Aetna

151 Farmington Avenue

Hartford, CT 06156

August 16, 2010

Steven B. Kelmar

Senior Vice President

Government and Public Policy

Law & Regulatory Affairs, RE6A

(860) 273-2706

Fax: (860) 273-8340

Hon. Kathleen Sebelius, Secretary, U.S. Department of Health and Human Services

Hon. Hilda Solis, Secretary, U.S. Department of Labor

Hon. Timothy Geithner, Secretary, U.S. Department of Treasury

Attention: OCIIO-9991-IFC

Room 445-G, Hubert H. Humphrey Building

200 Independence Avenue, S.W.

Washington, DC 20201

Submitted via the Federal Regulations Web Portal, http://www.regulations.gov

Re: Comments on the Interim Final Rules Relating to "Grandfather" Status

Under the Patient Protection and Affordable Care Act

Dear Secretaries Sebelius, Solis, and Geithner:

Aetna appreciates the opportunity to respond to the request for comments issued

by the Department of Health and Human Services ("HHS"), the Department of Labor

("DOL"), and the Department of Treasury (collectively, the "Agencies") regarding the

Interim Final Rule for Group Health Plans and Health Insurance Coverage Relating to

Status as a Grandfathered Health Plan Under the Patient Protection and Affordable Care

Act ("PPACA") (the "IFR" or the "Regulation"), 75 Fed. Reg. 34538 (June 17, 2010).

Aetna is one of the nation's leading diversified health care benefits companies,

providing members with information and resources to help them make better informed

decisions about their health care. Our programs and services strive to improve the quality

of health care while controlling rising employee benefits costs. Aetna offers a broad

range of traditional and consumer-directed health insurance products and related services,

including medical, pharmacy, dental, behavioral health, group life, long-term care and

disability plans and medical management capabilities.

As a key stakeholder affected by PPACA, Aetna is committed to working with the

Agencies in developing reasonable standards for the implementation of PPACA. To that

end, we are submitting these comments to the Agencies, recommending modification of

the IFR in certain respects. Among other things, Aetna is concerned that the IFR may

subject health insurance issuers to penalties for non-compliance with PPACA for

unilateral actions that a plan sponsor may take without notifying the issuer. We therefore
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recommend that the Agencies either eliminate or modify the IFR's rules regarding

unilateral actions taken by a plan sponsor that could inadvertently cause an issuer to be

liable for non-compliance with PPACA (such as a decrease in employer contributions by

more than five percent).

Additionally, we are concerned that certain aspects of the IFR are unduly

restrictive with respect to the substitution of new insurance coverage and benefit and

cost-sharing changes that can be made without a loss of grandfather status. As detailed

below, our comments include suggested modifications to the IFR that would address

these concerns. Briefly, we recommend that the Agencies modify the Regulation to

provide that the following actions will not cause the loss of grandfather status:

• Issuance of a new policy by an issuer to the same policyholder for bona fide

business reasons, where the benefits under the new policy are substantially the

same as the benefits under the prior policy;

• Voluntary decisions by an individual policyholder to reduce benefit coverage

or increase cost-sharing;

• Changes to benefits that are adopted to comply with applicable federal or state

law, even if such changes otherwise exceed the parameters established by the

IFR;

• Modification of a HIPAA-compliant wellness program to alter incentives that

may impact an employee's cost-sharing obligation;

• Changes to enrollee cost-sharing, including coinsurance, where the actuarial

value of the cost-sharing provisions of the coverage remain within 15% of the

original value as of the date of the PPACA's enactment;

• Changes to out-of-network cost-sharing, without restriction;

• Modification of prescription drug formularies and pharmacy networks;

• Changes to provider networks; and

• Modification of plan terms, such as dependent eligibility and treatment

settings, where meaningful coverage for the benefit or condition is maintained.

Aetna's specific comments on the Regulation are set forth below.

