National Restaurant Association - August 16, 2010 Page 3
Re; OCIIO-9991-IFC, RIN 1210-AB42, REG-118412-10

where it no longer meets the standards for grandfathered status. The standards should allow for
more flexibility regarding what cost-sharing changes will trigger a loss of grandfathered status.

FURTHER CHANGES PROPOSED TO RESULT IN CESSATION OF GRANDFATHERED STATUS

In addition, the Departments should not consider further changes that would cause a plan to loose
grandfathered status such as changes in plan structure, a network plan’s provider network, or
prescription drug formulary. More restrictive standards are not consistent with the intent of
Section 1251 of the Patient Protection and Affordable Care Act.

Furthermore, we believe grandfathered status should not be threatened if an employer changes
issuers while keeping the same plan benefits and structure intact. The rule specifically allows for
a change in third party administrator without a cessation of grandfathered status. Similarly, the
issuer administering the benefits should not matter, but the benefits and structure of plan are what
should be considered in determining grandfathered status. As a consequence issuers will gain
leverage to raise premiums on current plans because they know employers must stay with the
same provider or loose grandfathered status.

RECORDKEEPING AND DISCLOSURE OF GRANDFATHERED PLAN STATUS

We believe that it is appropriate for issuers to maintain and be responsible for reporting
information for the purposes of recordkeeping. Employers should not be responsible for
maintaining these records and the weight of disclosure responsibility should fall on issuers not
employers.

CONCLUSION

Thank you again for this opportunity to submit the restaurant industry’s comments on the Interim
Final Rule concerning Group Health Plans and Health Insurance Coverage Relating to Status as a
Grandfathered Health Plan under the Patient Protection and Affordable Care Act. We look
forward to the Final Rule and strongly urge you to consider the restaurant and foodservice
industry’s perspective on maintaining grandfathered plan status.

Sincerely,

Scott DeFife
Executive Vice President
Policy & Government Affairs


SEP 9 2010 , d)9_)0
AL PROCESSING DIVISION REC-HP
Pu REGULATIONS

TION &
PUBLICA’ BRANCH

Page 1 of 1

As of: September 09, 2010

PUBLIC Status: Posted
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-2010-0010-0917
Comment on FR Doc # 2010-14488

Scot DeTHE Submitter Information

Address:

1200 17th Street NW

Washington, DC, 20036
Organization: National Restaurant Association
Government Agency Type: Federal
Government Agency: IRS

General Comment

See attached file(s)

Attachments

IRS-2010-0010-0917.1: Comment on FR Doc # 2010-14488

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



—
NATIONAL +
RESTAURANT
ASSOCIATION,

August 16, 2010

Submitted via Federal Rulemaking Portal:
itp: //www.regulations. gov

Mrs. Kathleen Sebelius, Secretary, Department of Health and Human Services

Mr. Jay Angoff, Director, Office of Consumer Information and Insurance Oversight, Department
of Health and Human Services

Ms. Phyllis C. Borzi, Assistant Secretary, Employee Benefits Security Administration,
Department of Labor

Mr. Michael Mundaca, Assistant Secretary, Tax Policy, Department of Treasury

Mr. Steven Miller, Deputy Commissioner for Services and Enforcement, Internal Revenue
Service, Department of Treasury

Re: OCIIO-9991-IFC, RIN 1210-AB42, REG-118412-10 regarding the Interim Final Rule
concerning Group Health Plans and Health Insurance Coverage Relating to Status as a
Grandfathered Health Plan Under the Patient Protection and Affordable Care Act.

Dear Secretary Sebelius, Director Angoff, Assistant Secretary Borzi, Assistant Secretary
Mundaca, and Deputy Commissioner Miller:

On behalf of the National Restaurant Association, we appreciate the opportunity to submit our
comments on the Interim Final Rule concerning group health plans and status as a grandfathered
plan.

The National Restaurant Association is the leading business association for the restaurant and
food service industry. Our mission is to help our members establish customer loyalty, build
rewarding careers, and achieve financial success. The industry is comprised of 945,000
restaurant and foodservice outlets employing 12.7 million people who serve 130 million guests
daily. Despite being an industry of predominately small businesses, the restaurant industry is the
nation’s second-largest private-sector employer.

