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Ju12G,2010 08:30:03 Wge20 

OSNUM: 072&20101011 Aetna 

OFFICE OF THE SECRETARY 151 Fannington Avenue CORRESPONDENCE 


CONTROL CENTER 
 Hartford. CT 06156 

Steven B. Kelmar 


Senior Vice President 


Government Affairs and Public Policy . 


Law &Regulatory Affairs, RE6A ' 
 July 20. 2010 (860) 273--2706 

Fax: (860) 273-8340 

The Honorable Kathleen Sebelius 

Department ofHealth and Human Services· 

Hubert H. Humphrey Building, 

Room 44S-G 

200 Independence Avenue, SW 

Washington, DC 20201 

Re: 	 Interim Final Rule Concerning Grandfather Status-Request for 


Issuance ofFAQs 


Dear Secretary Sebelius: 

On behalfof Aetna. Inc., I am writing to request that the Departments of Health and Human 

Services ("HHS"), Labor. and Treasury (the "Departments") issue near-tenn guidance addressing 

two important issues relating to the Interim Final Rule (the "IFRII) for 'fGrandfather,t Status under 

the Patient Protection and Affordable Care Act (UPPACAII

). 75 Fed. Reg. 34538 (June 17,2010). 

Aetna is one ofthe nation's leading diversified health care benefits companies, providing 

members with information and resources to help them make better infonned decisions about their 

health care. Our programs and services strive to improve the quality ofhealth care while 

controlling rising employee benefits costs. As a key stakeholder affected by PPACA, Aetna is : 

. committed to working with the Departments in developing reasonable and administrable ;! 

standards for the implementation ofPPACA. 

Aetna will submit more extensive comments regarding the IFR before the close ofthe comment 

period. but believes that the issues discussed in this letter are ofsuch importance to the insurer' 

and plan sponsor community that the Departments should issue FAQs in the near-tenn. For 

purposes of assisting the Departments with such guidance. Aetna submits the following questions 

and proposed responses. 

Questloo Number 1: Ifthe spoosor of ao insured pJan takes action that could trigger the 

loss of grandfather status without notifying the plan's iosurer (such as deereasl.og the 

sponsor's contribution rate by more than five percent measured from March 23, 2010 or 

transferring employees to grandfathered coverage without a bonafide employment-based I 

reason), will tbe Insurer be treated as non-compliant wltb PPACA if it continues to offer a 

grandf~thered policy to the pJan? 

i 
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Background 

Under the IFR, there are a number of actions that the sponsor ofa grandfathered plan can take " 

which could trigger the loss ofgrandfather status, about which the plan's insurer may have no 

notice or control. For example, employers detennine how to allocate the cost ofhealth 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 'I, ' 

the cost ofcoverage, or whether the employer (or employee organization) may modify its' 

contribution rate. Instead, insurers receive a monthly remittance from the employer which covJs 

the monthly premium, and tbe 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 anotber, without notifying the insurer ofthe transferee plan ofsuch actiof!-. :1 

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

grandfathered plan ifan employer (or employee organization) decreases its contribution rate 

"towards the cost ofany tier ofcoverage for any class ofsimilarly 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. § 147.14O(g)(l)(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 ofa merger, acquisition, or similar business restructuring is to cover 

new individuals under a grandfathered plan; or 

'2. Employees are transferred into a plan or bealth 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 ofgrandfather 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 ofa 

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 transfem&t 

employees from one plan to the plan for which the insurer is providing health insurance coverage. 

Without clarification, 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 nC)t 

providing all ofthe PPACA required benefits for non-grandfathered plans) for continuing to offer 

a grandfathered policy to an employer that has Ul\i1aterally taken action that could trigger Joss or: 

grandfather status, even ifthe insurer had no notice ofthe employer's action. 

Proposed Response 

The Departments have determined that, with respect to the period ofMarch 23, 2010 until 

September 23, 2010, a health insurance issuer will not be treated as non-comp1iant 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, 
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2010 or transferring employees to the grandfathered coverage without a bona fide employment.! 

based reason. : 

For plan years beginning on or after September 23, 2010, the Departments will not treat a health 

insurance issuer as non-compliant with PPACA ifit 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 bonafide employment-based reason), but only where 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 ofgrandfather status under the IFR, and the 

employer or employee organization fails to do so notwithstanding the insurer's requirement. In 

such circumstances. the Department will treat the insurer's efforts to obtain notice of the 

employers actions as good faith compliance with the IFR. 

Oaesdon Number 2: Ifa health iDsuraDee Issaer issues a new poUcy or certificate of 

iDsarance to a po6cyholder with grandfatbered coverage which provides benefits that are ,: 

identical or sabstaDtialJy tbe same as the benefits provided ander the prior policy or 

certificate, will the new policy or certificate be treated as a continaation of the 

grandfatbered coverage and retain its grandfathered statas? 

Backgroand 

It is common for health insurance issuers to issue new policies or certificates of insurance to 

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

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

a smaller number ofsubstantially simi1ar 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 Ii 

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 [ofthe 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 ofinsurance after March 23, 2010 (because. for example. any 

previous policy, certificate. or contract ofinsurance is not being renewed), then that policy. 

certificate, or contract of insurance is not a grsndfathered health plan with respect to the 

individuals in that group health plan." 4S C.F.R. § 147.14O(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.l40(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 
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July 20,2010 

policyholder for bonafide business reasons, and the coverage is substantially the same as was in 

force on March 23, 2010. We note that~ in other'circumstances. the Department ofLabor has ii 

recognized that non-substantive changes to policy terms should not disqualify an insurance policy 

from grandfather status. See Department ofLabor Adv. Op. 2000-12A (October 4,2000)' 

(amendments to group annuity contracts to accommodate changes in a plan sponsor's corporate Ii 

structure are not material, and will not disqualify such policies from their status as "transition I 

policies" under DOL regulation issued pursuant to ERISA § 401(c)(1». 

Proposed Response 

The Departments have determined that a new policy or certificate will be grandfathered where (l) 

the new policy or certificate is issued by a health insurance issuer to the same policyholder for 

bonafide business reasons and (2) the coverage under the new policy, when compared to the 

coverage under the old policy, would not cause the loss ofgrandfathered status under the 

provisions ofsection (g)(1) ofthe IFR. In these circumstances, the new policy or certificate wit' 

be considered as continuing in force the same insurance coverage that was in effect on March 2~, 

2010. ' 

... ... ... 

Aetna appreciates the Department's consideration ofthese proposed FAQs, and looks forward to, 

working with the Departments in developing final regulations regarding grandfather status under 

PPACA. Should you have any questions, please feel free to contact me. 

Steven B. Kelrnar 

CC: 	Jay Angoff 

Steve Larsen