1. An Insurer Should Not Be Liable for Continuing to Offer a Grandfathered

Policy to a Plan Sponsor That Has, Without Notice to the Insurer, Taken

Unilateral Action to Defeat Grandfather Status

Under the IFR, there are a number of actions that the sponsor of a grandfathered

plan can take which could trigger the loss of grandfather status, about which the plan's

insurer may have no notice or control. For example, employers determine how to
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allocate the cost of health insurance coverage between themselves and their employees,

typically on an annual basis. Insurers of group health plans do not know what an

employer (or an employee organization) contributes to the cost of coverage, or whether

the employer (or employee organization) may modify its contribution rate. Instead,

insurers receive a monthly remittance from the employer which covers the monthly

premium, and the remittance does not detail the contribution formula as between the

employer and plan participants. Likewise, an employer could transfer employees from

coverage under one plan to another, without notifying the insurer of the transferee plan of

such action.

The IFR provides that a group health plan or health insurance coverage ceases to

be a grandfathered plan if an employer (or employee organization) decreases its

contribution rate "towards the cost of any tier of coverage for any class of similarly

situated individuals . . . by more than 5 percentage points below the contribution rate for

the coverage period that includes March 23, 2010." 45 C.F.R. § 147.140(g)(1)(v). And,

the IFR sets forth two "anti-abuse" rules, which provide, in pertinent part, that a plan will

lose grandfather status if:

1. The principal purpose of a merger, acquisition, or similar business

restructuring is to cover new individuals under a grandfathered plan; or

2. Employees are transferred into a plan or health insurance coverage (the

transferee plan) from a plan or health insurance coverage under which employees were

covered on March 23, 2010 (the transferor plan), and: (a) comparing the transferee plan

to the transferor plan would cause a loss of grandfather status; and (b) there was no bona

fide employment-based reason for the transfer. 45 C.F.R. § 147.140(b)(2).

However, the IFR does not address how these rules apply in the context of an

insurer of a grandfathered group health plan where the insurer has no notice as to whether

an employer has decreased its contribution rate toward coverage, undergone a business

restructuring, or transferred employees from one plan to the plan for which the insurer is

providing health insurance coverage. Without clarification in the final regulation, an

insurer could be deemed non-compliant with PPACA (and therefore subject to penalties

under the Public Health Services Act as well as lawsuits under ERISA for not providing

all of the PPACA required benefits for non-grandfathered plans) for continuing to offer a

grandfathered policy to an employer that has unilaterally taken action that could trigger

loss of grandfather status, even if the insurer had no notice of the employer's action.

Accordingly, Aetna requests that the Agencies adopt a final regulation which

clarifies that, with respect to the period of March 23, 2010 until September 23, 2010, a

health insurance issuer will not be treated as non-compliant with PPACA where, without

notifying the insurer, an employer (or employee organization) has taken action that could

cause the health insurance coverage to cease to be a grandfathered plan, such as

decreasing the sponsor's contribution rate by more than five percent measured from

March 23, 2010 or transferring employees to the grandfathered coverage without a bona

fide employment-based reason.
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And, for plan years beginning on or after September 23, 2010, we request that the

final regulation clarify that the Agencies will not treat a health insurance issuer as noncompliant with PPACA if it continues to offer a grandfathered policy to an employer or

employee organization that has taken action that could cause the coverage to cease to be a

grandfathered plan (such as decreasing the sponsor's contribution rate by more than five

percent measured from March 23, 2010 or transferring employees to the grandfathered

coverage without a bona fide employment-based reason), where: (a) the insurer has taken

steps to require that an employer (or employee organization) disclose any actions by the

employer (or employee organization) that could cause the loss of grandfather status under

the IFR; and (b) the employer or employee organization fails to do so notwithstanding the

insurer's requirement. In such circumstances, we respectfully submit that the Agencies

should treat the insurer's efforts to obtain notice of the employer's actions as good faith

compliance with the regulation.

2. An Insurer Should Be Able to Issue a New Policy To a Policyholder With

Grandfathered Coverage, Without Loss of Grandfather Status, Where the

Benefits Under the New Policy Are Identical Or Substantially the Same as

the Benefits Under the Prior Policy

Insurers commonly issue new policies or certificates of insurance to policyholders

which are substantially the same as a previously issued policy or certificate for bona fide

business reasons. For example, an insurer may consolidate duplicate policy forms into a

smaller number of substantially similar policy forms for purposes of simplifying the

insurer's administration. In such cases, a new policy or certificate is issued by the same

insurer to the same policyholder, which details the new policy or certificate number, but

the benefits under the new policy or certificate are nearly the same as the benefits offered

under the previous policy or certificate.