BACKGROUND ON THE RESTAURANT AND FOOD SERVICE INDUSTRY

The restaurant and food service industry is unique for several reasons. First and foremost, small
businesses dominate the industry — with more than seven out of 10 eating and drinking
establishments being single-unit operators. We employ a high proportion of part-time and
seasonal workers. Our workforce is typically young, with nearly half under the age of 25. We
also have a high average workforce turnover rate relative to other industries — a 75 percent
average turnover rate in 2008 compared to 49 percent for the overall private sector. In addition,
the business model of the restaurant industry produces relatively low profit margins of 4 to 6
percent before taxes, with labor costs being one of the most significant line items for a restaurant.

1200 SEVENTEENTH STREET. NW + WASHINGTON, OC 70030-3097

TEL: 202 331.5900 + FAX: 202.331.2429 + WWW.ALSTAURANT.ORG


National Restaurant Association — August 16, 2010 Page 2
Re: OCIIO-9991-IFC, RIN 1210-AB42, REG-118412-10

Staying competitive in recruiting and retaining employees is essential to the restaurant industry.
Restaurateurs want to continue to provide health care coverage to their employees, and like all
employers have flexibility to design such coverage to meet the needs of their employees and the
business. Current coverage offerings have been crafted to strike and maintain that balance and
restaurateurs should be permitted to do so as envisioned under Section 1251 of the Patient
Protection and Affordable Care Act allowing for continuation of existing coverage in effect as of
March 23, 2010. The National Restaurant Association, is concerned however, that in its current
form the interim final rule will inhibit restaurateurs from achieving that objective.

SPECIFIC STANDARDS ON BENEFITS, COST-SHARING AND EMPLOYER CONTRIBUTIONS
The rule’s provisions appear to phase out health plans that existed on March 23, 2010, and not
provide the intended protection for such plans for any significant amount of time. As the
preamble to the rule states,

To accommodate these changes in market dynamics in 2014, the Departments
have structured a cost-sharing rule whose parameters enable greater flexibility in
early years and less over time. It is likely that few plans will delay for many
years before making changes that exceed medical inflation. This is because the
cumulative increase in copayments from March 23, 2010 is compared to a
maximum percentage increase that includes a fixed amount — 15 percentage
points — that does not increase annually with any type of inflator. This

should, ..require plans and issuers that seek to maintain grandfathered status to
find ways other than increased copayments to limit cost growth.

This approach severely limits strategies that restaurateurs can employ to control cost growth.
Although medical inflation is considered by other cost-sharing rules, pressure will be placed on
plans to the point where no other alternative exists but to decrease employer contribution as the
tule suggests. Such changes may help maintain the health plan’s grandfather status, but could
negatively impact employers’ relationships with their employees. The potential for such an
impact is a major concern for the restaurant industry because restaurateurs must maintain good
labor relations to remain competitive.

The Departments estimate that 37 percent of small businesses (100 employees; small group
market) and 28 percent of large employers that face the choice to maintain grandfathered status
by decreasing the employer contribution or lose status will opt to loose the health plan’s
grandfathered status in 2011. Taken together with those employers expected to change issuers,
which will cause a loss of status, the Departments’ high-end estimate is that approximately 42
percent of small employers and 29 percent of large employers will relinquish grandfathered status
in 201] alone. If the same assumptions are applied and the estimates are extended through 2013,
the Departments’ high-end estimates are that 80 percent of small employer plans and 64 percent
of large employer plans will relinquish their status by the end of 2013. Even the mid-range
estimates are 66 percent and 45 percent respectively through 2013. If true, the standards in the
rule will force too many businesses to change coverage by 2013, not allowing maintenance of
existing plans they may want to keep. As an industry of mostly small businesses, it strikes us as
extreme that 80 percent, or even 66 percent at the mid-range, of small businesses will be forced to
relinquish grandfathered status because of the proposed standards.

Section 1251 of the Patient Protection and Affordable Care Act states that individuals who wish
to maintain existing coverage will be allowed to do so. However, this rule is structured to cause
the eventual phase out of grandfathered plans because inflation is not applied to copayments. In
combination with other benefit standards this will continue to put pressure on the plan to the point