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{S]ound and stable industrial peace and the advancement of the genera! welfare,
health, and safety of the Nation and of the best interest of employers and
employees can most satisfactorily be secured by the settlement of issues between
employers and employees through the processes of conference and collective
bargaining between employers and representatives of their employees.

29 U.S.C. § 171(a) (emphasis added).

In unionized work settings, the federal labor policies favoring bargaining stem from the
importance of permitting the employers and unions to mutually address challenges, with a view
towards fashioning better solutions than could be formulated by either party unilaterally. As the
Supreme Court stated in NLRB v. Insurance Agents’ International Union, 361 U.S. 477, 488
(1960), the NLRA’s the legislative history reveals that Congress favored bargaining not only to
promote “the over-all design of achieving industrial peace” but also that “Congress intended that
the parties should have wide latitude in their negotiations, unrestricted by any governmental
power to regulate she substantive solution of their differences.” Id. at 488 (emphasis added;
citation omitted),

Self-insured health plans present issues that are more important, for several reasons, than
fully-insured health plans when it comes to bargaining over the new healthcare reform law's
mandates:

¢ Because the employer maintaining a self-insured health plan directly bears the
financial costs and risks associated with the plan’s healthcare claims, collective
bargaining provides the opportunity for the employer and union to formulate a wide
array of potential arrangements to address new or increased costs, with the possible
options ranging from adjustments in wages, other benefits, work practices,
management restrictions, other aspects of plan design, working conditions and all
other potential subjects of bargaining.

¢ The direct financial impact of new healthcare reform mandates on the employers who
maintain self-insured plans, creates a shared interest — more so than would exist with
fully-insured plans - among the employer, its union(s) and, and its employees to
address and formulate mutually acceptable ways to deal with changes in costs,
coverage, plan design, and other variables,

© Most important, if the section 1251 CBA deferral is unavailable to unionized
employers that maintain self-insured plans — thereby denying employers the time and
opportunity afforded by section 1251 to consider and negotiate different ways to
address healthcare reform mandates — employers will face costs and risks ranging
from potential legal challenges to the denial of opportunities to adequately prepare for
the new mandates. These risks, in combination, especially cause injury to the
employers who maintain self-insured health plans, because increased employment-
related costs imposed directly on the employer predictably will cause decreased
employment and potential layoffs. Thus, the outcome will be to reduce the
availability of employer-provided healthcare coverage for union-represented
employees, which directly undercuts the policies underlying our new healthcare


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3. Collectively Bargained Plans. The Interim Rules should not differentiate between
collectively bargained self-insured plans and fully-insured plans, and should defer all
healthcare reform mandates until the beginning of the plan year after termination of
the last plan-related collective bargaining agreement.

Section 1251(d) of the Affordable Care Act makes grandfathered mandates inapplicable
to collectively bargained health insurance coverage until, at the earliest, the termination of the
last collective bargaining agreement (“CBA”) relating to the coverage. However, the Interim
Final Rules indicate that this language (hereinafter referred to as “CBA deferral” language) has
no impact on collectively bargained self-insured plans. Moreover, the Interim Rules also
indicate that the CBA deferral language has no effect on the immediate mandates. Although
collectively bargained fully-insured health plans are covered by Section 1251(d)’s CBA deferral
language, the Interim Rules still make the immediate mandates applicable to such plans.

For the reasons noted below, the Departments should modify these aspects of the Interim
Rules, which pertain to collectively bargained plans.

(a) Treatment of Collectively Bargained “Self-Insured” Plans. Collectively bargained
“self-insured” plans should be subject to the explicit collective bargaining agreement

deferral language set forth in Affordable Care Act section 1251(d). _

Section 1251(d) of the Affordable Care Act states that the non-grandfathered healthcare
reform mandates (set forth in subtitles A and C of Title | of the Act) do not apply to certain
healthcare plans until the termination of the last plan-related CBA (i.e., the last collective
bargaining agreement relating to the coverage in question), Thus, Section 1251(d) states:

(d) EFFECT ON COLLECTIVE BARGAINING AGREEMENTS. In the case of health insurance
coverage maintained pursuant to one or more collective bargaining agreements between
employee representatives and one or more employers that was ratified before the date of
enactment of this Act, the provisions of this subtitle and subtitle A (and the amendments
made by such subtitles) shall not apply until the date on which the last of the collective
bargaining agreements relating to the coverage terminates. Any coverage amendment
made pursuant to a collective bargaining agreement relating to the coverage which
amends the coverage solely to conform to any requirement added by this subtitle or
subtitle A (or amendments) shall not be treated as a termination of such collective
bargaining agreement.

Affordable Care Act § 1251(d) (emphasis added).

The Interim Rules, as explained by the Departments, would substantially narrow the
above language by excluding self-insured healthcare plans from any CBA deferral. Here, the
Interim Rules incorporate the statutory language almost verbatim, and add a sentence indicating
that, after the termination of the last plan-related CBA, “the determination of whether health
insurance coverage . . . is grandfathered health plan coverage is made under the [other] rules of
this section .. . and, for any changes in insurance coverage after the termination of the collective
bargaining agreement, under the rules of paragraph (a)(1)(ii) of this section.” 75 Fed. Reg. at


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meet at reasonable times, and a prohibition against implementation unless and until
negotiations result in a new agreement or impasse. Bottom Line Enterprises, 302
N.L.R.B. 373 (1991), enforced, 15 F.3d 1087 (9th Cir. 1994); RBE Electronics of
S.D., Inc., 320 N.L.R.B. 80 (1995). Again, unlike other statutes, the Affordable Care
Act contains no provisions negating or limiting notice and bargaining obligations.
See note 15 above. Consequently, it is important for the Departments to reconcile
these competing obligations by deferring healthcare reform mandates until after the
expiration of existing plan-related collective bargaining agreements.

¢ Applying the immediate healthcare reform mandates on collectively bargained plans,
before the parties have the opportunity for bargaining, may substantially undermine
the likelihood that employers and unions in bargaining can reach a mutually
acceptable resolution of healthcare benefit issues. In most if not all cases, employers
and unions have already worked for years on efforts to preserve healthcare benefits to
the extent possible while attempting to cope with substantial ongoing increases in
healthcare costs. Imposing the immediate mandates before employers and unions
next have the chance to negotiate healthcare issues may overwhelm parties who, in
the next round of bargaining, will be confronted by immense backward- and forward-
looking healthcare benefit challenges.

¢ Inthe case of multi-employer collective bargaining agreements, such as the national
rail freight agreements, healthcare benefits involve an even greater proliferation of
potential obstacles to the immediate application of healthcare reform mandates. Ifa
preexisting agreement does not preclude bargaining, even more time for bargaining is
required based on the participation of employer and multi-employer association
representatives, the participation of international and local union representatives, and
the frequent need for separate follow up bargaining with other industry employers
(and local unions) that may independently adopt the “pattern” established by multi-
employer agreements, with yet additional bargaining over company-specific issues.

e In many cases, union-negotiated health and welfare funds are responsible for single-
and multi-employer healthcare arrangements, and escalating healthcare costs have
placed those funds in financial distress to the point of insolvency. Without the
deferral of new mandates until after existing agreements expire — thereby permitting
new negotiations concerning funding, contributions, plan design and related measures
— the new healthcare reform requirements may cause health plan benefits to be
reduced or unavailable altogether. Such outcomes obviously would undermine, rather
than advance, the policies underlying the healthcare reform laws.

(3) Preexisting recognition of healthcare reform burdens. Reinforcing the above
considerations is the acknowledgement — already incorporated into the healthcare reform laws,
and reflected in the Interim Rules — that new healthcare mandates create substantial challenges
for union and nonunion employers. As noted previously, the Affordable Care Act itself
recognizes the need at least to defer grandfathered mandates for collectively bargained health
plans, See pages 12-19 above.


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In several important respects, the Interim Rules warrant modification to be consistent
with statutory language, to advance the policies and purposes underlying the healthcare reform
laws, and to avoid outcomes that are incongruous with other federal statutes, including the other
benefits laws and the National Labor Relations Act (“NLRA”), 29 U.S.C. §§ 151 e¢ seq. (2006),
the Labor Management Relations Act (“LMRA”), 29 U.S.C. §§ 141 ef seq. (2006), and the
Railway Labor Act (“RLA”), 45 U.S.C. §§ 151 er seq. (2006).

SUMMARY OF COMMENTS

1. Immediate Mandate Cost. The costs of the immediate mandates imposed by the Act are
greater than the permissible range of cost changes permitted under the Grandfather Interim
Final Rules and, hence, the maximum permissible modifications under the Interim Final
Rules are set too low. See pages 5-9.

(a) Dependent Coverage to Age 26. The Dependent Rule itself constrains employer’s
ability to recover the cost of the Immediate Mandate and consumes over half of the
permissible cost-sharing latitude permitted by the Grandfather Interim Final Rules. See
pages 5-6.

(b) Prohibition on Lifetime Limits. The prohibition on Lifetime Limits will create
financial uncertainty for employers and will have widely varying cost impacts that are not
adequately recognized in the Grandfather Interim Final Rules. See pages 6-8.

(c) Restricted Annual Limits. The Interim Final Rules have widely disparate impacts on
plans that currently contain annual limits and should be revised to permit plans to retain
their current annual limits or end coverage for part-time, seasonal or low-wage
workforces. See pages 6-8.

(d) Prohibition on Rescission. The Interim Final Rules impose unanticipated costs on
standard plan administrative practices and are overbroad in relation to the perceived
abuse in the traditional insurance market. See pages 8-9.