The IFR defines a grandfathered health plan as "coverage provided by a group

health plan, or a group or individual health insurance issuer, in which an individual was

enrolled on March 23, 2010 (for so long as it maintains that status under the rules [of the

IFR])." 45 C.F.R. § 147.140(a). The IFR also provides that "if an employer or employee

organization enters into a new policy, certificate, or contract of insurance after March 23,

2010 (because, for example, any previous policy, certificate, or contract of insurance is

not being renewed), then that policy, certificate, or contract of insurance is not a

grandfathered health plan with respect to the individuals in that group health plan." 45

C.F.R. § 147.140(b)(2). The IFR includes a special anti-abuse rule that effectively

permits a group health plan and health insurance coverage to retain its grandfathered

status where (1) employees are transferred into existing coverage, (2) comparing the

transferee plan to the transferor plan would not cause the loss of grandfathered plan

status, and (3) there is a bona fide employment based reason for the transfer. 45 C.F.R.

§ 147.140(a)(ii).

The IFR does not address whether a grandfathered health plan will cease to be

treated as such where a new policy or certificate of insurance is issued by the same

insurer to the same policyholder for bona fide business reasons, and the coverage is

substantially the same as was in force on March 23, 2010. We note, however, that in
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other circumstances, the DOL has recognized that non-substantive changes to policy

terms should not disqualify an insurance policy from grandfather status. See DOL Adv.

Op. 2000-12A (October 4, 2000) (amendments to group annuity contracts to

accommodate changes in a plan sponsor's corporate structure are not material, and will

not disqualify such policies from their status as "transition policies" under DOL

regulation issued pursuant to ERISA § 401(c)(1)).

Aetna therefore requests that the final regulation clarify that a new policy or

certificate will be considered as a grandfathered health plan where: (a) the new policy or

certificate is issued by a health insurance issuer to the same policyholder for bona fide

business reasons; and (b) the coverage under the new policy, when compared to the

coverage under the old policy, would not cause the loss of grandfathered status under the

provisions of section (g)(1) of the IFR. In these circumstances, the new policy or

certificate will be considered as continuing in force the same insurance coverage that was

in effect on March 23, 2010.

3. Voluntary Decisions By An Individual Policyholder to Reduce Benefits

Should Not Cause a Loss of Grandfather Status

Policyholders in the individual market frequently make voluntary requests to

decrease benefits by eliminating coverage for certain conditions, or to increase the

policyholder's deductible, out-of-pocket maximum, coinsurance, or copayments.

Individual policyholders make these requests for reduced coverage to reduce their

premiums, and they commonly do so following the loss of a job or another significant

change in the policyholder's financial situation or family status.

The IFR provides that a plan or policy will lose grandfathered status if, among

other things, there is:

a. The elimination of all (or substantially all) benefits to diagnose or treat a

particular condition;

b. An increase in copayment above the level in effect on March 23, 2010;

c. An increase in deductible, out-of-pocket maximum, or other fixed-amount

cost-sharing that is more than medical inflation plus 15 percent (measured

from March 23, 2010); or

d. An increase in copayment in an amount greater than $5 increased by

medical inflation, or medical inflation plus 15 % (measured from

March 23, 2010).

45 C.F.R. § 147.140(g)(1)(i)-(iv). The IFR, however, does not address whether a benefit

change that is voluntarily requested by a policyholder in the individual market, which

would otherwise exceed the IFR's limits, may cause a loss of grandfather status. If a

voluntary reduction in coverage causes the loss of grandfather status, the policyholder

would be required to either drop coverage entirely (which is contrary to PPACA's goal of

expanding coverage), or to buy a new policy that is subject to all of PPACA's insurance
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market reforms, which will be more expensive and likely beyond the means of the

policyholder who has experienced a job loss or change in financial status. Additionally,

these policyholders will not be eligible for the temporary high-risk pool established by

PPACA for at least six months following their loss of coverage, see PPACA

§ 1101(d)(2), and they will not be eligible for federal subsidies available through the

Exchanges until 2014.

