Kaiser Permanente Comments
HHS Omnibus Interim Final Rule
August 27, 2010

is silent on the issue of whether reasonable day and visit limits on specified benefits are
permissible as long as they are within the permitted overall annual limit on the dollar value of
those benefits. We seek clarification of this issue.

Application of annual and lifetime limits to out-of-network benefits

As stated above, the IFR establishes restricted annual limits on the dollar value of essential
health benefits. However, it is unclear whether both the annual and lifetime limits are
applicable for in-network benefits only or whether they also extend to out-of-network
benefits. In the case of the newly established requirements for preventive services, HHS
clarified that the zero cost sharing restrictions pertain to in-network benefits only. We believe
HHS should adopt the same rule here. In addition, it would be helpful to clarify that all plans,
including plans that differentiate coverage based on provider status (whether in a HMO, PPO
or POS plan) must provide at least one tier of coverage in which the restrictions on annual and
lifetime limits apply. For example, Kaiser Permanente as an integrated system with a limited
geography sometimes offers out of area PPO plans for employers with staff outside of
Kaiser’s service area. For employees enrolled in the out of area PPO, the restrictions would
apply to the contracted preferred providers in the areas, but not to non-preferred providers. In
a multi-tier plan in our service area, the restriction on limits would apply to our HMO
provider network, but not to a secondary PPO or POS providers. We think this approach best
offers patients the benefit of the new rules and promotes affordability of coverage.

Annual internal/sub-limits and Annual cumulative limits

To avoid gaming and excessive application of dollar limits, HHS should clarify that the new
regulations on annual and lifetime limits do not permit internal sub-limits that are lower than
the overall limit. If HHS intends to permit internal sub-limits, it should provide more specific
guidance, and not simply permit plans to establish lower sub-limits with a cumulative limit of
$750,000.

Recognizing Good Faith Efforts and Hold Harmless Provisions

Given the clarifications requested above, Kaiser Permanente requests that HHS acknowledge

an issuer’s good faith efforts to comply with the regulations. We recommend a safe harbor be
granted such that issuers would be required to amend plans on a prospective basis only for the
following plan year, once further guidance has been issued.

Patient Protections

Coverage of Emergency Services

Prohibition against balance billing by providers for emergency services is an important
protection for patients. Kaiser Permanente assumes that the new regulation does not seek to
preempt existing state laws that limit the ability of providers to balance bill for emergency
services. We also interpret the new regulation relating to the amount a group health plan or
health insurance issuer must pay to emergency service providers to apply in states regardless
of whether the state has prohibited providers from balance billing for emergency medical


Kaiser Permanente Comments
HHS Omnibus Interim Final Rule
August 27, 2010

¢ Allcarriers follow an initial open enrollment period from October 1, 2010 through
November 30" 2010, with an effective date of coverage January 1, 2011.

© Subsequent open enrollment periods would occur once a year, on the child’s birth
month.

¢ Carriers may apply a risk-based rating factor of no more than 2 times the rate charged
for a child of the same age of a standard health risk.

© Children may enroll throughout the year following a qualifying event, provided the
child submits an application within 30 days.

© Outside of the annual open enrollment periods (based on children’s birth month or
qualifying event) individuals can apply for coverage at any time. However, applicants
of any age are subject to medical underwriting standards, if allowed under state law.

¢ For those who enroll after the initial open enrollment period, a late enrollment
surcharge of 20% of the premium will be levied on applicants who have been
uninsured for more than the prior 90 days, unless enrolling through a qualifying event.

Medical Underwriting Outside Open Enrollment

It has been argued that medical underwriting should continue outside the open enrollment periods.
Under this structure, children would have year round access to coverage unless they failed
medical underwriting and did not enter through a qualifying event. If a child fails medical
underwriting their coverage would be effective at the next open enrollment period. This structure
would preserve the stability of the current market, retain greater access to affordable coverage for
all children and incentivize maintenance of coverage, while allowing high risk children the
opportunity to enroll in coverage at a reasonable rate during annual open enrollment periods. We
would recommend that HHS clarify that medical underwriting is permissible outside open
enrollment periods.

