subscribers or their beneficiaries. In the drug benefit context, PCMA believes that
a change in the channel through which drug benefits are delivered should not
imperil retention of grandfathered status. For example, a plan should be able to
utilize preferred pharmacy locations, such as mail service pharmacies, which have
been shown to increase patient adherence to drug therapy, improve safety of drug
dispensing, and lower costs.

PCMA Recommendation: PCMA recommends that the Departments not add
changes in plan structure to the list of causes for loss of grandfathered status. If
the Departments do include some changes in plan structure in the list of changes
that would cause a plan to lose grandfathering status, the Departments should
clarify that changing the channel through which drug benefits are delivered does
not implicate grandfathered health plan status.

Changes in Plan’s Provider Network -- PCMA believes that health plans and
insurers must be able to make changes in their networks of participating providers
in order to assure subscriber access, maintain quality, and control provider fraud,
waste and abuse. Currently, group health plans routinely make changes in their
provider networks at the beginning of each new plan year, and even during the
plan year (e.g., to prevent or eliminate provider fraud, waste, or abuse or to add a
new provider). As long as subscribers are assured of reasonable access to
providers and pharmacies for exercising their covered benefits, the Departments
should allow grandfathered plans and insurers the discretion to manage their
provider networks. In the context of pharmacy benefit access, the Departments
should look to the Tri-Care or Medicare Part D pharmacy access standards, or
similar access requirements imposed by private sector plan sponsors, for
examples of maintaining appropriate network access. For example, the
Departments should allow changes in particular pharmacies as long as the total
number of network pharmacies remains within an adequate range.

PCMA Recommendation: PCMA recommends that the Departments not add
changes in a network plan’s provider network to the list of changes that would
result in loss of grandfathered status. If the Departments do include some
changes in a plan’s provider network in the list of changes that would cause a
plan to lose grandfathering status, the Departments should clarify that changes
will be allowed as long as the total number of network providers in a category
remains within an adequate range.

Changes to a Prescription Drug Formulary — Prescription drug formularies are
“living” arrangements that adapt to changes in available therapy and
contemporary standards of medical practice. PCMA believes that grandfathered
plans should be able to make changes in their formularies that are consistent with
best practices, enhance the quality of care, ensure safety, and improve the cost-
effectiveness of the subscriber’s drug benefit. Locking grandfathered plans in to
the formularies they had in place on March 23, 2010 would reduce plan members’
access to new and innovative drugs, disadvantage the plans in their negotiations



Services to ensure successful implementation of the Patient Protection and Affordable
Care Act.

Sincerely,

Michelle Galvanek

Vice President, Regulatory Affairs


Departments could allow an actuarially equivalent standard for prescription drug
benefits. Further, PCMA recommends that the benchmark for allowable changes
in drug benefit copayments be prescription drug inflation and not general medical
care inflation.

Decrease in Contribution Rate by Employers and Employee Organizations/
Contribution Rate Based on Cost of Coverage (Paragraph (g)(1)(v)) -- Under the
IFR, if an employer decreases its contribution rate based on the cost of coverage
for “any tier of coverage for any class of similarly situated individuals” by more
than five percent below the contribution rate as of March 23, the health plan loses
grandfathered health plan status. The IFR does not define “tier of coverage”, but
implies in Example 7 that it may refer to “self-only or family”. PCMA believes
the “tier of coverage” term should be defined and clarified in the Final Rule.

PCMA is concerned that the five percent formula may be too rigid and fails to
take into consideration changes in care that may reduce costs while maintaining,
or improving, the quality of outcomes. Nor does the formula take into account
safety considerations. For example, shifting coverage from inpatient care to
ambulatory or home-based settings for many therapies reduces costs while
maintaining quality and safety. Similarly, increased use of outpatient surgery
lowers costs, reduces hospital infection rates, and generally improves patient
outcomes. However, the rule as written seems to disallow such changes in
coverage by a grandfathered health plan if they result in reducing the employer’s
contribution rate by more than 5 percentage points below that which was
contributed on March 23, 2010.