Accordingly, in the final regulation, the Agencies should clarify that an individual

insurance policy that is grandfathered will continue to remain so notwithstanding the

individual policyholder's voluntary decision to decrease benefits by eliminating coverage

for certain conditions or increasing the policyholder's deductible, out-of-pocket

maximum, coinsurance or copayments.

4. Changes to Comply with Mental Health Parity and Other Laws Should Not

Cause a Loss of Grandfather Status

Between the promulgation of the Mental Health Parity and Addiction Equity Act

("MHPAEA") regulations in February 2010 (which became applicable as of July 1, 2010)

and the issuance of the grandfather IFR on June 14, 2010, many plans and issuers

adopted benefit and cost-sharing changes for mental health/substance use and

medical/surgical benefits. These changes were adopted for purposes of satisfying the

MHPAEA regulation's "predominant/substantially all" test.

The IFR's Preamble provides that "group health plans and health insurance issuers

will not cease to be considered grandfathered if the plan sponsor or issuer makes changes

to comply with Federal or State legal requirements[.]" 75 Fed. Reg. at 34544. The IFR,

however, does not address whether changes to benefits or cost-sharing that were adopted

to comply with federal or state law may cause the loss of grandfather status, where such

changes exceed the IFR's limits of permissible benefit or cost-sharing changes. Nor does

the IFR address whether such changes may be covered under the good faith compliance

period.

To clarify this issue, Aetna recommends that the final regulation expressly

provide that changes to a plan or policy's cost sharing provisions that affect

medical/surgical benefits or mental health/substance use benefits – which were adopted

between March 23 and June 14, 2010 for purposes of coming into compliance with the

MHPAEA regulations – will not cause the loss of grandfather status. The Agencies could

issue this clarification by advising that coverage will not lose its grandfathered status

where the plan or issuer made the benefit modification in a good faith effort to comply

with law between March 23, 2010 and June 14, 2010, even if the modification altered

benefits or cost sharing in a manner that exceeded the limits in the IFR.

We also recommend that the final regulation clarify that where a federal or state

law provides a plan sponsor or issuer with options as to how to comply with the law, a

grandfathered plan will not lose such status based upon the sponsor or issuer's election of

an option that is permitted by law, even if such option exceeds the parameters of the IFR.
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5. The Modification of HIPAA-Compliant Wellness Programs That Offer

Incentives That May Impact Employee Cost-Sharing Should Not Cause a

Loss of Grandfather Status

Wellness programs are dynamic benefits which are subject to frequent change.

Among other things, insurers and sponsors may change wellness providers to improve the

delivery of benefits, and they frequently modify a wellness program's incentives to

encourage greater participation in the program and to provide greater incentives for

participants to make important lifestyle changes, such as quitting smoking or losing

weight. Wellness programs are often offered by separate vendors and sometimes are

offered outside of a group health plan or group health insurance coverage.

Under HIPAA, wellness programs are permitted to provide rewards based on

health status, provided that the reward is limited to 20 percent of the cost of coverage.

For example, as expressly permitted by the HIPAA regulation, a wellness program may

provide a premium holiday or deductible credit of a limited amount for employees who

do not smoke or who have a favorable cholesterol level. By definition, wellness rewards

tend to be temporary, given that they are provided only for as long as the employee is

compliant with the program (within the parameters established by the HIPAA regulation),

and they are subject to frequent modification to incentivize changes in behavior.

The IFR provides, in pertinent part, that:

The elimination of all or substantially all benefits to diagnose or treat a

particular condition causes a group health plan or health insurance

coverage to cease to be a grandfathered health plan. For this purpose, the

elimination of benefits for any necessary element to diagnose or treat a

condition is considered the elimination of all or substantially all benefits to

diagnose or treat a particular condition.

45 C.F.R. § 147.140(g)(1)(i) (emphasis added). And, the IFR provides that a change in

deductible or out-of-pocket maximum that is greater than medical inflation plus 15

percent (measured from March 23, 2010), or a change in copayment that is greater than

(a) medical inflation plus 15 percent, or (b) $5 plus medical inflation (measured from

March 23, 2010) will cause the plan to lose grandfather status.