Lifetime and Annual Limits

Definition of Essei Benefits In the Context of Annual and Li e L
PPACA requires the ‘ination of lifetime limits and allows restricted annual limits with respect to
essential health benefits for plan years beginning before January 1, 2014. The IFR defines “essential
health benefits” by cross reference to section 1302 (b) of PPACA. Under this section essential health
benefits are defined to “include at least the following general categories and the items and services
covered within the categories: ambulatory patient services; emergency services; hospitalization;
maternity and newborn care; mental health and substance use disorder services, including behavioral
health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory
services; preventive and wellness services and chronic disease management ; and pediatric services,
including oral and vision care.” The IFR does not provide further specifics regarding the items and
services that fall within these categories. Kaiser Permanente assumes that DME and organ transplants
would both be considered items and services included in these categories and thus subject to these
mandated limits, but seeks clarification of this issue.

Day and visit limits

Section 2711 of the PHS Act and the IFR released June 28", prohibit group plans and insurance
issuers offering group or individual health insurance coverage from imposing lifetime limits and
establish a restricted annual limit on the dollar value of health benefits. However, the regulation


Kaiser Permanente Comments
HHS Omnibus Interim Final Rule
August 27, 2010

services. Such limits prevent providers from charging beyond the usual and customary
community rate for emergency medical services and help to support affordable premiums for
health benefits coverage.

We appreciate the opportunity to comment on this IFR. If you have questions or concerns,

please contact me at 510.271.6385 (email: anthony.barrueta@kp.org).

Sincerely,

litem Cr. Brom _€

Anthony Barrueta
Senior Vice President, Government Relations
Kaiser Permanente



Page 1 of 1
PEG -|Z0297-10

LEGAL PROCESSING DIVISION
PUBLICATION & REGULATIONS
BR

As of: September 01, 2010

PUBLIC Status: Posted,

Posted: September 01, 2010
SUBMISSION Comments Due: August 27, 2010

Submission Type: Web

SEP 1 2010

Docket: IRS-2010-0015
Requirements for Group Health Plans and Health Insurance Issuers under the Patient Protection
and Affordable Care Act

Comment On: IRS-2010-0015-0002
Patient Protection and Affordable Care Act: Preexisting Condition Exclusions, Lifetime and Annual
Limits, Rescissions, and PatientProtections

Document: IRS-2010-0015-0024
Comment on FR Doc # 2010-15278

SS

Submitter Information

Name: Anthony Barrueta
Address:

Oakland, CA,
Organization: Kaiser Permanente

General Comment

Re: Interim Final Rules for Group Health Plans and Health Insurance Coverage Relating to
PreExisitng Condition Exclusions, Lifetime and Annual Limits, Rescissions and Patient Protections
Under the Patient Protection and Affordable Care Act

Attachments

IRS-2010-0015-0024.1: Comment on FR Doc # 2010-15278

https://fdms.erulemaking.net/fdms-web-agency/component/submitterInfoCoverPage?Call=P... 9/1/2010



iy, KAISER PERMANENTE: Kaiser Foundation Health Plan, Inc.

August 27, 2010
Submitted Electronically: http://www.regulations.gov

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

Attention: OCIIO-4150-IFC

Baltimore Maryland 21244-1850

Re: Interim Final Rule for Group Health Plans and Health Insurance Coverage Relating to
PreExisitng Condition Exclusions, Lifetime and Annual Limits, Rescissions and Patient
Protections Under the Patient Protection and Affordable Care Act

Dear Sir or Madam:

Kaiser Permanente offers the following comments in response to the above-captioned Interim
Final Rule (“IFR”), issued in the Federal Register on June 28". Kaiser Permanente is the
largest private integrated healthcare delivery system in the U.S., delivering health care to
approximately 8.7 million members in nine states and the District of Columbia. Kaiser
Permanente comprises Kaiser Foundation Health Plan, Inc., the nation’s largest not-for-profit
health plan, and its health plan subsidiaries outside California and Hawaii; the not-for-profit
Kaiser Foundation Hospitals which operates 36 hospitals and over 400 other clinical facilities;
and the Permanente Medical Groups, independent physician group practices that contract with
Kaiser Foundation Health Plan to meet the health needs of Kaiser Permanente’s members.
Most pharmacy, diagnostic, and laboratory services delivered to Kaiser Permanente members
are performed within Kaiser Permanente.