PCMA Recommendation: PCMA recommends that the Departments define and
clarify “tier of coverage”. PCMA also recommends that the Departments modify
this section of the rule to recognize the value of changes in the site or method of
care that enhance quality and safety, or improve patient outcomes, and allow
such changes in coverage even if they result in lowering the contribution rate by
more than 5 percentage points from the March 23, 2010 benchmark.

Request for Comments on Additions to List of Changes that Result in Loss of
Grandfathered Status

The Departments ask for comments on what other changes, if any, should be
added to the list of changes in a health plan or insurance coverage that would
cause the plan or coverage to cease to be grandfathered. The following changes
are specifically noted:

Changes in Plan Structure -- PCMA believes that the structure or design of a
health benefit plan should not, in and of itself, be cause for cessation of
grandfathered status. The tests should be the scope of coverage, access to
providers, employer contribution, and general level of subscriber cost-sharing,
and not the structural elements of how those benefits are delivered to the


with pharmaceutical manufacturers, and could result in unnecessarily increasing
the cost of providing drug benefits. PCMA believes that as long as formulary
changes are subject to objective standards, such changes should not result in
jeopardizing the grandfathered status of a health plan or health insurance. Such
objective standards would include review and approval by an independent
pharmacy and therapeutics (P&T) committee, manufacturer labeling, clinical best
practices, and patient safety.

PCMA Recommendation: PCMA recommends that the Departments not add
changes to a prescription drug formulary to the list of changes that would result
in the loss of grandfathered status, as long as formulary changes are made based
on objective standards such as those described above.

Changes Other than Those Described in the Rule -- The preamble to the IFR
states that changes other than those specifically described in the rule will not
cause a plan or coverage to cease to be a grandfathered health plan. Examples
cited include changes to comply with Federal or state legal requirements, changes
in premium, or changing third-party administrators. PCMA supports this
clarification, particularly compliance with Federal or state legal requirements.
However, there are other requirements that may be imposed by accreditation or
certification organizations or professional societies that assure or enhance quality
and promote best practices. These requirements or recommendations should be
recognized and supported by the Departments as legitimate drivers for making
changes in benefits that should not jeopardize grandfathered status.

PCMA Recommendation: PCMA recommends that the Departments expand the
list of changes that will not cause a plan or insurance coverage to lose
grandfathered status to include changes required by accreditation or certification
bodies or recommended by professional organizations as “best practices”.

Definition of Grandfathered Health Plan Coverage

Requirement for plan to include statement in any plan materials that it believes it
is a grandfathered plan and to provide a contact for questions or complaints — The
requirement for a plan to include a statement in “any plan materials provided to a
participant or beneficiary describing the benefits provided” that the plan believes
it is a grandfathered health plan needs to be clarified and narrowed. As written,
the requirement is overly broad and potentially burdensome. PCMA could
support such a requirement if it were narrowed to the summary plan document
and documents provided to subscribers during the annual open enrollment period.
PCMA supports the proposed model language to meet the disclosure requirement
but we do not agree with those who suggested to the Departments that each
grandfathered plan be required to list and describe consumer protections that do
not apply to the plan (including their effective dates) because it is grandfathered.

PCMA Recommendation: PCMA recommends that the Departments narrow the
statement requirement to the summary plan document and documents provided to


PCMA

PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION

August 16, 2010

Jay Angoff

Director

Office of Consumer Information and Insurance Oversight
U.S. Department of Health and Human Services

Hubert H. Humphrey Building

Room 445-G

200 Independence Avenue, S.W.

Washington, DC 20201

Attention: OCIIO-9991-IFC
Dear Mr. Angoff:

The Pharmaceutical Care Management Association (PCMA) appreciates the opportunity
to submit comments on the “Interim Final Rules for Group Health Plans and Health
Insurance Coverage Relating to Status as a Grandfathered Health Plan Under the Patient
Protection and Affordable Care Act,” published in the Federal Register on June 17,
2010. PCMA is the national association representing America’s pharmacy benefit
managers (PBMs), which administer prescription drug plans for more than 210 million
Americans with health coverage through Fortune 500 employers, health insurers, labor
unions, and Medicare.

PCMA appreciates all the tasks that the Departments of Treasury, Labor, and Health and
Human Services must complete to implement the recently enacted health care reform
statute and we value opportunities to comment on the many aspects of regulations to
implement the law. PCMA is generally supportive of the Grandfathered Health Plan IFR,
but we do have concerns with several aspects of the rules. Our detailed comments appear
below.

Section I: Section 1251 of PPACA, Preservation of Right to Maintain Existing
Coverage

1. Maintenance of Grandfathered Status of Paragraph (g) of 45 CFR 147.140

e Elimination of benefits (Paragraph (g)(1)(i)) -- The language of this section of the
tule states that 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, resulting in the loss of grandfathered
status. PCMA is concerned about the interpretation of “any necessary element”
as it might be applied to the coverage or formulary status of a particular
medication. We are also concerned about who will determine what is “necessary”
and whether that determination will be based on medical compendia or other
published medical authority.

601 Pennsylvania Avenue, NW « Seventh Floor ¢ Washington, DC 20004 * 202.207.3610 «
www.pemanet.org


subscribers during open enrollment. PCMA supports the model language, but we
believe it is not necessary for each grandfathered plan to list and describe every
consumer protection in PPACA that does not apply to it: those who are interested
in obtaining such information can so inquire with the required point of contact.

e Maintenance of records -- PCMA supports the requirement for maintenance of
records documenting the terms of the plan in effect on March 23, 2010.

PCMA Recommendation: PCMA supports the requirement for maintenance of
records documenting the terms of the plan in effect on March 23, 2010.

e Inspection of records - While PCMA supports the right of inspection by
governmental officials and subscribers, PCMA recommends that the language be
modified to require written requests from non-governmental officials and to allow
adequate time for plans to respond.

PCMA Recommendation: PCMA recommends that the Departments modify the
inspection language to indicate that subscribers, participants or beneficiaries
must submit their request in writing and indicate the specific plan by name and/or
identifying number. Plans should be allowed a reasonable time to respond to
such requests, such as 14 business days.

4. Section IV: Economic Impact and Paperwork Burden

e Subsection B. 2. Regulatory Alternatives -- PCMA agrees with the decision of
the Departments to opt against rules that would require a plan sponsor or
insurance issuer to relinquish grandfather status if only relatively small changes
are made to a plan. We applaud the Departments’ conclusion that plan sponsors
and issuers should be able to take steps to control costs, including limited changes
in cost sharing. Health plans are “living” contractual arrangements that must
adapt to changes in the practice of medicine and the delivery of health care goods
and services in order to maintain quality and manage costs. With regard to drug
benefits, formularies and provider networks are periodically reviewed and
modified to reflect changes in medication therapy, patient needs, and to maintain
convenient access to pharmacy providers. Allowing plans and issuers the
flexibility to make such modifications and retain their grandfather status will go a
long way toward preserving the right of individuals to maintain their existing
health care coverage.

PCMA Recommendation: PCMA supports the decision by the Departments to
not adopt rules that would require a plan sponsor or insurance issuer to
relinquish grandfather status if only relatively small changes are made to a plan.
We agree that plan sponsors and issuers should be able to take steps to control
costs, including limited changes in cost sharing.

As always, we appreciate your consideration of our comments and look forward to
continuing to work with the Departments of Treasury, Labor, and Health and Human


The specific drugs on a health plan formulary change as new products come to
market, older products lose their patents and become available as less costly
generic versions, or products are removed from the market for safety reasons.
Formularies and cost-sharing arrangements for covered drugs currently change
from one plan year to the next, and often change within a plan year as new
products are approved for use. PCMA believes that grandfathered health plans
must be allowed to continue to make formulary changes that maintain a
commensurate level of coverage without risking loss of their grandfathered plan
status.

If grandfathered health plans were not allowed the flexibility to modify their
formularies, plan members would not be able to access new drugs that come to
market under their plan benefits. In addition, such restrictions on grandfathered
plans would disadvantage them in their negotiations with pharmaceutical
manufacturers, which could lead to higher drug prices.

PCMA Recommendation: PCMA recommends that the Departments clarify that
grandfathered health plans retain the ability to make routine formulary changes
consistent with those made prior to March 23, 2010, as long as a commensurate
level of coverage is maintained. We also recommend that the Departments clarify
that grandfathered health plans may continue to encourage the use of generic
drugs and utilize incentives to encourage clinically appropriate drug utilization.
Finally, PCMA recommends that the Departments modify this section of the rule
to add further clarification regarding the basis for determining what constitutes
“any necessary element” to treat a condition. PCMA recommends that such
determinations be made by independent medical experts (e.g., Institute of
Medicine).