2. Permissible Financial Changes Are Too Narrow. The permissible range of financial
changes outlined in the Grandfather Interim Final Rules is too narrow to reflect the cost of
the immediate mandates. See pages 9-11.

(a) Current Grandfather Rule Contains Too Little Leeway. The limits reflected in the
Grandfather Rule are totally insufficient to reflect the cost of the immediate mandates.
See pages 9-11.

(b) Prohibition on Cost Sharing for Preventive Care. The cost of violating grandfather
treatment, and adding in the grandfathered mandate of preventive services, adds even
further cost to complying with the Act. See page 11.

3. Collectively Bargained Plans. The Interim Rules should not differentiate between
collectively bargained self-insured plans and fully-insured plans, and should defer all
healthcare reform mandates until the beginning of the plan year after termination of the last
plan-related collective bargaining agreement. See pages 12-25.


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reform laws, and which poorly serves the interests of employers, unions, employees
and other plan participants.

For all of the above reasons, the Departments should conclude that the section 1251 CBA
deferral is equally available to self-insured health plans in addition to fully-insured plans.

(b) All Mandates Should be Deferred for Collectively Bargained Plans. Consistent with
the policies underlying the new healthcare reform laws, as well as other benefits laws and
federal labor law requirements, the Departments should exercise their discretion to defer

the effective date of afl healthcare reform mandates for collectively bargained plans.

For many reasons relevant to the CBA deferral’s applicability to collectively bargained
self-insured plans (see pages 12-19 above), the Departments should exercise their discretion, for
collectively bargained plans, to defer the effective date of all healthcare reform mandates, even
those that would otherwise apply to grandfathered plans.'* As discussed in subpart (c) (pages
24-25 below), the healthcare reform mandates should be deferred for collectively bargained
plans at feast until the beginning of the plan year following termination of the last collective
bargaining agreement relating to health plan coverage (or, if later, until the loss of grandfather
status based on the final grandfather rules adopted by the Departments).

Preliminarily, there is ample precedent and authority for the Departments, as a general
proposition, to defer enforcing grandfathered and non-grandfathered healthcare reform mandates
for collectively bargained plans as described above. As noted in the Interim Rules, ERISA and
the PHS Act authorize the Departments to promulgate rules addressing their respective
enforcement responsibilities. See 75 Fed. Reg. at 34,545,

The Interim Rules also recognize the authority of the Departments, as a discretionary
matter, to refrain from enforcing certain requirements under the healthcare reform laws and
related statutes. See, e.g., 75 Fed. Reg. at 34,540 (noting that, in the interest of avoiding
“confusion with respect to the obligations of issuers,” certain enforcement authority will not be
exercised, stating that States having “primary authority” to enforce particular PHS Act
provisions are being encouraged “not to apply” certain provisions, and explaining that no
citations will be issued against the States for “failing to substantially enforce” the provisions in
question).

Several considerations in particular warrant the exercise of discretion by the Departments
to refrain from enforcing any healthcare reform mandates for collectively bargained benefits
until after existing agreements expire.

TM* The exemptions associated with grandfathered status do not automatically eliminate every mandate
associated with the healthcare reform laws. See Interim Rules Table 1, 75 Fed. Reg. at 34,542 (“List of the New
Health Reform Provisions of Part A of Title XXVII of the PHS Act that Apply to Grandfathered Health Plans”). In
these comments, the phrase “immediate mandates” is used to describe those healthcare reform requirements that
remain potentially applicable to grandfathered plans, including grandfathered collectively bargained plans. As noted
more fully in the text, we believe the policies underlying the healthcare reform laws, federal labor law and the
interests of employers, unions, employees and other plan participants warrant the Departments’ exercise of their
discretion to defer enforcement of ai! mandates for collectively bargained plans.


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continue deferral at least until the commencement of the new plan year after the last plan-related
collective bargaining agreement terminates.

First, the mid-year imposition of healthcare reform mandates will result in substantial
costs which, in turn, will detract from the ability of each plan to deal with other mandate-related
cost increases, Additionally, the wide variety of different healthcare arrangements prevents any
certainty concerning who will ultimately bear such mid-plan-year costs, which may end up being
imposed on the plan, the employer, the union, employees, and/or other plan participants.
Especially in the aggregate, such mid-year costs will be enormous, and the interests of all parties
will be advanced, along with healthcare reform policies in general, by avoiding such costs.

Second, more burdens will result from the extensive multi-party coordination needed to
deal with the mid-plan-year imposition of healthcare reform changes. For example, such
changes will require significant out-of-cycle work between employer and union representatives,
officials associated with union health and welfare funds, possible third party insurers, third party
administrators, outside actuaries, consultants, and/or inhouse or outside counsel. In addition to
requiring coordination among these various parties, duplicative coordination among many or all
of the same parties predictably will need to occur again upon when the next plan year
commences following expiration of the last plan-related collective bargaining agreement.

Third, adding to the complexity of mid-plan-year changes is the time lag that invariably
exists between the receipt of medical services by healthcare plan participants and the time that
the participant’s claim is received by and/or processed by the plan. Focusing on CBA expiration
dates also would create unmanageable problems for employers that had multiple unionized
locations, each with separate expiring collective bargaining agreements. Such employers could
face a gauntlet of successive out-of-cycle benefits changes that could persist for years, which
clearly would degrade the benefits and/or assistance otherwise available to employees and other
plan participants.

Fourth, because open enrollment periods are timed in coordination with the relevant plan
year, the required implementation of mid-plan-year mandates, with corresponding costs and
changes in plan design, could dramatically affect - for better and worse — enrollment elections
made by employees and other participants. Such changes predictably would also cause
substantial unnecessary confusion for employees and other participants (as well as employer and
union representatives, third party insurers or administrators and others), all of which are
accustomed to addressing benefits issues on a plan year basis,

No party will experience any long-term disadvantage by extending the deferral of
mandates for collectively bargained plans until the new plan year’s commencement after
termination of the last plan-related CBA. If such a modest additional deferral caused a delay in
mandated benefit improvements or protection, this disadvantage would clearly be offset entirely
by the increased costs, confusion and potential prejudice caused by materially altering the
consequences of the employee’s prior open enrollment choices.


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Retail Clerks Local 455 v. NLRB, 510 F.2d 802, 807 n.20 (D.C. Cir. 1975) (integrity
of collective bargaining agreements is “a most basic policy of the national labor
law”). Without a reasonable deferral of healthcare reform mandates, a requirement of
immediate implementation will expose employers and unions to significant liability
under existing contracts and federal labor law. Most collective bargaining
agreements have multiple-year terms, commonly spanning three years, and frequently
specifying a term of five years or longer. Under the NLRA, the existence of a
collective bargaining agreement suspends, for the agreement’s duration, any party’s
obligation to renegotiate commitments expressed in the agreement. See NLRA §
8(d), 29 U.S.C. § 158(d) (making it unlawful for any party to insist on a mid-term
“modification” of any provision contained in a CBA); Mead Corp., 318 N.L.R.B. 201
(1995) (contractual “zipper clause” eliminates obligation to bargain during term of
CBA).

© Inthe railroad and airline industries, collective bargaining agreements continue
indefinitely until changed, but become amendable at certain dates determined by the
parties. The process of amending a collective bargaining agreement is subject to an
extensive process of negotiation and mandatory mediation under the Railway Labor
Act. See 45 U.S.C. § 156; Detroit & Toledo Shore Line R. R. v. United Transp.
Union, 396 U.S. 142, 149 (1969). Any changes to existing collective bargaining
agreements to implement the healthcare reform mandates wil! be subject to this
lengthy, federally regulated process under the auspices of the National Mediation
Board. Moreover, to the extent that implementation of the healthcare reform
mandates raise questions concerning the interpretation of existing provisions of
collective bargaining agreements, those disputes are subject to mandatory, binding
arbitration under the Railway Labor Act. See Conrail v. Railway Labor Executives’
Ass'n, 491 U.S. 299, 303-04 (1989).

¢ Imposing mid-term healthcare reform mandates on collectively bargained plans will
predictably distort the complex assortment of tradeoffs, concessions, and
compromises that constitute the quid pro quo underlying every collective bargaining
agreement. See Shaw's Supermarkets, 343 NLRB 963, 969 (2004) (collective
bargaining inherently “involves a party giving up a right in one area in exchange for
concessions in another area”), Thus, the healthcare reform mandates are likely to
cause severe inequities — for employers, unions, and/or employee-participants — with
no available relief until the agreement’s expiration. As the court stated in NLRE v.
United States Postal Service, 8 F.3d 832, 836 (D.C. Cir. 1993): “[NJeither the Board
nor the courts may abrogate a lawful agreement merely because one of the bargaining
parties is unhappy with a term of the contract and would prefer to negotiate a better
arrangement. ... [T]he courts are bound to enforce lawful labor agreements as
written.”

¢ As noted previously, it has long been established that employers are required to
provide the opportunity for bargaining over changes in healthcare plans, medical
benefits, premium and contribution amounts, and related matters. Under the NLRA,
such bargaining generally entails an array of subsidiary obligations, including the
duty to provide relevant information and documentation upon request, the right to


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other words, is . . . on the particular operations of the business as they affect the members of the
relevant bargaining unit.”\' See also Nephi Rubber Products Corp. v. NLRB, 976 F.2d 1361
(1992), enforcing 303 N.L.R.B. 151 (1991), supplemented, 312 N.L.R.B. 297 (1993) (“the key to
the successor analysis is the perspective of the employees”).

Employees and other plan participants are treated in precisely the same manner by self-
insured and fully-insured health plans alike. For this reason as well, the Interim Rules should not
differentiate between self-insured and fully-insured plans for purposes of section 1251(d)’s CBA
deferral provision.

(3) Healthcare reform mandates are generally considered a mandatory subject of
bargaining, irrespective of whether health plans are self-insured. Evaluation of the healthcare
reform mandates from a different perspective — that is, considering the other federal labor
obligations imposed on employers and unions — further supports a broad-based application cf the
section 1251(d)'s CBA deferral language to include self-insured plans. Regardless of whether an
employer’s health plan is fully-insured or self-insured, changes like those required by the
healthcare reform mandates in various contexts have been deemed mandatory subjects of
bargaining for purposes of federal labor law.”

For example, Sections 8(a)(5) and 8(b)(3) of the NLRA require employers and unions to
bargain collectively with one another. 29 U.S.C. § 158(a)(5), (b)(3). See also NLRA section
8(d), 29 U.S.C. § 158(d) (defining the duty to bargain collectively as “the performance of the
mutual obligation of the employer and the representative of the employees to meet at reasonable
times and confer in good faith with respect to wages, hours, and other terms and conditions of
employment”). The NLRB and the courts have long made a distinction between “mandatory”
bargaining subjects and “permissive” bargaining subjects, with “mandatory” subjects defined as
those subjects over which employers and unions are compelled by law to bargain. See, e.g..
NLRB v. Borg Warner Corp., Wooster Div., 356 U.S. 342 (1958). Employers are barred from
taking unilateral action with respect to mandatory subjects. NLRB v. Katz, 369 U.S. 736 (1962),
Consequently, employers are generally prohibited, without bargaining, from making changes
concerning mandatory bargaining subjects — whether favorable or unfavorable — without
violating the NLRA. Provena Hosp., 350 NLRB 808 (2007).

"768 F.2d at 1470 (emphasis added).

"2 Because the new healthcare reform mandates were enacted so recently, and become effective in stages
(with various mandates and plans being afforded “grandfathered” status), no NLRA or RLA rulings deal with
bargaining obligations pertaining to the healthcare reform mandates. As noted in the text, substantial case law
indicates various types of benefits changes are generally deemed mandatory bargaining subjects. At the same time,
NLRA and RLA case law regarding bargaining obligations establishes that determinations concerning any
employer’s obligations in particular cases depend on a highly fact-specific inquiry frequently involving questions
about impact, specific contract language, negotiating history, past practice, and the potential waiver of bargaining
rights, among other things. Consequently, notwithstanding the general labor law principles summarized in the text,
nothing in these comments should be regarded as any suggestion or indication concerning how future bargaining-
related issues pertaining to healthcare reform mandates should be resolved. Of course, the significant variables that
govern these types of bargaining determinations only add to the considerations, described in the text, which warrant
the deferral of healthcare reform mandates for collectively bargained plans.


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Coverage, which become effective on January 1, 2014, do address part-time coverage. The
statute makes clear that the penalties are not triggered by failure to provide health care coverage
to part-time employees. The fact that employers will face no penalties for failing to offer
coverage of any kind to part-time employees in 2014 combined with the huge cost increases that
will result when the restricted annual fimits rule and lifetime limit prohibition become effective
will likely prompt employers to drop part-time coverage well before the Exchanges come on line
in 2014. This will add to the ranks of the uninsured for at least the next three years.

To preserve until 2014 the important health care benefits that 1.4 million workers enjoy
under limited benefit plans, such plans should be exempted entirely from the immediate
mandates, particularly the restricted annual limits rule and the lifetime limits prohibition. This
exemption would be consistent with Congress’s apparent intention to apply the Act’s 2014 rules
only to full-time employee coverage. If a complete exemption is not permitted, then the waiver
program, contemplated in the Patient Protection Rule, should be implemented with no
restrictions on the annual limits that these limited benefit plans can impose. Under the waiver
program, plans seeking a waiver will have to show that compliance with the restricted annual
limits would either significantly diminish benefits access or cause significant premium increases
for the limited benefit coverage. The Departments should ensure that the burden of seeking a
waiver is not so great that employers choose to discontinue limited benefits coverage rather than
seek a waiver.

(d) Prohibition on Rescission. The Interim Final Rules impose unanticipated costs on
standard plan administrative practices and are overbroad in relation to the perceived
abuse in the traditional insurance market.

Many employers anticipated that the prohibition on rescission would protect individuals
from the insurance market practice of rescinding coverage retroactively based on arguably false
or unfair bases. Because participants in group health plans are protected by ERISA, including
the portability and nondiscrimination provisions in Part 7, as a general matter employers did not
regard the prohibition on rescissions as imposing a substantial burden on healthcare plans.

However, the Patient Protection Rule takes a very expansive view of this prohibition, and
includes instances in which group health plans revoke health care coverage retroactively when an
employee’s coverage is mistakenly continued. For example, if an individual is moved from full-
time to part-time employment, but continues to receive full-time health benefits, or if an
individual is terminated, but, due to ministerial error, his health coverage is not timely
discontinued. This raises a quandary for group health plans because, if an ineligible employee’s
coverage is mistakenly continued, it is the plan’s ERISA obligation to ensure that mistake is
fixed in a fashion that does not waste plan assets. In the normal course, the health plan would
terminate the individual’ s coverage retroactively back to the proper date, and, as required, offer
the participant COBRA continuation coverage. It is unclear whether that procedure would still
be permissible under the new rescission rules. But, if not, the cost of covering these ineligible
individuals wil! be another additional cost foisted on the employer.

Further, these costs will likely be unaffordable to multi-employer plans that do not have
“general assets” available to cover unexpected costs. Moreover, in the multi-employer context,


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By imposing the immediate mandates, the healthcare reform laws already provide for
significant changes in the coverage available to employees, with substantial cost increases. To
reflect this reality, the promise that employees will be able to keep their current coverage should
permit plans to retain their grandfathered status, even if the employer implements plan changes
to comply with the new mandates, or to address marketplace issues. Allowing employers greater
latitude to adjust coverage and premiums should be regarded as an important tool permitting
employers and grandfathered plans to bear the increased costs associated with immediate
mandates. In turn, greater flexibility in the Interim Rules will translate into greater protection for
ongoing coverage between now and January 1, 2014, thereby advancing the interests of
healthcare reform. In 2014, if an employee is dissatisfied with the employer-sponsored
coverage, the employee can enter the Exchange provided in the new laws, and employers
themselves will face potential penalties if their coverage fails to meet minimum essential
coverage standards that will then be required.

1. Immediate Mandate Cost. The costs of the immediate mandates imposed by the Act are
greater than the permissible range of cost changes permitted under the Grandfather Interim
Final Rules and, hence, the maximum permissible modifications under the Interim Final
Rules are set too low.

The Act requires that all group health plans, regardless of their grandfather status, cornply
with the following, costly immediate mandates in the first plan year beginning on or after
September 23, 2010 (which for many employer sponsored plans is January 1, 2011). The
Departments recognize the significant cost of these immediate mandates but fail to permit
sufficient latitude in the Interim Final Rules for employers to respond to these increased costs
without, in turn, losing their grandfather status. Examples of these immediate mandates, and the
costs drawn from the Department’s own estimates, are as follows:

(a) Dependent Coverage to Age 26. The Dependent Rule itself constrains employer’s
ability to recover the cost of the Immediate Mandate and consumes over half of the

per ible cost-sharing latitude permitted by the Grandfather Interim Final Rules.

As noted in the Dependent Rule, it is difficult to determine how many adult children will
take this coverage, and/or how much it will cost to cover these children. But the Interim Rules
do acknowledge that adverse self-selection will occur, such that adult children in fair or poor
health will likely enroll in their parents’ coverage, and the Departments’ “mid range” assessment
indicates that premiums will be increased over three years by 2.6%.

Even though the extension of dependent coverage to 26 will certainly increase the plan
sponsor’s health care costs, the Dependent Rule provides them with almost no ability to share the
cost of this coverage with the adult dependents. Employers cannot require adult children to pay
a higher percentage of the premium for their coverage or higher out-of-pocket expenses, or
provide them with a more restrictive set of benefits. The only way for employers to recoup any
of these costs is to raise the premiums for all dependents, which could be harmful to employee
relations and make it more expensive for employees to cover their minor children. Moreover. in
the context of collectively bargained plans, premiums cannot be raised mid-bargaining cycle.


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(a) Treatment of Collectively Bargained “Self-Insured” Plans. Collectively bargained
“self-insured” plans should be subject to the explicit collective bargaining agreement
deferral language set forth in Affordable Care Act section 1251(d). See pages 12-19.

(b) All Mandates Should be Deferred for Collectively Bargained Plans. Consistent with
the policies underlying the new healthcare reform laws, as well as other benefits laws and
federal labor law requirements, the Departments should exercise their discretion to defer
the effective date of all healthcare reform mandates for collectively bargained plans. See
pages 19-24.

(c) CBA Deferral Should Relate to the Relevant Plan Year. The deferral of healthcare
reform mandates for collectively bargained plans should continue at least until the
commencement of the plan year after termination of the last plan-related collective
bargaining agreement. See pages 24-25.

DISCUSSION AND ANALYSIS

Consistent with promises made during the legislative process about the preservation of
existing health plans, the Affordable Care Act confers “grandfathered” status on plans in effect
as of March 23, 2010, with a requirement that at least one employee was enrolled in the plan as
of March 23, 2010. The statute further provides that new employees and dependents may enroll
going forward without compromising grandfather status.

However, the Interim Rules undermine, in important ways, the ability for employers to
continue robust health’ care coverage. Employers are required to comply with a series of
immediate costly mandates, including providing coverage to dependents up to age 26, the
prohibition on lifetime limits, restricted annual limits and the prohibition on rescission
(hereinafter referred to as the “immediate mandates”). Yet, if an employer makes any
meaningful plan design changes, cost shifting modifications, or business restructuring to comply
with immediate mandates, under the Interim Rules the employer’s plan will lose its grandfather
status, resulting in additional, more costly mandates (the “grandfathered mandates”). These
immediate and grandfathered mandates are being imposed on employers who are already facing
skyrocketing health care costs and who are experiencing significant financial challenges in the
current economy.

Taking these circumstances together, the predictable result of the immediate mandates
will in many cases be the reduction or elimination of many benefits to accommodate the cost of
the new healthcare reform mandates. This significant problem will undermine efforts to advance
healthcare reform, and should be accommodated in more concrete ways by the Interim Rules.

Underlying the Interim Rules is a flawed assumption that the promise to “keep the
coverage you have” requires that the level and type of coverage be frozen in time (as of March
23, 2010). All employees understand that employers frequently make annual modifications to
benefits, increase copays, adjust fixed cost percentages, make other structural or business
changes, and such adjustments are not regarded as an elimination of the preexisting employer-
sponsored coverage.


Comments on -17- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

The Railway Labor Act similarly imposes a broad duty on carriers and employees in the
railroad and airline industries, to “exert every reasonable effort to make and maintain agreements
concerning rates of pay, rules, and working conditions.” 45 U.S.C. § 152 First. This obligation
is central to the purpose of the RLA, which is to avoid “any interruption to commerce” resulting
from labor disputes in the airline and railroad industries, industries that serve vital transportation
functions in the national economy. Therefore, the Supreme Court has held that the duty to
bargain collectively under the RLA is not merely a “statement of policy or exhortation to the
parties; rather, it was designed to be a legal obligation, enforceable by whatever appropriate
means might be developed on a case-by-case basis.” Chicago & North Western Ry. Co. v.
United Transp. Union, 402 U.S. 570, 577 (1971). This obligation is the “heart of the Railway
Labor Act.” Brotherhood of R.R. Trainmen v. Jacksonville Terminal Co., 394 U.S. 369, 377-78
(1969).

For railway and airline employers governed by the RLA, bargaining plays the same
essential role as it does under the NLRA — i.e., required bargaining permits employers and
unions to work out the resolution of challenges involving wage and benefits issues, among other
things. International Ass’n of Machinists v. Northeast Airlines, Inc,, 473 F.2d 549, 554-57 (Ist
Cir.), cert. denied, 409 U.S. 845 (1972) (bargaining issues under RLA resolved based by
reference to NLRA principles and legal decisions); Elgin, Joliet & Eastern Ry. v. Bhd. of R.R.
Trainmen, 302 F.2d 540 (7th Cir. 1962) (pension plans are a mandatory subject of bargaining
under the RLA). Cf First Nat'l Maintenance Corp. v. NLRB, 452 U.S. 666, 682-83 and n.20
(1981) (citation of RLA case law involving bargaining issues in Supreme Court decision
involving NLRA bargaining obligations).

Under both the NLRA and RLA, health and welfare benefits for more than six decades
have been considered a mandatory subject of bargaining. See, e.g., Allied Chem. & Alkali
Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971); W.W. Cross & Co, v. NLRB, 174
F.2d 875 (Ist Cir. 1949); Standard Oil Co., 92 NLRB 227 (1950), During the same period, the
NLRB and the courts have repeatedly held that employers have violated federal law if they made
unilateral changes to benefit plans.®

The driving purpose underlying federal labor policy is the notion that employers, unions
and employees mutually benefit from the opportunity to work together and resolve important
issues as a result of negotiation. As formulated by Congress in LMRA section 201 (a):

} See W.W. Cross & Co. v. NLRB, 174 F.2d 875 (Ist Cir. 1949) (“wages” as used in the Act embraces a
group program providing “a financial cushion in the event of illness or injury . . . at less cost than such a cushion
could be obtained . . . individually”); Beverly California Carp,, 310 N.L.R.B. 222 (1993), enforced in part sub nom.
Torrington Extend-A-Care Employee Ass'n v. NLRB, \7 F.2d $80 (2d Cir. 1994) (unlawful for employer to
unilaterally impose consultation and screening requirement prior to surgery or hospital stay exceeding 24 hours);
Garrett Flexible Products, 276 N.L.R.B. 704 (1985) (untawfal for employer to unilaterally require employee
contributions for insurance contrary to past practice); Bastian-Blessing v. NLRB, 474 F.2d 49 (6th Cir. 1973)
(unlawful unilateral change in carrier affecting benefits coverage); Carpenter Sprinkler Corp., 238 N.L.R.B, 974
(1978), enforced in part, 605 F.2d 60 (2d Cir. 2979) (unlawful for employer to substitute its own health and welfare
benefits for those provided under expired contract). Accord: Loral Defense Sys., 320 NLRB 755, 756 (1996): United
Hosp. Med. Ctr. 317 NLRB 1279 (1995); Master Slack Corp. 230 N.L.R.B. 1054 (1977), enforced, 618 F.2d 6 (6th
Cir, 1980).


Comments on -7- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

For the group health plans that have annual limits, they are an important cost control
measure, and losing or greatly restricting those limits will impose a heavy burden on those plans.
While the impact of dropping annual limits will vary by plan size, the smallest plans are
expected to face a premium increase of 6.6% over time as they move to the unrestricted annual
limit.

While the smallest plans will likely face significant premium increases, the restricted
annual limits rule and lifetime limits prohibition will likely threaten the existence of limited
health coverage options offered by many employers with significant part-time, seasonal, and
low-wage workforces. For example, employers in the retail and supermarket industries
commonly offer limited benefit plans to their part-time workers. This limited coverage provides
important health coverage and has proven to be an important benefit for many of these
participants. Application of the Act’s annual limits rule and lifetime limits prohibition will
endanger the continued existence of this important coverage and may leave many workers
without health coverage for years until 2014, when Exchange coverage becomes available.

Limited benefit plans, including those offered to part-time retail and supermarket
workers, typically involve significant waiting periods, offer expanded benefits over time,” and
impose annual and lifetime limits that cap the employer’s coverage liability and often offer
employee-only coverage. While the coverage is “limited” in nature, it serves an important
purpose. Limited benefit plans allow approximately 1.4 million workers access to affordable
health coverage for a majority of key medical issues,

Without limited benefit plans, many workers will not have access to health coverage until
2014. Application of the restricted annual limits rule and lifetime limits prohibition to these
plans will result in substantial costs increases for employers. Such cost increases could cause
employers either to significantly raise premiums, rendering coverage unaffordable for many low-
wage workers, or to drop coverage entirely. In either event, many workers may be left without
health coverage.

Such a result was certainly not among the Act’s intended consequences. President
Obama and Congress have assured the public that the Act would not affect an individual’s ability
to retain health coverage that satisfied his or her needs. Indeed, both have explained that the Act,
in general, and the grandfather rule, in particular, were intended to allow workers to keep
employer-sponsored coverage with which they are satisfied, It would be counterproductive if the
Act and the grandfather rules resulted in the loss of coverage for a significant number of workers
rather than the preservation, improvement, and expansion of coverage, as was intended.

Moreover, although the statute does not explicitly: address the application of the coverage
mandates to part-time or limited benefit plans, it appears that Congress did not generally intend
the Act’s coverage mandates to apply to part-time plans that currently offer limited coverage.
Conversely, the provisions regarding employer penalties related to Minimum Essential

2 For example, a part-time employee may, after 90 days of employment, become eligible for vision coverage.
After an additional 90 days, a part-time employee may become eligible for dental coverage. After an additional six
months, the part-time employee becomes eligible for medical coverage.


Comments on -23- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

The Departments’ own description of the insufficient time available for rulemaking bears
a striking resemblance to the variables and requirements applicable to mandated bargaining over
healthcare changes, The Departments concluded that the healthcare reform timetable renders
“impractical” and “contrary to the public interest” the normal 60-day notice of rulemaking
usually associated with new regulations (75 Fed. Reg. at 34,545), The factors responsible for
bypassing conventional rulemaking bear witness to the obstacles facing employers, unions, and
employees if new mandates are not deferred for collectively bargained health plans. The Interim
Rules recognize that group plans, especially if not grandfathered, “must make significant
changes in their provisions to comply”; that “plans and issuers considering other modifications
. .. need to know whether those modifications will affect their status”; and that compliance and
enforcement activities are “needed well in advance of the effective date of the requirements of
the Affordable Care Act.” Id. As noted by the Departments: “The six-month period between the
enactment of the Affordable Care Act and the applicability of many of the provisions affected by
grandfather status would not allow sufficient time for the Departments to draft and publish
proposed regulations, receive and consider comments, and draft and publish final regulations.”
Jd. (emphasis added).

For similar reasons, collectively bargained health plans ~ and employers, unions,
employees and other participants — face enormous challenges that render “impractical” and
“contrary to the public interest” the implementation of healthcare reform mandates prior to the
termination of all plan-related CBAs. Id. Consequently, the Interim Rules should defer all
mandates, including the immediate mandates, for collectively bargained plans,

(4) Past benefits laws have consistently deferred their application for collectively
bargained plans. The litany of prior benefits laws that have deferred implementation of new
requirements for collectively bargained plans provides additional compelling evidence that
Congress has recognized the need to defer new requirements until compliance issues can be
resolved in bargaining. Relevant examples include the following:

© Employee Retirement Income Security Act of 1974 (ERISA): General effective date:
plan years beginning after September 2, 1974; Effective date for collectively
bargained plans: Earlier of the date on which the last CBA expires or plan years
beginning after December 31, 1980.

© Health Insurance Portability and Accountability Act of 1996 (HIPAA): General
effective date: plan years beginning after June 30, 1997; Effective date for
collectively bargained plans: Later of June 30, 1997 or the date on which the last
CBA terminates.

¢ Economic Growth and Tax Relief Reconciliation Act of 2001: General effective date:
plan years beginning after December 31, 2001; Effective date for collectively
bargained plans: Earlier of January 1, 2006 or later of January 1, 2002 or expiration
of the CBA with a termination date on or after May 26, 2001.

* The Pension Protection Act of 2006 (PPA): General effective date: plan years
beginning after December 3), 2007; Effective date for collectively bargained plans:
Earlier of January 1, 2010 or date the last CBA terminates.


Page 1 of 1
a Rec- ievia-/8 ;

LEGAL PROCESSING DI
VISION
Pi
UBLICATION & REGULATIONS IAs of: September 09, 2010

BRAN :
PUBLIC crcersacta 6 20
Posted: September 09, 2010
SUBMISSION Comments Duet August 16, 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-2010-0010-0001
Group Health Plans and Health Insurance Coverage: Interim Final Rules for Relating to Status as
a Grandfathered Health Plan under the Patient Protection and Affordable Care Act

Document: IRS-2010-0010-0941
Comment on FR Doc # 2010-14488

Submitter Information

Name: Philip A. Miscimarra
Address:
Morgan Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC, 20004-2541
Email: pmiscimarra@morganlewis.com
Phone: 312-324-1165
Submitter's Representative: Morgan Lewis & Bockius LLP
Organization: ENROLL Coalition et al.

General Comment

See attached file.

Attachments

IRS-2010-0010-0941.1: Comment on FR Doc # 2010-14488

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


Comments on -10- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

decreasing their share of the cost of coverage, the grandfather rule allows for very limited
modifications as noted above. However, those permissible levels are totally insufficient. Also,
in the normal course, employers may decide to adjust the co-insurance amounts for the same
reasons, but the grandfather rule allows for no such adjustment. Employees generally understand
these types of adjustments are necessary for the employer to continue to provide its health care
coverage, and these types of changes are not viewed as “changing” the benefits available.

Although the Departments may need to set some limits on the financial tools described
above, those limits should, at a minimum, reflect the actual increases of approximately 10% that
employers and plans will experience due to implementing the immediate mandates, as well as
anticipated (and true) medical inflation. The language of the Act contains no such restrictions,
the current limits in the grandfather rule fall far short of reflecting the true increases in cost
created by the Act, and there is nothing in the grandfather rule that indicates that the
Departments considered setting limits that would permit the employers to shift some meaningful
portion of the increased costs associated with the immediate mandates.

The grandfather rule does allow employers or plan sponsors to increase premiums
without losing grandfather status, but that does not provide employers with sufficient tools to
counter the costs of implementing the immediate mandates. Many employers believe it is far
more of an imposition on employees to raise their premiums than copays and other out of pocket
expenses. Premium increases apply across the board, while increases in copays and out of
pocket expenses shift the costs to employees who actually use medical services, and therefore,
encourage efficient and smart use of medical services. Further, as collectively bargained plans
do not have the option to increase health care premiums outside of the bargaining cycle, they
cannot even use this option to recoup the costs associated with the immediate mandates.

With regard to vendors, plans may switch third party administrators without losing
grandfather status, but entering a new policy, certificate or insurance contract will cause a loss of
grandfather status. These rules once again leave employers with little leeway to manage the
increased costs of the immediate mandates. Allowing self-insured plans to switch third party
administrators provides little relief when, as is the case here, the plans can make no meaningful
changes to their financial structure. And, there is seemingly no legitimate policy reason to
require a loss of grandfather status due to the issuance of a new insurance policy, particularly if
the new policy offers substantially the same benefits as the original policy. It makes far more
sense to connect grandfather status to the level of coverage, and not the provider of such
coverage.

Lastly, the grandfather rule restrains employers from consolidating or restructuring their
group health plans to move new employees into a grandfathered plan. The “anti-abuse” rules
preclude employers from: (1) entering a merger, acquisition or business restructuring that has the
purpose of covering new employees in a grandfathered plan, or (2) transferring employees into
another, existing health plan (transferee plan) if the plan from which the employees were
transferred would lose grandfather status if it were amended to reflect the transferee plan.
However, these rules are contrary to the statute, which permits grandfathered plans to enroll new
employees and their family members into a grandfathered plan without affecting their
grandfather status. And, these rules, which are nowhere in the statute, deprive employers of


Comments on -9- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

the only way that the plan would know if an employee has been terminated or moved to part-
time status is if the employer timely informs the plan. In many instances multi-employer plans
do not receive information on whether an employee worked during a given month until midway
or later through the following month. So, in summary, multi-employer plans will be responsible
for covering ineligible employees when their employers fail to timely or correctly notify of the
employee’s termination or change to part-time status; and, arguably, this is a violation of ERISA
because plan funds will be used to cover ineligible employees. The Departments were unable to
estimate the cost impact of ending rescissions.

The immediate mandates detailed above change the coverage that was available to
employees as of March 23, 2010, and significantly increase the employers’ cost of providing
such coverage. For some employers, the cost of the immediate mandate will be at least 9.7% of
premiums, However, the grandfather rule does not provide employers with the necessary
financial and design tools to integrate these mandated changes into their current coverage in a
cost efficient manner. This obvious imbalance will cause many plans to lose their grandfather
status in short order, as they will be required to increase the employee’s share of the total
premium beyond the limited 5% provision in the grandfather rule. Once that occurs, employers
will be burdened with the additional grandfathered mandates described below, which will likely
result in unanticipated reductions in or elimination of employer sponsored coverage prior to
January 1, 2014.

2. Permissible financial changes are too narrow. The permissible range of financial changes
outlined in the Grandfather Interim Fina! Rules is too narrow to reflect the cost of the
immediate mandates.

The grandfather interim final rules contain unnecessarily narrow restrictions on the
permissible changes that employers can make to their plans and still retain grandfathered status.
When coupled with the cost of the immediate mandates, the Interim Final Rules make it
extraordinarily difficult to retain grandfathered status for any period of time.

(a) Current Grandfather Rule contains too little leeway. The limits reflected in the
Grandfather Rule are totally insufficient to reflect the cost of the immediate mandates.

The grandfather rule greatly limits the financial tools available to plan sponsors by
causing group health plans to lose their grandfather status if they: (1) increase at all the
employee’s percentage of a fixed amount (such as co-insurance); (2) increase a fixed copay by
an amount that is greater than (i) an amount equal to $5 increased by “medical inflation” or (ii)
the “maximum percentage increase;”? (3) increase a fixed amount cost sharing requirement
other than a copay (such as deductible or out of pocket expense) if the total percentage increase
after March 23, 2010 exceeds the “maximum percentage increase;” and (4) if the employer or
employee organization decreases its contribution to the plan by more than 5% below its March
23, 2010 contribution rate. Recognizing that employers and plan sponsors routinely contain
costs and deflect medical inflation by increasing copays or other out of pocket expenses, or by

3 “Maximum Percentage Increase” is defined as “medical inflation” expressed as a percentage plus 15
percentage points.


Comments on -6- Employers Network for Responsible Options,
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This leaves employers not currently in negotiations with no opportunity to seck to recoup those
costs at this time.

(b) Prohibition on Lifetime Limits. The prohibition on Lifetime Limits will create
financial uncertainty for employers and will have widely varying cost impacts that

are not adequately recognized in the Grandfather Interim Final Rules.

According to the data provided in the Patient Protections Rule, 45% of large employers
have lifetime limits of $2 million or higher, and only 37% of large employers have no lifetime
limits at all. The data also suggests that relatively few individuals actually hit their lifetime
limits.

However, self-insured group plans that now have to eliminate their lifetime limits face
financial uncertainty. The claims of one participant that are in excess of the current lifetime limit
could have a significant negative impact on the health plan, including the possibility of
bankrupting the plan. This is particularly true in the context of multi-employer plans, which in
most cases are financed with limited employer contributions that are established in collective
bargaining, and the investment income that is earned on such contributions. If a multi-employer
plan has to cover health care claims that run into the millions of dollars for one participant, it is
possible that plan will not be able to pay for the claims of other participants. And, this scenario
is a serious proposition considering the limited investment income currently available to these
plans. Moreover, in most instances there is a corresponding multi-employer defined benefit
pension plan. Due to the market losses of 2008 and the application of the Pension Protection Act
of 2006, the contribution increases required to fund many of these plans are projected to be 10%
or more in each of the next five years. In the past, the collective bargaining parties have been
able to reduce contributions to the multi-employer health fund and to contribute the difference to
the multi-employer pension plan. Because of the current economic crisis, contributing
employers will be required to shoulder the burden of increased pension costs at the same time the
proposed regulations are imposing significant health plan increases. This double hit may cause
many contributing employers to reduce employment levels. The Interim Rules do acknowledge
that dropping lifetime limits will increases costs, and that the average increase will be .5% of
premiums, but this statistic may be misleading because the average includes plans with high or
no lifetime limits with plans that have low limits. It is anticipated that the cost increases for
plans with lower lifetime limits will experience cost increases in excess of 5%.

