PARTNERING TO MAKE A DIFFERENCE IN EMPLOYEE BENEFITS

August 27, 2010 

The Honorable Kathleen Sebelius 

Secretary 

U.S. Department of Health & Human Services 

200 Independence Avenue, S.W. 

Washington, D.C. 20201 

The Honorable Hilda Solis 

Secretary 

U.S. Department of Labor 

200 Constitution Ave., N.W. 

Washington, D.C. 20210 

The Honorable Timothy Geithner 

Secretary 

U.S. Department of the Treasury 

1500 Pennsylvania Avenue, N.W. 

Washington, D.C. 20220 

Dear Secretaries Sebelius, Solis, and Geithner: 

Employee Benefit Solutions (“EBS”) is pleased to comment on the Interim Final Rule (IFR) 

published on June 28, 2010, in the Federal Register3T pertaining to rescissions in the group health plan 

environment under the Patient Protection and Affordable Care Act . 

EBS is finding it difficult to reconcile the standards outlined in the IFR regarding rescissions for 

individual participants in a group health plan with actual administrative practices and timelines. 

There are events that, due to timing of general processing, require the retroactive termination of 

benefits: 

• Employee loss of eligibility: Many employers and administrators rely on electronic file 

transfer to communicate employee status changes that affect benefit eligibility. Most files 

are transferred on a weekly basis creating an automatic one to three week lag time as the 

data moves from the work location to the centralized human resources and/or payroll 

group to the benefits administrator to the health benefits carrier. We are fearful that this 

routine process may be hindered by the lack of definition around “timely” as related to 

administrative processes. 

• Spouse loss of eligibility: Many qualified life events that affect eligibility are self-reported 

by the participant. Divorce is a common example and is often reported late to the employer 

and/or administrator. This will result in retroactive termination of benefits for the ex-
Secretaries Sebelius, Solis, and Geithner 

August 27, 2010 

Page 2

spouse who is not longer in an eligible participant. It is not clear in the IFR if a rescission is 

prohibited in this case, but it is noteworthy that this is not an administrative error of the 

employer or carrier. It is also not clear if the withholding of this information would be 

considered “fraud” on the part of the participant. 

• Other dependent loss of eligibility: It is a common practice for employers to conduct a 

periodic “dependent audit” reviewing the eligibility of participant’s dependents. This 

process includes reviewing birth certificates, marriage documents, etc. to confirm that 

employees have covered only dependents that meet the criteria of the plan. It is not clear in 

the IFR if any misrepresentation of dependent eligibility revealed by the audit is considered 

fraud or would be prohibited from retroactive termination. Again, it is important to note 

that this is not administration error on the part of the employer or administrator. 

EBS feels that much more clarification is needed to administer this portion of the IFR. Additional 

clarification on the definition of “timely” and what is considered fraudulent would allow group 

health plan sponsors to administrate and communicate more clearly to participants. 

 

Sincerely, 

Employee Benefit Solutions