Program Office 

 One Kaiser Plaza, 27th Floor 

 Oakland, CA 94612 

 Kaiser Foundation Health Plan, Inc. 

August 16, 2010 

Submitted Electronically: http://www.regulations.gov 

Office of Consumer Information and Insurance Oversight 

Department of Health and Human Services 

Attention: OCIIO-4150-IFC 

Baltimore, Maryland 21244-1850 

Re: Interim Final 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 

Dear Sir or Madam: 

Kaiser Permanente offers the following comments in response to the above-captioned Interim 

Final Rules (“IFR”), issued in the Federal Register on June 17th. Kaiser Permanente is the largest 

private integrated healthcare delivery system in the U.S., delivering health care to approximately 

8.7 million members in nine states and the District of Columbia. Kaiser Permanente comprises 

Kaiser Foundation Health Plan, Inc., the nation’s largest not-for-profit health plan, and its health 

plan subsidiaries outside California and Hawaii; the not-for-profit Kaiser Foundation Hospitals 

which operates 36 hospitals and over 400 other clinical facilities; and the Permanente Medical 

Groups, independent physician group practices that contract with Kaiser Foundation Health Plan 

to meet the health needs of Kaiser Permanente’s members. Most pharmacy, diagnostic, and 

laboratory services delivered to Kaiser Permanente members are performed within Kaiser 

Permanente. 

Kaiser Permanente believes that the Patient Protection and Affordable Care Act (PPACA) has the 

potential to represent an important step towards achieving universal coverage in the United States 

and towards establishing reasonable market rules that will allow plans to compete on quality and 

cost rather than on risk avoidance. We appreciate your efforts through this IFR to balance the 

objectives of preserving the ability of individuals to maintain their existing coverage with the 

goals of ensuring access to affordable essential coverage for all individuals, grandfathered or not, 

and improving the quality of coverage over time. 

In the IFR you have requested comment on several issues that might impact grandfathered status 

including (1) changes to plan structure and (2) changes to a prescription drug formulary. We offer 

our recommendations below on these topics, recommend good faith effort and hold harmless 

provisions, and seek clarification on issues that may impact a plan’s grandfathered status. 

Administrative Changes to a Plan’s Structure

The IFR requests comment on whether changes to a plan’s structure should result in cessation of 

grandfathered health plan status for a plan or health insurance coverage. Kaiser Permanente 

recommends that changes made to a plan’s structure that do not decrease benefits beyond what is 

allowed under the guidelines should not jeopardize a plan’s grandfathered status. Specifically, we 
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August 16th, 2010 

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recommend that an employer be allowed to change the structure and financing of a plan from a 

fully insured plan to a self funded plan or vice versa without losing grandfathered status and 

request clarification on this issue. 

Routine Changes to a Prescription Drug Formulary 

The availability of new generic drugs, development of new prescription drugs, advances in 

medical knowledge and research, and revised medical guidelines necessarily require regular 

changes to prescription drug formularies. The Permanente Medical Groups routinely update our 

formularies to incorporate the latest pharmaceutical research and evidenced-based guidelines to 

provide our members the highest quality care. These modifications also ensure the most costeffective use of our member’s dollars by assuring the use of equally effective generic (or less 

costly brand name) alternatives wherever clinically indicated. For these reasons, Kaiser 

Permanente recommends that routine modifications to a prescription drug formulary, as opposed 

to wholesale formulary changes that materially reduce the value of a drug benefit, should be 

allowed without affecting the grandfathered status of plans. 

Recognizing Good Faith Efforts and Hold Harmless Provisions 

The IFR notes that the Department will take into account good-faith efforts to comply with a 

reasonable interpretation of the statutory requirements and may disregard changes to a plan or 

policy that only modestly exceed those changes described in paragraph (g) (1) of 45 CFR 147.140 

and that are adopted before the date the regulations were made publicly available. Kaiser 

Permanente appreciates the acknowledgement of an issuer’s good faith efforts to comply with the 

regulations and recommends only requiring prospective changes to grandfathered plans in this 

instance. In addition, we recommend holding health insurance issuers harmless from any 

administrative or other penalties for providing a grandfathered benefit offering to an ineligible 

employer plan if an employer action (such as a change in contribution level) ends grandfathered 

status and the issuer had no knowledge of the changes. 

Preserving the Right to Maintain Grandfathered Status for Purchase of Coverage Through 

a Trust 

Kaiser Permanente seeks to clarify that the date for determining the grandfathered status of 

coverage issued through a trust is the date the employer or individual consumer purchased 

coverage through that trust. 

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

contact me at 510.271.6835 (email: anthony.barrueta@kp.org). 

Sincerely, 

Anthony Barrueta 

Senior Vice President, Government Relations 
Office of Consumer Information and Insurance Oversight 

August 16th, 2010 

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