Kaiser Permanente believes the Patient Protection and Affordable Care Act (PPACA) has the
potential to represent an important step towards achieving universal coverage in the United
States and towards establishing reasonable market rules that will allow plans to compete on
quality and cost rather than on risk avoidance. It is in this context that we offer comments on
the aforementioned rule.

PreExisting Condition Exclusions

Guaranteed Issue in the Absence of a Mandate
Tl

he IFR issued on June 28" clarifies that under the new PHS section 2704, the prohibition of
preexisting condition exclusions for children under 19 “prohibits not just an exclusion of
coverage of specific benefits associated with the preexisting condition, but a complete
exclusion from such plan or coverage, if that exclusion is based on a preexisting condition.”
With this interpretation, carriers are required to issue coverage on a guaranteed issue basis to
all children under 19, irrespective of any preexisting condition. (p. 37190) While Kaiser

Legal and Goverment Relations
One Kaiser Plaza, 27th Floor
Oakland, CA 94612


Kaiser Permanente Comments
HHS Omnibus Interim Final Rule
August 27, 2010

Permanente has long supported universal access to care, a guaranteed issue requirement on
health insurers should be accompanied by an individual mandate to purchase coverage with
subsidies for those in need. In the absence of such a mandate, individuals have a financial
incentive to remain uninsured when they are healthy, and buy coverage only when they are
sick. Asa result, individual health coverage in a guarantee issue market is less “insurance”
than pay-as-you go health care on demand. Guaranteed issue without an individual mandate
will raise costs for all individuals. We are very concerned that the impact of this provision
will increase costs substantially for al! children and severely undermine the stability of this
market. We suggest steps below to partially mitigate these problems, but emphasize the
difficulty of retaining a broadly accessible and affordable market under these conditions. The
most effective way to retain a strong, stable and affordable individual market when insurers
are required to accept all children is to require all to purchase and maintain coverage through
an enforceable individual mandate.

Uniform Open Enrollment Period

Given the new guaranteed issue requirements, there is a very real possibility that children
without access to employer-sponsored or other subsidized coverage will only purchase
coverage when they are sick and drop coverage once they receive the services they need.
Given these market rules and expected consumer behavior, there is also a strong incentive for
insurers to exit the individual market for children altogether or to avoid enrolling high risk
children by charging premiums substantially higher than other possible options.

On July 28", HHS released a Q & A allowing carriers in the individual market to restrict
enrollment of children under 19, whether in family or child only coverage, to specific open
enrollment periods if otherwise allowed under State law to “address concems over adverse
selection”. While we agree that a properly structured open enrollment period will partially
mitigate adverse selection concerns, we believe it would only be effective if all carriers follow
the enrollment rules. However, the HHS Q & A is not so specific as prevent each carrier from
separately determining the number, time and length of open enrollment periods for children
under 19, families and adults. Kaiser Permanente is concerned that allowing each carrier to
establish its own open enrollment period will result in substantial disruption of the individual
market and broad confusion among consumers as to when and from whom they can purchase
coverage. In addition, if at any time one carrier is the only “open” carrier, that carrier is in
effect the only option for children with immediate health care needs. Permitting each carrier
to set its own open enrollment period provides an incentive to be open late and a disincentive
to be open early, For example, carriers which schedule shorter or later enrollment periods
could expect that most high risk children would enroll with their competitors.

For these reasons, we strongly recommend HHS establish a uniform annual open enrollment
period accompanied by reasonable rating rules and a penalty for individuals who wait to
purchase coverage or drop in and out of the market depending on need.

Specifically we recommend the following: