SS2K98V.1

Internal Revenue Service Davis MALM &
August 16, 2010 DAGOSTI NE PC

Page 4 Nitec Stas vio baa

This modification of the proposed regulation would allow all parties to proceed under plan desizns
that were clearly in effect as of March 23. 2010, but simply not yet reduced to the terms of a phan
amendment.

3. Clarify the transition relief for plans which implemented disqualifying changes

during the period from March 23 - June 14, and provide additional reliel for
changes made in that period.

‘The transition rule in the proposed regulations is meant to assist plans which implemented
disqualifying changes (i.e. changes which would cause a health plan to lose grandfathered status)
during the period between enactment and the date the proposed regulations were first available to the
public. Depending on how it is interpreted, the transition rule may not give adequate lime for some
plans to act to preserve grandfathered status.

As indicated earlier in this letter. it would be better if the regulations did not penalize employers at all
for relatively minor plan changes after enactment. Ata minimum, there should be more protection for
employers which implemented changes prior to June 14 unless the changes were so drastic as to be
unreasonable. This would eliminate the need for many plans to go through an expensive remedial
process of calculating amounts necessary for refund (if'a change in co-pay exceeded the limits of the
proposed regulations. for example)

Clarification is also needed. What does it mean to revoke or modify a change as of the effective date
of the first plan year starting on or after September 23, 2010? Do employee refunds actually aave to be
processed by that date’? Does each affected employee have to be notified of the precise amount of the
adjustment? This is a virtually impossible task for those unlucky plans with fiscal years starting in
October, November, December, and even January. It would be more reasonable to require: (1) thata
blanket notice be issued to all participants no later than December 31, 2010, and (2) that refunds
should be processed no later than the end of the first PPACA plan year.

In conclusion, we hope you will consider these comments when you finalize the regulations. We
appreciate that you were working under tight deadlines, and we ask thal you consider the extraordinary
pressure this law places on employers which would like to provide good health insurance but which do
not have unlimited resources to do that,

Very truly yours,

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George L. Chimento

GLC:mal

Enclosure



Internal Revenue Service DAVIS MALM &
August 16. 2010 DAGOSTINE PC

Page 3 Vibensxiy

many times in a plan’s existence, should not deprive a plan of grandfathered status without some
suggestion in the statute that this is what Congress intended. The debates preceding enactment, the
statute, and its scant legislative history contain no suggestion that minor changes in cost structure
would trigger loss of grandfather status.

In addition to the legal argument that these proposed regulations exceeds the authority of the rule-
making agencies, there is also the common sense argument that unfunded mandates created by
regulatory authorities do not help employers or employces. Increasing an employee's share of ca
may actually be the only way for a plan to preserve a benefit package. The alternative, for self-insured
employers which need to cape ina bad economy, may be to concede to grandfathering, and then to
remove coverage which is not mandated by [ederal law and which is exempt from state mandates.
such as mental health coverage. Do employees win in that scenario? There is no credible evidence that
insured employees have been asking for the additional protections of non-grand fathered status,
especially if they have to bear some or all of the cost, In sum, the proposed regulations remove the
promised right that PPACA would not take away coverage under existing plans.

2. Changes which were announced prior to March 23, 2010 should not jeopardize grandfathered
status, provided that plan amendments are executed promptly.

It is not unusual for plan sponsors to announce changes in premium and cost sharing prior to making
changes to a plan document. form of notification is usually by clear written notice, and prior to
the actual reduction from employee paychecks (in the case of premium sharing) and prior to the
additional billing (in the case of coinsurance. co-pa: nd deductibles).

Unfortunately, the proposed regulations require that an amendment to a plan must also have been
adopted by March 23. 2010. We suggest an additional paragraph 1 to that portion of the regulation
which deals with determining whether such changes may be considered to be plan provisions as of
March 23, 2010. As amended, the provision would read:

‘The following changes are considered to be plan provisions as of March 23, 2010:

A) — Changes effective after March 23, 2010 pursuant to a legally binding contract
entered into on or before March 23, 2010:

B) Changes effective after March 23, 2010 pursuant to it Hiting on or before
March 23, 2010 with a State insurance department; or

C) Changes effective after March 23, 2010 pursuant to written amendinents to a
plan that were adopted on or before March 23, 2010.

D) Changes communicated in writing to participating employees prior ta
March 23, 2010, provided thut the plan is amended no tater than the first day:
of the plan year commencing on or after September 23, 2010.

* In fact, there are probably thou:
benelit booklets. cert es of cove!

js of health plans which do not even have a~plan document,” but simply provide
cand the like.