Increase in Percentage Cost-sharing (Paragraph (g)(1)(ii) -- This requirement
states that any increase measured from March 23, 2010, in a percentage cost-
sharing requirement (such as an individual’s coinsurance) causes a group health
plan or health insurance coverage to cease to be a grandfathered health plan.
Next, in sections (iii) and (iv), the Grandfathered Health Plan IFR discusses
allowable increases in deductibles or out-of-pocket limits, and fixed-amount
copayments. PCMA is concerned that many prescription drug benefit plans
utilize a combination of coinsurance and fixed-amount copayments, and that these
arrangements do not fit neatly into the three categories listed in subparts (ii), (iii),
and (iv) of Paragraph (g)(1). For example, a drug benefit plan may require the
subscriber to pay coinsurance, with a maximum dollar amount (e.g., 20%
coinsurance, with a maximum of $35).

PCMA Recommendation: PCMA recommends that the Departments clarify that
grandfathered health plans with hybrid drug benefit designs utilizing both
coinsurance and fixed-amount copayments, or coinsurance and fixed-amount
cost-sharing other than a copayment, may increase the fixed-amount portions of
such arrangements as long as the increase is otherwise in compliance with the
terms of Paragraph (g)(1)(iii) and (iv).


Increase in Fixed-Amount Copayment (Paragraph (g)(1)(iv)) — This requirement
states that any increase in a fixed-amount copayment causes a plan to lose
grandfathered health plan status if the increase is greater than the maximum
percentage increase of medical inflation plus 15 percentage points or five dollars
increased by medical inflation. While this requirement may be appropriate with
regard to hospital services or physician payments, PCMA believes that
application of this requirement on a per prescription basis would be unduly
restrictive given the tiers of coverage used by most group health plans and the
large number of prescription drug transactions completed in any given plan year.
For example, a grandfathered health plan should be allowed to move a brand
name drug into a higher formulary tier once a generic version becomes available
without losing grandfathered health plan status. Under the IFR, however, a move
to a higher tier could subject the brand to a higher copayment, exceeding the cap
imposed by the formula in the IFR.

Instead of the requirements proposed in the IFR, PCMA believes this section of
the rule should apply only to increases in the first and second tiers of a
prescription drug benefit formulary. Co-pay increases to third or higher tiers of a
prescription drug benefit for non-specialty drugs should be excluded from this cap
on increases to fixed-amount co-payments. Most prescription drug benefit plans
incentivize plan members to use the most cost-effective drugs on the drug
formulary, which are purposely placed on the first and second tiers.
Alternatively, PCMA recommends that an actuarially equivalent standard be
utilized to allow plans to adjust their co-payments with some flexibility provided
they are actuarially equivalent to the plan benefits that were in effect on March
23, 2010. Further, PCMA suggests the Departments consider adopting
prescription drug inflation rather than general medical care inflation as the
benchmark for allowable increases in drug benefits copayments. Data on
prescription drug inflation are collected and published by The Bureau of Labor
Statistics (BLS).

In addition, PCMA is concerned that the hypothetical CPI-U for medical care
used in Example 3 of the IFR gives an inaccurate perception of acceptable
changes. The CPI-U used in the example is 87 points higher than the current CPI-
U for medical care and, because it is skewed so high, the example conveys an
incorrect result. If actual 2009 data were used in the example, the result would be
that the subject plan would cease to be a grandfathered plan: exactly the opposite
of what is depicted in the IFR. We believe the parameters for permissible
increases in copayments under the IFR formula are considerably tighter than what
Example 3 would lead the reader to believe.

PCMA Recommendation: PCMA recommends that the Departments clarify that
any change in the maximum per prescription price should not cause the cessation
of grandfathered status as long as the maximum change in copayment for
aggregate prescription drug benefit transactions is otherwise consistent with the
IFR. Further, the cap on any increase in a fixed-amount copayment should only
apply to the first two tiers of a drug formulary. In the alternative, the