(c) Restricted Annual Limits. The Interim Final Rules have widely disparate impacts on
plans that currently contain annual limits and should be revised to permit plans to retain
their current annual limits or end coverage for part-time, seasonal or low-wage
workforces.

According to the data in the Patient Protections Rule, only 8.2% of large employers have
annual limits. However, these statistics do not include multi-employer plans, which typically
have annual limits. Moreover, it is likely that, during the transition period until 2014 during
which annual limits are permitted but lifetime limits are not, certain plans will be converting
their lifetime limits to annual limits. As such, it is likely that the 8.2% figure will rise
substantially between now and 2014.


Comments on -20- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

(1) Federal labor law generally prohibits mid-term unilateral benefit changes. As noted
previously, it has long been established that employers are generally prohibited from making
mid-term changes in wages, working conditions, and benefits without satisfying bargaining
obligations imposed by federal law. This prohibition against unilateral changes has been deemed
applicable even if the changes involve mandates imposed under other federal laws." Thus, in
Winn-Dixie Texas, Inc., 234 N.L.R.B. 72 (1978), the employer was found to have violated the
NLRA even though its actions were based on constraints imposed by the Internal Revenue Code.
In reference to the “mandate of the Internal Revenue Code,” the Board concluded that the
employer’s obligation to engage in bargaining was not “minimized or obviated” by the
“mandate and requirements of other Federal statutes.” /d. at 77.

Even two months ago, current members of the NLRB, upholding an administrative law
judge’s findings, reaffirmed that “requirements of complying with other Federal statutes” are not
automatically considered an “extraordinary event” permitting “immediate action” without
bargaining. San Miguel Hospital Corp., 355 N.L.R.B. No. 43, slip op. at 8 June 11, 2010). See
also Quality House of Graphics, Inc., 336 N.L.R.B. 497, 498 (2001) (unilateral action not
permitted notwithstanding the “necessity to alter terms and conditions of employment to meet
the requirements of other federal statutes”).

(2) Unique aspects of collectively bargained plans. Collectively bargained plans in a
multitude of ways are unusually situated for purposes of healthcare reform compliance. For
many reasons similar to those raised previously (see pages 16-19 above), these unique aspects of
collectively bargained health plans warrant a meaningful deferral of all healthcare reform
mandates. This is not a case of favoring delay for delay’s sake. Rather, for collectively
bargained plans, the deferral of healthcare reform mandates centers around (i) fundamental
constraints, (ii) unique needs, and (iii) competing federal policies that conflict with the
immediate implementation of healthcare reform changes:

¢ Nothing in the Affordable Care Act repeals, rescinds or limits the contractual
commitments of the parties under existing collective bargaining agreements. See

»5 Unlike other statutes, the Affordable Care Act contains no provision reconciling its requirements with the
competing obligations imposed under collective bargaining agreements or other federal laws. Compare Worker
Adjustment and Retraining Notification Act §§ 6, 9, 29 U.S.C. §§ 2105, 2108 (2006) (provisions in federal WARN
notice statute stating statutory notice “shall run concurrently with any period of notification required by contract or
by any other statute” and that the “giving of notice . . . in good faith . . . shall not constitute a violation of the
National Labor Relations Act”), Although longstanding case law indicates that changes in healthcare benefit plans
are considered mandatory subjects of bargaining, which results in a general prohibition against unilateral changes,
some cases have held (in different contexts) that employers can be permitted to comply with new statutory
requirements without bargaining to an impasse or agreement if the new requirements involve no employer
discretion. See, e.g., Long Island Day Care Services, 303 N.L.R.B. 112 (1991) (involving federal grant mandates);
United Telephone, Case No. 16-CA-14505 (NLRB Gen. Counsel Advice Mem. Jan, 31, 1991) (involving drug
testing requirements imposed by U.S. Department of Transportation); Cf. Standard Candy Co., 147 N.L.R.B. 1070,
1073 (1964) (unilateral wage adjustments exceeding new minimum wage rate required under Fair Labor Standard
Act deemed unlawful except for adjustment of wages that previously were lower than the new minimum wage). As
indicated in note 12 above, these comments should not be regarded as any suggestion or indication concerning how
future bargaining-related issues pertaining to healthcare reform mandates should be resolved, given the many
variables which relate to bargaining determinations in individual cases. /d.



Comments on -26- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

CONCLUSION

We hope that the Departments will consider the comments set forth above and
incorporate them in the Final Grandfather Rules, consistent with the Affordable Care Act, the
Reconciliation Act, and the interests of employers, employees and other healthcare benefit plan
participants. We remain available to meet and consult with representatives of the Departments
and to provide any other assistance that will facilitate development of the final regulations.

Respectfully submitted,

EMPLOYERS NETWORK FOR RESPONSIBLE
OPTIONS, LAWS AND LEADERSHIP

INTERNATIONAL PUBLIC MANAGEMENT
ASSOCIATION FOR HUMAN RESOURCES

COLLEGE AND UNIVERSITY PROFESSIONAL
ASSOCIATION FOR HUMAN RESOURCES

NATIONAL RAILWAY LABOR CONFERENCE
Of Counsel

ANDY R. ANDERSON
PHILIP A. MISCIMARRA
STEVEN D. SPENCER
JOHN F. RING

MorGAN Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004-2541
202-739-3000

DaTeD: August 16, 2010


Comments on -2- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

or health insurance coverage in which such individual was enrolled on the date of
enactment of this Act.

(2) 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’
shall not apply to such plan or coverage, regardless of whether the individual renews
such coverage after such date of enactment.

(b) ALLOWANCE FOR FAMILY MEMBERS TO JOIN CURRENT 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 and which is renewed after such date, family members of
such individual shall be permitted to enroll in such plan or coverage if such enrollment is
permitted under the terms of the plan in effect as of such date of enactment.

(c) ALLOWANCE FoR NEW EMPLOYEES TO JOIN CURRENT PLAN.— A group health plan
that provides coverage on the date of enactment of this Act may provide for the enrolling
of new employees (and their families) in such plan, and this subtitle and subtitle A (and
the amendments made by such subtitles) shall not apply with respect to such plan and
such new employees (and their families).

(d) EFFECT ON COLLECTIVE BARGAINING AGREEMENTS.~ In the case of health insurance
coverage maintained pursuant to one or more collective bargaining agreements between
employee representatives and one or more employers that was ratified before the date of
enactment of this Act, the provisions of this subtitle and subtitle A (and the amendments
made by such subtitles) shall not apply until the date on which the last of the collective
bargaining agreements relating to the coverage terminates. Any coverage amendment
made pursuant to a collective bargaining agreement relating to the coverage which
amends the coverage solely to conform to any requirement added by this subtitle or
subtitle A (or amendments) shall not be treated as a termination of such collective
bargaining agreement.

(e) DEFINITION.~ In this title, the term “grandfathered health plan” means any group
health plan or health insurance coverage to which this section applies.

Affordable Care Act § 1251(a)-(e).

There is boundless diversity among the employers, industries, unions, and benefit plans
affected by the new healthcare reform laws. As reflected in the employers on whose behalf these
comments are submitted, the new requirements profoundly affect healthcare benefits afforded to
employees in railway transportation, trucking, integrated steel production, truck body production,
biotechnology, chemical production, food product manufacturing, consumer packaging,
publishing, broadcasting, heavy building materials, higher education, and municipal, state and
federal governments. Based on the range of changes and costs associated with the new
requirements, the “grandfathering” of existing health plans plays a central role in healthcare
reform efforts. The concept of “grandfathering” provides the primary means by which
employers throughout the country can formulate effective ways to implement the new mandates,
which require extensive work by representatives of employers, unions, insurers, administrators
and other parties involved in employer-provided healthcare arrangements.


Comments on -13- Employers Network for Responsible Options,
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34,559 (interim 26 CFR § 54.9815-1251T(f), 34,564 (interim 29 CFR § 2590.715~1251(f)),
34,568 (interim 42 CFR § 147.140(f).

However, the preamble accompanying the Interim Rules indicates that the Departments
intend to exclude self-insured health plans from Section 1251’s CBA deferral. The Departments
state:

The statutory language of the provision refers solely to “health insurance coverage" and
does not refer to a group health plan, therefore, these interim final regulations apply this
provision only to insured plans maintained pursuant to a collective bargaining agreement
and not to self-insured plans.

75 Fed. Reg. at 34,542 (emphasis added). The importance attached to the phrase, “group health
plan,” which is absent from section 1251, is explained elsewhere in the preamble in a footncte
reading:

The term “group health plan” is used in title XXVII of the [Public Health Service] Act,
part 7 of ERISA, and chapter 100 of the Code, and is distinct from the term “health plan”,
as used in other provisions of title 1 of the Affordable Care Act. The term “health plan”
does not include self-insured group health plans.

75 Fed. Reg. § 34,539 n.l. Cf Affordable Care Act § 1301(b)(1)(A) (“The term ‘health plan’
means health insurance coverage and a group health plan”); § 1301(b)(1)(B) (“the term ‘health
plan” shall not include a group health plan , . . not subject to State insurance regulation under
{ERISA] section 514”); § 1301(b)(2) (defining “health insurance coverage” by reference to
Public Health Service Act § 2791(b)); § 1301(b)(3) (defining “group health plan” by refererice to
Public Health Service Act § 2791(a)).