Page 1 of 1

REGE-NVH2TE

LEGAL PROCESSING DIVISION

PUBLICATION & REG
UL,
BRANCH ATIONS As of: September 09, 2010

PUBLIC Status: Posted,

Posted: September 09, 2010
SUBMISSION Comments Due: September 15, 2010

Submission Type: Web

Docket: IRS-2010-0010
Group Health Plans and Health Insurance Coverage Rules Relating to Status as a Grandfathered
Health Plan Under the Patient Protection and Afforable Care Act

Comment On: IRS-2010-0010-0002
Group Health Plans and Health Insurance Coverage: Status as Grandfathered Health Plan uncer
the Patient Protection and Affordable Care Act; Cross-Reference

Document: IRS-2010-0010-0949
Comment on FR Doc # 2010-14487

SE

Submitter Information

Name: George L. Chimento
Address:

Boston, MA,
Submitter’s Representative: George L. Chimento
Organization: Davis, Malm & D'Agostine, P.C.
Government Agency Type: Federal
Government Agency: IRS

General Comment

See attached file(s)

Attachments

IRS-2010-0010-0949.1: Comment on FR Doc # 2010-14487

https://fdms.erulemaking.net/fdms-web-agency/component/submitterInfoCoverPage?Call=P.... 9/9/2010


Davis MALM &
DAGOSTINE PC

ALOR NYS AT Law

George L. Chiments+

August 16, 2010
VIA OVERNIGHT MAIL

Internal Revenue Service
CC:PA:LPD:PR (REG-118412-10)
Room 5205

P.O. Box 7604

Ben Franklin Station

Washington, DC 20044.

Re:  OCHO-9991-IFC / grandfathered health plans
Dear Sir or Madam:

We appreciate the opportunity to comment on the proposed regulations relating to the status of a group
health plan as a grandfathered health plan under the Patient Protection and Affordable Care Act
(°PPACA”). These comments are based on direct communications with employers which sponsor
health plans, many of them self-insured, in various industries. Employers are concemed that the
proposed regulations add unnecessarily to the costs which they share with their insured employees.
‘They note that cach additional dollar that is spent for additional mandates will be diverted from
business and household needs.

We request that the final regulations:

1. Adopt a less stringent approach to defining the events which cause a health plan to lose
grandfathered status.

2. Make clear that changes which were announced prior to March 23, 2010 and subsequently
implemented will not jeopardize grandfathered status, even if not yet contained ina formal plan
amendment.

3. Clarify the special transition relief for plans which implemented disqualifying changes during
the period from March 23 — June 14, and provide additional relief for changes made in that period.

Our reasons for these requested changes appear below.

inet 617-589-3847 aver peer 617-305-3197,

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Intefnal Revenue Service Davis Ma LM &
August 16, 2010 IAGOSTINE PC
Lvs

Page 2 Vinaurxtus vt

1. ‘The final regulations should be less strict in defining events which cause a plan to lose
wrandfatheres tu

The view of regulators scems to be that the incremental cost to provide non-grandfathered benefit
not that much compared with the entire cost of a plan, and is therefore inconsequential. Regulators
have been candid that they expect most plans to lose grandfathered status within the next few years
due to the structure of these proposed regulations. We disagree with this « /a carte analysis which
disregards the totality of plan costs. Adding another 2% or more for additional benefits if'a plan is not
grandfathered just makes health insurance less affordable,’ And a regulatory decision to disqualily
plans from grandfathering for even modest changes is at odds with the statute and with the public
statements which were made during the long campaign prior to its enactment.

Section 1251(a)(2) of PPACA = Preservation of Right to Maintain
clear:

ing Coverage — is brief and

“CONTINUATION OF COVERAGE, With respect to a group health plan or health
insurance coverage in which an individual was enrolled on the date of enactment of
this Act, this subtitle and subtitle A (and the amendments made by such subtitles) shatl
not apply to such plan or coverage, regardless af whether the individual renews suc h
coverage afer such date of enactment.”

Contrary to the proposed regulations, the statute does not say that amendments or chan,
cause it to lose grandfathered coverage. Congress has had plenty of experience in draf
Code statutes where amendments to a plan cause il to lose protected status.
provide that. Instead, it
cl

to a plan

ge ERISA and
statute does 20t

ays that a plan which was in existence prior to enactment does not have to be
ned, except for changes which apply to all plans regardless of grandfathering.

The proposed regulations do what Congress did not, Even minor change
insurance carrier, modest adjustments to co-pays. a shill in premium sharing of more than 5% since
March 23. 2010. and any shift in co-insurance. trigger a full menu of non-grandfathered mandates. We
respectfully request that the final regulations get closer to the statute’s clear language. Plans which
were in existence prior to enactment should be allowed to continue without losing grandfathered status
unless (here is a major change in covered procedures, of a major shift in cost-sharing. The hair-trigger
adjustments in the proposed regulations are not authorized by the statute

such as a change in

However, if it is deemed appropriate to have some bright tine rules. they should not deprive a plan
from changing insurers. or from converting to sel!-insured status, or from raising: the cost of co-pays:
and deductibles beyond the meager allotment in the proposed regulations. Most importantly, plans
should be allowed to increase the premium share of employees by more than five (5) percentage points
from the level in effect on March 23, 2010. Changes such as these, which have probably oecurred

Bear in mind the substantial additional costs which all plans — grandfathered or not - must incur under the
amended Public Health Services Act (°PIIS") including PIS Act Sections 2708, 2711, 2712, 2714, 2715, 2718