DORSEY

LESLIE J. ANDERSON
Partner

(612) 343-7960

FAX (612) 340-8827
anderson.leslie@dorsey.com

August 23, 2010

VIA ELECTRONIC FILING AT
WWW.REGULATIONS.GOV

Office of Health Plan Standards and
Compliance Assistance

Employee Benefits Security Administration
Room N-5653

U.S. Department of Labor

200 Constitution Avenue, NW.
Washington, DC 20210

Attention: RIN 1210-AB43

Re: _ Final Interim Rules Regarding Requirements for Group Health Plan and Health
Insurance Issuers Under the Patient Protection and Affordable Care Act Relating
to Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions,
and Patient Protections
Federal Register, Volume 75, No. 123, page 37188 (June 28, 2010)

Comments Regarding Certain Stand-Alone HRAs

Dear Sir or Madam:

Dorsey & Whitney LLP is a law firm whose clients include many employers to whom we
provide advice on employee benefits, including group health plans. We are writing to comment
on the interim final rules regarding restrictions on lifetime and annual limits found in section
2711 of the Public Health Service Act (“PHS Act”) as added by the Patient Protection and
Affordable Care Act (“PPACA”). The interim final regulations were published on June 28, 2010
in the Federal Register. 75 Fed. Reg. 37188. The comments below discuss the application of
restrictions on lifetime and annual limits to certain stand-alone health reimbursement
arrangements (“HRAs”).

Background

Section 2711 of the PHS Act prohibits lifetime and annual limits on essential health
benefits offered under group health plans. Section 1001 of PPACA, as amended by section
10101 of PPACA. In the preamble to the interim final regulations, the Departments of Health
and Human Services, Labor and the Treasury (“the Departments”) requests “comments
regarding the application of PHS Act section 2711 to stand-alone HRAs that are not retiree-only
plans.” 75 Fed. Reg. 37188, 37191.

Some of our employer clients offer a stand-alone HRA that reimburses certain medical
expenses (as defined in section 213(d) of the Internal Revenue Code) of current employees
who are also eligible for the employer’s major medical plan. These employees will participate in

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DORSEY

Department of Labor
August 23, 2010
Page 2

the stand-alone HRA regardless of whether they choose to participate in the major medical plan.
Employees who are not eligible for the employer’s major medical plan are not eligible for the
HRA. We believe that lifetime or annual limits on all benefits provided under a stand-alone HRA
that is provided to all employees who are eligible for the employer’s major medical plan
(regardless of whether the employee actually elects to participate in the major medical plan)
should not violate 2711 of the PHS Act.

Comment on Certain Stand-Alone HRAs

In the preamble to the interim final regulations, the Departments state that an HRA that
is “integrated with other coverage as part of a group health plan and the other coverage alone
would comply with the requirements of PHS Act section 2711, the fact that benefits under the
HRA by itself are limited does not violate PHS Act section 2711 because the combined benefit
Satisfies the requirements.” 75 Fed. Reg. 37188, 37190-91. We believe the type of HRA
described above is very similar to this kind of integrated HRA because every employee who
participates in the HRA has access to the employer’s major medical plan that complies with
section 2711 of the PHS Act. Therefore, like the integrated HRA discussed in the preamble,
lifetime or annual limits on this type of HRA do not violate section 2711 of the PHS Act.

In this situation, as with the integrated HRA, the HRA is not the only group health plan
offered to the employees; all employees who participate in the HRA are also eligible for the
employer's PPACA-compliant major medical plan. Regardless of whether the eligible employee
actually elects to participate in the major medical plan, the employee will automatically
participate in the HRA. Permitting a stand-alone HRA of this kind to continue to impose annual
and lifetime limits will allow the employer to offer the HRA to all benefit-eligible employees, not
just those who elect to participate in the employer's major medical plan.

In contrast, applying the new restrictions on annual and lifetime limits to this type of
stand-alone HRA will disadvantage employees and their dependents. Employers will, as a
practical matter, be faced with two options if the restrictions on annual and lifetime limits are
applied to these HRAs. The employer will either have to terminate the plan (because the
employer cannot fund an unlimited HRA for all benefit-eligible employees) or modify the HRA so
that it is integrated with the major medical plan and only available to employees who elect to
participate in the major medical plan (so that the annual and lifetime limits can be maintained).
Neither option is favorable to participants.

Conclusion

We request that the Departments issue guidance that stand-alone HRAs with lifetime or
annual limits that are provided to all employees who are eligible for the employer’s compliant
major medical plan (regardless of the employee’s actual election to participate in the major
medical plan) do not violate section 2711 of the PHS Act.

In the event that the Departments decide to require stand-alone HRAs to eliminate

annual and lifetime limits, we request the Departments issue transition relief for stand-alone
HRAs. The deadline for open enrollment for calendar year plans is quickly approaching and

DORSEY & WHITNEY LLP


DORSEY

Department of Labor
August 23, 2010
Page 3

companies generally must make decisions about next year’s plans far in advance of open
enrollment. We therefore request that, if stand-alone HRAs are subject to restrictions on lifetime
and annual limits, the Departments provide transition relief until the first plan year beginning on
or after September 23, 2011 to allow employers with stand-alone HRAs to comply with the
restrictions (if the Departments issue such guidance).

We appreciate the Departments providing a request for comments on the interim final
regulations and the opportunity to comment. In addition, we welcome the opportunity to discuss
this comment and any questions you may have regarding the comment.

Very truly yours,

Leslie J. Anderson

4837-7588-58313 DORSEY & WHITNEY LLP