The IFR does not address, however, whether changes to a wellness program could

cause the loss of grandfather status. Considering that the incentives and benefits offered

by wellness programs frequently change to address the medical conditions and lifestyles

of plan participants, a broad interpretation of the IFR could stifle the innovation of

wellness programs, especially if changes to a wellness program's incentives may trigger

the loss of grandfather status for the entire plan. Such an interpretation of the IFR would

be contrary to clear Congressional intent.

Specifically, Congress encouraged the establishment of wellness programs in

PPACA. For example, PPACA permits plan sponsors and issuers to increase the value of

a wellness program reward from 20 percent to 30 percent of the cost of employee
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coverage, which can be increased up to 50 percent at the discretion of the Agencies.

PHSA § 2705(j)(3)(A). PPACA also establishes a grant program to assist employers in

establishing and evaluating workplace wellness programs. PPACA § 10408. And,

Congress established reporting requirements for certain plans and insurers that implement

wellness and health promotion activities. PHSA § 2717. Given the clear Congressional

intent to encourage the continued development of effective wellness programs, Aetna

recommends that the Agencies modify the Regulation to expressly provide that changes

to wellness program providers or incentives will not cause a loss of grandfather status.

6. The Regulation Should Permit Greater Flexibility With Respect

to Cost-Sharing

The IFR imposes significant restrictions upon a plan sponsor or issuer's ability to

modify cost-sharing provisions in the plan without triggering a loss of grandfather status.

These restrictions apparently apply regardless of whether the cost-sharing change is

imposed with respect to services rendered by in-network or out-of-network providers, and

without regard to whether the cost-sharing applies to "essential benefits" or "nonessential" benefits.

Specifically, the IFR provides, in pertinent part, that a plan or policy will lose its

grandfathered status if the sponsor or issuer makes any of the following changes to costsharing:

• Increases coinsurance (or another percentage cost-sharing requirement) above

the level at which it set on March 23, 2010;

• Increases fixed-amount cost-sharing requirements other than copayments,

such as a deductible or an out-of-pocket limit, by a total percentage (measured

from March 23, 2010) that is more than the sum of medical inflation plus 15

percent; or

• Increases copayments above the level in effect on March 23, 2010 by an

amount that exceeds the greater of (a) the sum of medical inflation plus 15%,

or (b) $5 increased by medical inflation.

45 C.F.R. § 147.140(g)(1)(ii)-(iv). The Agencies, in the IFR's Preamble, appear to

recognize the importance of ensuring that plans and issuers have flexibility with respect

to cost-sharing, noting that:

[M]any plan sponsors and issuers make changes to the terms of plans or

health insurance coverage on an annual basis: Premiums fluctuate,

provider networks and drug formularies change, employer and employee

contributions and cost-sharing change, and covered items and services

may vary. Without some ability to make some adjustments while

retaining grandfather status, the ability of individuals to maintain their

current coverage would be frustrated, because most plans or health

insurance coverage would quickly cease to be regarded as the same group

health plan or health insurance coverage in existence on March 23, 2010.
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75 Fed. Reg. at 34546. We respectfully submit, however, that the IFR adopts unduly

restrictive limits to cost-sharing which (a) severely limit a plan sponsor's ability to utilize

value-based insurance design as a means of improving the quality and efficiency of the

delivery of medical care, and (b) do not accurately reflect the factors that plan sponsors

and issuers take into account when designing benefit plans.

a. The Regulation Should Establish Limits On Changes to Cost-Sharing

Only for Services Delivered In-Network

The IFR appears to provide that any change to cost-sharing that exceeds the limits

established by the IFR will cause a loss of grandfather status, without regard to whether

the cost-sharing change applies to in-network or out-of-network benefits. We

recommend that the Agencies modify the Regulation to provide that only changes to costsharing for benefits delivered on an in-network basis should be subject to limits that may

impact grandfather status, thereby preserving plan sponsors' flexibility with respect to

out-of-network cost-sharing. This distinction between in-network and out-of-network

cost-sharing is entirely consistent with the distinction that the Agencies themselves

recognized in the IFR addressing preventive services. 75 Fed. Reg. 41726 (July 19,

2010).

