diagnose or treat a condition is considered the elimination of all or
substantially all benefits.” As written, grandfather status arguably would be lost if a Plan eliminated
coverage for a single treatment of a condition though countless other (perhaps more effective)
treatments remained covered. Because clinical recommendations surrounding new treatments and
information on the efficacy of existing treatments is constantly evolving, we do not feel that equating
“any” with “all” is in the clinical best interests of covered-individuals. Such a prohibition would
discourage Plans from wisely limiting diagnostic and treatment modalities to only those most effective
for fear of losing their grandfathered status. Moreover, a concession by the Department that
grandfather status would only be lost if the elimination of a benefit was made for reasons other than
for clinical efficacy would be administratively and practically unworkable and would potentially impair a
Plan’s ability to effectively manage care.

We note as well that, before a prohibition of the elimination of “any necessary element” to diagnose or
treat a condition should result in the loss of grandfather status by a Plan, further clarification as to what
is meant by “any necessary element” would be necessary.

Having shared our concerns, please understand that we do agree with the importance of the rule in
prohibiting the elimination of “all benefits” to diagnose or treat a single condition. We believe that this
may be a workable standard, which would not present the administrative and practical challenges
posed by the more restrictive approach set forth above. We would argue, however, that Plan
discretion as to which “conditions “are capable of a meaningful response to medical intervention
should remain intact.

5. Cost-Sharing Limits.

The IFR limits permissible cost-sharing changes with respect to deductibles and out-of-pocket
maximums to 15% plus the annual cost of medical inflation. The medical component of the Consumer
Price Index (Medical CP!) measures the inflationary component of prices charged for a fixed group of
medical services. It does not, however, consider or include any of the other factors driving increases in
health care spending. For example, it is not unreasonable to assume that some of the changes required
by PPACA will result in increased utilization of medical services, which may drive up the costs
associated with providing medical care. Likewise, the aging population and the development of new
medical technologies may similarly result in increased costs. Accordingly, we respectfully submit that
the Medical CPI is an inadequate measure of the cost of providing health benefits to covered-
individuals.