For several reasons, the Departments should reconsider the status of self-insured
collectively bargained health plans, and conclude that self-insured plans ~ like fully-insured
plans — are subject to the CBA deferral provision in Affordable Care Act section 1251(d).

(1) Section 1251's Plain Language. The language of section 1251 does not support
making a distinction between “self-insured” and “fully-insured” healthcare plans for purposes of
the CBA deferral. Nor does the Affordable Care Act’s legislative history establish that Congress
intentionally used the phrase “health insurance coverage” (rather than “group health plan”) to
exclude self-insured health plans from the CBA deferral.’ Several aspects of section 1251s
construction support a more expansive application of the CBA deferral to self-insured (as well as
fully-insured) health plans:

© The title of section 1251(d), “Effect on Collective Bargaining Agreements,” suggests
that the subject matter of the section relates to collective bargaining agreements

* As noted on page 24 below, the courts refrain from drawing conclusions about Congressional intent from
the omission of a particular statutory term when the outcome would be contrary to other provisions, legal
requirements and/or the policies underlying the statute,


Comments on -15- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

would make such a deferral unavailable for a large number of collectively bargained
plans.

(2) The perspective of employees. Another reason that section 1251's CBA deferral
should be available for self-insured plans stems from the lack of any rational reason that self-
insured plans, for purposes of the new healthcare reform mandates, should be treated differently
from fully-insured plans. Self-insured plans are indistinguishable from fully-insured plans as to
the process by which benefits are negotiated. There is no difference between the two types cf
plans as to the level or types of benefits offered. The ERISA requirements pertaining to welfare
plans, and the flexibility afforded to employers under such plans, apply equally to self-insured
and fully-insured health plans. Indeed, employers can (and many have) transitioned from
maintaining self-insured health plans to arranging for fully-insured coverage (and vice versa)
based on the coverage, just as employers often change insurance carriers without making
modifications in the underlying plan. For employees and other plan participants, the salient
feature that characterizes collectively bargained health plans — whether or not they are self-
insured — is the origination and maintenance of such plans in bargaining between one or more
unions and one or more employers.

Cases dealing with collective bargaining ~ which is the central focus of section 1251(d) -
emphasize that bargaining-related issues should be governed by the impact on employees. For
example, in Fall River Dyeing & Finishing Corp. v. NLRB,’ the Supreme Court stressed that the
National Labor Relations Board (“NLRB”) must evaluate whether and how any changes affected
employees. The Supreme Court in Fall River Dyeing stated:

The Board keeps in mind the question whether “those employees who have been retained
will understandably view their job situations as essentially unaltered.” ... This emphasis
on the employees’ perspective furthers the Act's policy of industrial peace. If the
employees find themselves in essentially the same jobs after the employer transition and
if their legitimate expectations in continued representation by their union are thwarted,
their dissatisfaction may lead to labor unrest.’

To the same effect, the Court of Appeals for the D.C. Circuit in UFCW Local 152 v.
NLRB¥ criticized the Board for attributing significance to changes that could no reasonably have
affected employees’ attitudes concerning union representation.” The court asserted that the
“essential inquiry is whether operations, as they impinge on union members, remain essentially
the same after the transfer of ownership.”'® The court concluded: “The focus of the analysis, in

® 482 U.S. 27 (1987).

7 Id, at 43-44 (emphasis added), quoting Golden State Bottling Co., 414 U.S. 168, 184 (1973); NLRB v.
Jeffries Lithograph Co., 752 F.2d 459, 464 (9th Cir. 1985).

§ 768 F.2d 1463 (D.C. Cir. 1985).

? For example, the Board relied on the new employer’s disposition of four different facilities that had been
acquired from the predecessor, the reduction from a two-shift to a one-shift operation, and comparable changes.

19 768 F.2d at 1470, quoting International Union of Electrical Workers v, NLRB, 604 F.2d 689, 694 (1).C.
Cir. 1979), citing NLRB v. Zayre Corp., 424 F.2d 1159, 1162 (Sth Cir. 1970).


COMMENTS ON “GRANDFATHER” INTERIM FINAL RULES

Submitted by

EMPLOYERS NETWORK FOR RESPONSIBLE OPTIONS, LAWS AND LEADERSHIP (ENROLL)
INTERNATIONAL PUBLIC MANAGEMENT ASSOCIATION FOR HUMAN RESOURCES
COLLEGE AND UNIVERSITY PROFESSIONAL ASSOCIATION FOR HUMAN RESOURCES
NATIONAL RAILWAY LABOR CONFERENCE

INTRODUCTION

On June 17, 2010, 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, 75 Fed. Reg. 34,538-34,570 (June 17, 2010) (“Grandfather Rules,”
“Interim Rules” or “Rules”) were published pursuant to the Patient Protection and Affordable
Care Act, Pub. L. No. 111~148 (March 23, 2010) (“Affordable Care Act” or “Act”), and the
Health Care and Education Reconciliation Act, Pub. L. No. 111-152 (March 30, 2010)
(“Reconciliation Act”), The Interim Rules were issued by the three agencies responsible for
healthcare reform law rulemaking: the Internal Revenue Service in the United States Department
of the Treasury (“IRS”), the Employee Benefits Security Administration in the United States
Department of Labor (“DOL”), and the Office of Consumer Information and Insurance
Oversight in the United States Department of Health and Human Services (“HHS”) (together the
“Departments”). The Interim Rules included a request for comments.

These comments! are submitted on behalf of the Employers Network for Responsible
Options, Laws and Leadership (“ENROLL”), including the International Public Management
Association for Human Resources (“IPMA-HR”), the College and University Professional
Association for Human Resources (““CUPA-HR”), and the National Railway Labor Conference
(“NRLC”). ENROLL consists of employers and associations that have a shared commitment to
the responsible administration of healthcare benefit plans, In many respects, the Affordable Care
Act and the Reconciliation Act (collectively “the Act”) reinforce the role played by employers
and employment relationships in national healthcare policy. As evidenced by the Interim Rules,
responsibility for healthcare reform changes and costs will rest heavily on employers, and
employers will play a central role in advancing the policies underlying healthcare reform. The
employers and associations participating in ENROLL are identified in the Appendix.

The Interim Rules provide needed guidance concerning many aspects of Affordable Care
Act Section 1251, captioned “Preservation of Right to Maintain Existing Coverage,” which
states:

(a) No CHANGES To EXISTING COVERAGE —
(1) IN GENERAL.-Nothing in this Act (or an amendment made by this Act) shall be
construed to require that an individual terminate coverage under a group health plan

Additional contributors to the these comments, on behalf of ENROLL and the associations identified in the
text, include Morgan Lewis attorneys Ross H. Friedman, Sage Fattahian, Marianne Hogan, and Jessica R. Bernanke.


Comments on ~24- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

« Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA): General
effective date: plan years beginning after one year following the date of enactment of
the statute; Effective date for collectively bargained plans: the later of (i) the date on
which the last of the collective bargaining agreements relating to the plan terminates
(determined without regard to any extension thereof agreed to after the date of the
enactment of this Act), or (ii) January 1, 2010.

A broad-based deferral of healthcare mandates for collectively bargained plans is not
rendered inappropriate based on the absence of an unqualified CBA deferral provision in the
Affordable Care Act. As noted previously, section 1251(d) in the Affordable Care Act does
contain a broad-based deferral applicable to collectively bargained plans. See pages 12-19
above. Although section 1251 does not provide for the automatic deferral of immediate
mandates for collectively bargained plans, the absence of explicit statutory language is not
controlling especially when a particular interpretation is supported by the statute’s underlying
policies and objectives, and/or additional legal requirements imposed under other laws. As the
court indicated in E.F. Hutton Group, Inc. v. United States, 811 F.2d 581, 586 (Fed. Cir. 1987),
“While the intention of the legislature must be ascertained from the words used to express it, the
manifest reason and obvious purpose of the law should not be sacrificed to a literal interpretation
of such words” (citations omitted). See also 2A SUTHERLAND STATUTORY CONSTRUCTION §
46:7 (Singer & Singer eds. 7th ed. 2007) (same); United States v. Brumbaugh, 909 F.2d 289,
289-91 (7th Cir. 1990) (absence of statutory reference held not to preclude interpretation based
on “structure and language of the statute” and where “legislative history does not address the
deletion”); United States y, Truong Dinh Hung, 629 F.2d 908, 924 (4th Cir. 1980) (absence of
explicit mention of intent held not to eliminate intent as statutory requirement); Jn re Casper, 154
B.R. 243, 247 (N.D. Ill. 1993) (absence of phrase statutory language held immaterial where
contrary reading would produce anomalous results).

For all the above reasons, the Interim Rules should defer all mandates until the
commencement of the new plan year following termination of such CBAs (or, if later, until
grandfather status is lost based on other requirements set forth in final grandfather rules adopted
by the Departments).

(c) CBA Deferral Should Relate to the Relevant Plan Year. The deferral of healthcare
reform mandates for collectively bargained plans should continue at least until the
commencement of the plan year after termination of the last plan-related collective
bargaining agreement.

The deferral of healthcare reform mandates for collectively bargained plans should
continue at least until the beginning of the new plan year following termination of the last
collective bargaining agreement relating to health plan coverage (or, if later, until the loss of
grandfather status based on the final grandfather rules adopted by the Departments).