Specifically, the Preamble to the preventive services IFR notes that PPACA

authorizes the Agencies to develop guidelines to permit a plan or insurer to utilize "valuebased insurance designs," which "include[s] the provision of information and incentives

for consumers that promote access to and use of higher value providers, treatments and

services." 75 Fed. Reg. at 41729 (emphasis added). Recognizing that the establishment

of differential cost-sharing levels with respect to in-network and out-of-network benefits

is a critical component of a value-based design, the Agencies expressly permitted plans

and issuers "to implement designs that seek to foster better quality and efficiency by

allowing cost-sharing for recommended preventive services delivered on an out-ofnetwork basis while eliminating cost-sharing for recommended preventive health services

delivered on an in-network basis." Id.

Just as the Agencies permit cost-sharing for preventive services delivered on an

out-of-network basis, so too should the Agencies allow plan sponsors and issuers to retain

flexibility with respect to out-of-network cost-sharing. Differential cost-sharing for

services delivered in-network or out-of-network is an important component of valuebased design, given that such differentials enhance utilization of credentialed network

providers. To ensure that innovation with respect to value-based design is not

inadvertently stifled, we recommend that the final regulation establish limits as to

permissible changes only with respect to cost-sharing for in-network services.

b. The Regulation's Limits on Changes to Cost-Sharing Should Only

Apply to Essential Benefits

We also recommend that the IFR be modified to provide that changes to costsharing with respect to non-essential benefits will not trigger a loss of grandfather status.

In enacting PPACA, Congress was clearly focused on ensuring that participants had
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access to coverage for essential benefits, as defined by PPACA § 1302. Given that nonessential benefits were not a subject of Congressional concern due to the incidental nature

of such benefits, the Regulation should not treat cost-sharing changes for non-essential

benefits as implicating the plan's grandfather status.

c. The Agencies Should Adopt an Actuarial Equivalence Standard With

Respect to Cost-Sharing for Essential Benefits Delivered In-Network

The IFR's limits to changes to cost-sharing do not reflect critical factors that plans

and issuers take into account when designing plans. For example, the IFR's limits on

changes to cost-sharing are all based upon the rate of medical inflation. The rate of

medical inflation, however, does not take into account the full scope of medical cost

trend, or utilization and demographic changes that may significantly increase a plan's

costs above the rate of medical inflation—especially when measured from March 23,

2010, as the Regulation requires, rather than annually.

Accordingly, Aetna recommends that the final regulation modify the IFR, to

eliminate the prohibition on any changes to coinsurance, and the IFR's prohibition on

changes to deductibles, out-of-pocket maximums, or copayments above the limits

established by the IFR. We instead recommend that the Agencies adopt an actuarial

equivalence standard which would assure that typical year-to-year changes in costsharing would be permitted. Our recommended standard would allow plans and issuers

flexibility to adopt changes to in-network coinsurance, copayments, deductibles, and outof-pocket maximums, provided that the actuarial value remains within 15% of the plan's

original value as of March 23, 2010.

The Preamble to the IFR indicates that the Agencies rejected an actuarial

equivalence standard, finding that such a standard could permit a plan "[to] make

fundamental changes to the benefit design." 75 Fed. Reg. at 34547. We note, however,

that the final regulation could limit modifications based on actuarial value only with

respect to a plan's cost-sharing provisions, rather than permitting wholesale changes to

plan benefits. Aetna would be pleased to work with the Agencies in developing such a

standard.

7. Changes to Prescription Drug Formularies and Prescription Drug Benefits

Should Not Trigger Loss of Grandfather Status

Responding to the IFR's request for comments regarding whether changes to a

plan's prescription drug formulary should trigger a loss of grandfather status, 75 Fed.

Reg. at 34544, Aetna respectfully submits that such changes should not cause a loss of

grandfather status. In drafting the IFR, the Agencies appropriately preserved a plan

sponsor's flexibility with respect to the design of prescription drug formularies and

pharmacy benefit programs. Issuing a final regulation that would limit this flexibility

would significantly restrict the sponsor's ability to adapt to constantly changing industry

developments, and severely restrict a critical tool that helps control spiraling health care

costs.
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Pharmacy benefit programs are especially dynamic and are subject to frequent

modifications that reflect constant changes in the industry and the needs of plan

participants. Among other things, new drugs are continuously introduced to the market

while other drugs become obsolete or less favored, lower cost generic drugs regularly

become available, and therapeutic equivalents are introduced. Moreover, prescription

drug formularies and pharmacy benefit programs vary widely among plan sponsors to

reflect the unique characteristics and needs of plan participants. For example, many

plans have adopted multi-tier formularies to reflect differences in drug efficacy and

pricing. In virtually all instances, however, plans maintain at least one drug within each

therapeutic class within its top (most preferred) tier of benefits. Although specific drugs

or cost-sharing within a benefit tier may change based on factors such as drug safety,

efficacy, and the availability of generic substitutes, plan participants are assured preferred

coverage within each therapeutic class. So long as a plan continues to adhere to this

standard, its grandfather status should not be threatened based on changes in the

designated drugs or cost-sharing within the formulary tiers.

Many plans have also established, or are considering, step-therapy protocols as a

means of providing the most effective treatment for participants at the least out-of-pocket

cost. Step-therapy protocols encourage safe and cost-effective medication use by

providing coverage for front-line medications (usually generic), with access to back up

drugs (such as higher copay brand name drugs) should the front-line treatment prove

ineffective. The final regulation should not restrict a plan sponsor or issuer's ability to

introduce or modify step-therapy protocols; doing so would have the counterproductive

effect of increasing plan and participant costs, with no appreciable benefit to participants.

Additionally, many plans require, or are considering, the use of mail order

pharmacies for maintenance medications, or require that such medications be dispensed

in larger quantities, such as 60 day supplies. Requiring use of mail order pharmacies or

specifying a minimum day supply for prescription drug medications does not restrict a

participant's access to prescription drug benefits. Accordingly, adding or modifying a

mail order requirement or a quantity standard should not trigger a loss of grandfather

status.

We also encourage the Agencies to recognize that a change to a plan's pharmacy

network should not cause a loss of grandfather status. Plans switch provider networks for

a variety of reasons: plans may seek a network that provides more geographically

convenient access to plan participants, or may switch to a network that has comparable

geographical access, but more favorable reimbursement rates. We note, however, that in

considering changes to a pharmacy network, plans have an inherent incentive to ensure

that participants have convenient access to network pharmacies, given the plan's desire to

steer a greater percentage of participants to contracted providers. Accordingly, the

Agencies should recognize in the Regulation that a change to a pharmacy network will

not cause a loss of grandfather status.
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8. Changes to Provider Networks Should Not Trigger Loss of

Grandfather Status

In response to the Agencies request for comments regarding changes to a plan's

provider network, 75 Fed. Reg. at 34544, we submit that such changes should not cause

the loss of grandfather status. As noted above, plan sponsors and issuers have an inherent

incentive to maintain stable provider networks that provide participants with convenient

access to health care providers and health care services. Nevertheless, some change in

the composition of a network is inevitable, given that institutional providers merge,

change the services they provide, or exit particular markets. Likewise, physicians and

other professionals may close their practices, retire, or relocate. Even in the absence of

these changes, providers may not agree to continue participation in a particular network.

These routine changes do not impact a participant's ability to access health care providers

or services. As such, the Agencies should recognize that routine changes to a provider

network should not trigger a loss of grandfather status.

Likewise, a plan should not lose grandfather status as a result of switching its

network provider. As described above in connection with pharmacy benefits, plans

switch provider networks for a number of reasons: a geographically significant provider

may discontinue its participation in the network, forcing the plan to seek an alternate

network that can provide services to participants; or a plan may negotiate more favorable

reimbursement rates with a new network that will result in cost-savings for the plan and

participants, in the form of lower premiums and cost-sharing. But as is the case with

pharmacy networks, plans have an incentive to ensure that participants have convenient

access to network providers, given that a failure to provide such access would defeat the

plan's attempt to steer a greater percentage of participants to network providers.

Accordingly, Aetna submits that changes to a provider network should not cause the loss

of grandfather status, where the network change does not alter an enrollee's access to

comparable providers in the same geographic area.