The CBA deferral language in Affordable Care Act section 1251(d) would defer various
mandates until “the date on which the last of the collective bargaining agreements relating to the
coverage terminates.” However, based on several considerations, the Departments should


[ IN | C) Lk. Employers Network for Responsible
L Options, Laws, and Leadership

W151 Pennsy ania Avenue, NW | Washingion, ine 2 7 202.739.3000

COMMENTS ON “GRANDFATHER” INTERIM FINAL RULES

Submitted by

EMPLOYERS NETWORK FOR RESPONSIBLE OPTIONS, LAWS AND LEADERSHIP (ENROLL)
INTERNATIONAL PUBLIC MANAGEMENT ASSOCIATION FOR HUMAN RESOURCES
COLLEGE AND UNIVERSITY PROFESSIONAL ASSOCIATION FOR HUMAN RESOURCES
NATIONAL RAILWAY LABOR CONFERENCE

Of Counsel

ANDY R. ANDERSON
PHILIP A. MISCIMARRA
STEVEN D. SPENCER
JOHN F. RING
MorGAN Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004-2541
202-739-3000

Submitted to

UNITED STATES DEPARTMENT OF THE TREASURY
Internal Revenue Service
REG-118412-10

UNITED STATES DEPARTMENT OF LABOR
Employee Benefits Security Administration
RIN 1210-AB42

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Consumer Information and Insurance Oversight
OCHO-99911FC

August 16, 2010


= IN = C) LL. Employers Network for Responsible
Lu Options, Laws, and Leadership

1111 Pennsylvania Avenue, NW | Washington. OC 2

39.3000

The Employers Network for Responsible Options, Laws and Leadership (ENROLL) consists of
companies and associations that have a shared commitment to the responsible administration
of healthcare benefit plans in the context of new requirements imposed under the Patient
Protection and Affordable Care Act, Pub. L. No. 111-148 (March 23, 2010) and the Health Care
and Education Reconciliation Act, Pub. L. No. 111-152 (March 30, 2010) ("Reconciliation Act”).
ENROLL participants include the International Public Management Association for Human
Resources, the College and University Professional Association for Human Resources, the
National Railway Labor Conference, United States Stee! Corporation, ArcelorMittal, Tribune
Company, Trucking Management Inc., Lehigh Hanson, Inc., Bemis Company, Inc., Pactiv
Corporation, Eppendorf, Inc., M&G Polymers USA, LLC, The Knapheide Manufacturing
Company, McCain Foods USA, Inc., and other employers.

The International Public Management Association for Human Resources (IPMA-HR) is an
organization that represents the interests of human resource professionals at the federal, state
and local levels of government. IPMA-HR includes more than 5,500 federal, state and local
human resource professionals throughout the United States.

The College and University Professional Association for Human Resources (CUPA-HR) is
devoted to the higher education human resources profession and the higher education
community, and consists of more than 12,000 higher education human resources professionals
at more than 1,700 colleges, universities and other institutions associated with higher education.
The participants in CUPA-HR encompass approximately 90 percent of the doctoral institutions,
70 percent of the master’s institutions, 50 percent of the bachelor's institutions and close to 500
two-year and specialized institutions throughout the United States.

The National Railway Labor Conference (NRLC) represents member railroads throughout the
United States in collective bargaining, labor relations, health and welfare benefits, and other
employment-related matters. The NRLC dates back to 1963, resulting from the merger of three
separate regional carriers conference committees which previously represented railway carriers
in the Eastern, Western and Southeastern United States. Organized within the NRLC is the
National Carriers' Conference Committee (NCCC), one of the two components of the joint plan
committee which serves as a fiduciary and administrator of the Railroad Employees National
Health & Welfare Plan.

APPENDIX



Comments on <i Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

important business tools by through which they could continue to offer their health plan coverage
and contain the costs imposed by the immediate mandates.

If a plan sponsor needs to make plan design changes or adjust its financial burden beyond
what is permitted by the Grandfather Rule (as described above), it will lose its grandfather status,
and then have to comply with additional, expensive grandfathered mandates described below.
The imposition of these additional mandates, on top of the immediate mandates, is likely to
cause certain employers to reduce or eliminate their group health plan benefits.

(b) Prohibition on Cost Sharing for Preventive Care. The cost of violating grandfather
treatment, and adding in the grandfathered mandate of preventive services, adds even
further cost to complying with the Act.

The Preventive Care Rule explains how increased use of preventive care should reduce
health care costs due to a healthier population, and therefore, it is reasonable to give participants
an incentive to seek preventive care by making that care free to them. But the Rule also
acknowledges that “free” preventive services will result in an uptick in the use of such services,
and it is the plan sponsors who are going to have to pay for those services without the benefit of
any cost-sharing. While the Preventive Care Rule acknowledges that the data related to the costs
of these services is uncertain, it posits that, based on the current cost of providing preventive care
services, the full cost of providing such services for free will result in a 1.5% increase in
premiums.

It is reasonable to assume that once an employer no longer has the incentive of
maintaining grandfather status, it will further increase the premiums to take into account the cost
of the Immediate and grandfathered mandates, which, for some employers, will be as high as
11.2% of premiums. Significantly, collectively bargained plans will not have the ability to raise
premiums until the parties’ next bargaining cycle. As such, collectively bargained plans,
including multi-employer plans with contractually limited resources, may not be able to offset
these increased costs for a number of years. In the meantime, these plans, many of which are
already in serious financial condition, likely will experience even more severe financial hardship
until the controlling collective bargaining agreements are renegotiated, at which time there will
be enormous pressure on employers to require substantial contribution increases.

Because the limits contained in the current Grandfather Interim Final Rules are so
restrictive, and the cost of immediate mandates so high (not to mention the additional cost cf
grandfathered mandates if grandfather treatment is lost), the Departments should give serious
consideration to revising the Rules to provide for all current grandfather limits to be tripled. This
additional room will allow employers to adequately reflect the cost of the immediate mandates
and, where necessary due to economic circumstances or collective bargaining restraints, pass the
increased cost along to their employees without losing grandfather status. This expansion will
allow the Interim Final rules to reflect the spirit of President Obama’s pledge and reflect the
unconstrained language of the Act.


Comments on -14- Employers Network for Responsible Options,
Grandfather Interim Final Rules Laws and Leadership (ENROLL)

generally, and nowhere in section 1251 is there any explicit distinction made between
self-insured and fully-insured medical plans.

© The concept of “insurance” is clearly evident in “fully-insured” and “self-insured”
health plans because the term “insured” is used when referring to both types of plans.
Likewise, the “insurance” concept underlying self-insured plans is not materially
different from fully-insured plans. Both types of plans involve the balancing of
benefit utilization, claims, costs and premiums across a group of participants.

¢ The proliferation of different “health plan” concepts — some of which include and
others which exclude self-insured benefits - precludes any reasonable inference that
Congress intended to exclude self-insured plans when using the phrase “health
insurance coverage” in section 1251(d). In fact, the conflicting and inconsistent
“health plan” terms in section 1251, ERISA and the Public Health Service (“PHS”)
Act, combined with a dearth of legislative history on this point, renders implausible
any conclusion that the single use of the word “insurance” in section 1251(d) means
Congress thereby intended to exclude all “self-insured” health plans.°

© Many group health plans include insured and self-insured benefits. For example, it is
not unusual to have a fully-insured medical plan but a self insured prescription drug,
dental and vision plan. Collectively bargained plans that combine insured and self-
insured benefits face the exact same collective bargaining obligations that are the
reason for treating collectively bargained plans under separate grandfathering rules.
Clearly Congress did not intend to draw distinctions between fully-insured, partially
insured and self-insured collectively bargained plans.

¢ The one thing that is clear from section 1251(d) is that Congress recognized that
collectively bargained healthcare benefits were sufficiently distinct from other types
of benefits to warrant an exemption, at least from the grandfathered mandates, until
the termination of plan-related collective bargaining agreements, This exemption
should not be narrowed — or, for a significant category of collectively bargained
benefits, extinguished — without a clear and unambiguous indication that such an
outcome was intended. It is incongruous to believe that Congress with one hand, in a
statutory provision captioned “Effect on Collective Bargaining Agreements,” would
create a broad deferral for collectively bargained health plans and with the other hand

5 As just one example of the confusing “health plan” references that now exist, the generic phrase “health
plan” would normally be considered broader than “group health plan,” since the term “group” (in the phrase “group
health plan”) clearly operates as a word of limitation. Paradoxically, “health plan” as defined in the PHS Act and
ERISA is actually given a narrower technical definition than “group health plan” because self-insured plans are only
included in the latter. See 75 Fed. Reg. at 34,539 n.1. Along similar lines, Affordable Care Act section 1251(e)
takes the term “health plan” (which, as noted above, has a technical definition that excludes self-insured plans) and
makes it part of the phrase, “grandfathered health plan,” which is then defined as encompassing any “group health
plan,” thereby including self-insured plans, In the same way, even the Interim Rules conflate the term “health
insurance coverage” (which, according to the Departments, excludes self-insured plans) and the term “grandfathered
health plan” (which, as defined in Affordable Care Act § 1251(e), includes self-insured plans as part of the term
“group health plan”), See, e.g., 75 Fed. Reg. at 34,559 (interim 26 CFR § 54.9815—-1251T(f) (referring to “the
determination of whether health insurance coverage . . . is grandfathered health plan coverage”). See also 75 Fed.
Reg. at 34,564 (interim 29 CFR § 2590.715-1251(f)), 34,568 (interim 42 CFR § 147.140(f)).