9. Changes to Plan Terms that Do Not Eliminate Benefits Should Not Trigger a

Loss of Grandfather Status

Aetna also recommends that the Agencies modify the Regulation to clarify that

changes to a plan's eligibility criteria or plan terms which do not eliminate all (or

substantially all) benefits to treat a particular condition will not cause the plan to lose

grandfather status. For example, a plan or issuer may alter its dependent eligibility

criteria under group or individual health plans, including the addition of a "tier" structure

(i.e., moving from "employee" to "employee +1" "employee + 2", etc.). Additionally,

plans and issuers routinely make changes to a plan's definition of medical necessity and

experimental/investigational procedures, and may modify coverage terms to reflect

appropriate treatment settings (e.g., providing coverage for certain minor procedures if

performed at a physician's office rather than an inpatient setting). Assuming that

meaningful coverage for a condition that was covered on March 23, 2010 is maintained,

none of these changes should be deemed to eliminate all (or substantially all) benefits to

treat a particular condition, or otherwise implicate limitations set forth in the final

regulation.
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10. The Elimination of a Benefit That Is No Longer Required By Applicable

State Law Should Not Trigger Loss of Grandfather Status

The IFR provides that "[t]he elimination of all or substantially all benefits to

diagnose or treat a particular condition causes a group health plan or health insurance

coverage to cease to be a grandfathered health plan." 45 C.F.R. § 147.140(g)(1)(i). We

note, however, that just as statesfrequently mandate that insurers (and other plans subject

to state law) provide coverage for particular items or procedures, so too do states revoke

such mandates. In such circumstances, the state is affirmatively authorizing insurers and

other plans to drop coverage for the particular items or procedures, and a plan should not

lose its grandfather status based on a decision to eliminate coverage for that item or

service. Accordingly, we request that the final regulation be modified to provide that a

grandfathered health plan will not lose such status based on a decision to eliminate

benefits for items or services that are no longer mandated under state law.

11. The IFR's Transition Rules Should Be Modified

The IFR provides specific "transition rules" which, if applicable, will prevent a

plan from losing grandfather status as a consequence of a benefit or cost-sharing change

that was adopted prior to June 14, 2010 which exceeds the parameters established by the

IFR. The availability of the IFR's transitional relief depends on when the benefit or costsharing change was adopted, and the magnitude of the change.

The first transition rule provides that a policy or plan will not lose grandfather

status based on benefit or cost-sharing changes that exceed the IFR's limits, if the changes

were adopted before March 23, 2010 (even if they take effect after March 23, 2010) so

long as such changes were adopted pursuant to "a legally binding contract entered into on

or before March 23, 2010," "a filing on or before March 23, 2010 with a State insurance

department," or "written amendments to a plan that were adopted on or before March 23,

2010." 45 C.F.R. § 147.140(g)(2)(i). With respect to filings with a state insurance

department, the IFR does not address whether the insurance department had to approve

the filing on or before March 23, 2010 as a condition of maintaining grandfather status.

We therefore recommend that the Agencies clarify that so long as the benefit or costsharing change was filed with a state insurance regulator before March 23, 2010, the

change will not trigger loss of grandfather status, even if an insurance regulator approves

the filing after such date.

The IFR also provides plan sponsors and insurers an opportunity to revoke

amendments that would cause the loss of grandfathered status that were adopted after

March 23, 2010 and before June 14, 2010. The Preamble to the Regulation also provides

that for plan changes adopted during this period that "only modestly exceed" the

Regulation's parameters, the Agencies will "take into account good-faith efforts to

comply" with PPACA, which is a very narrow standard. 75 Fed. Reg. at 34544. For

more "significant" changes adopted after March 23, 2010 – but before June 14, 2010 –

the only option is to revoke the change or lose grandfathered status.
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Plan sponsors and insurers must make changes year-round to address changes in

federal and state laws, and those changes are implemented when policies renew. As

noted above, many insurers and plans have already made changes to comply with

MHPAEA that were required by July 1, 2010. And many insurers filed amendments with

state insurance commissioners on a myriad of benefit or cost-sharing issues shortly after

March 23, 2010, when they had no notice as to the scope of the IFR or its restrictiveness

with respect to changes to benefits and cost-sharing. We therefore recommend that the

Agencies withdraw this transitional relief/good faith compliance standard, and apply the

Regulation only to changes made by plans and insurers after the publication of the IFR on

June 14, 2010.

* * *

Aetna is pleased to have the opportunity to provide comments regarding the

grandfather IFR, and we thank you for consideration of our comments. Should you have

any questions, please feel free to contact me.

Sincerely,

Steven B. Kelmar