CovINGTON & BURLING up

us in an untenable position of having to choose between either continuing our
Unicare coverage (without any assurances that a buyer would be found) or
beginning the process of contracting with a new insurer. We would have preferred
to remain insured by Unicare. However, we determined that the prudent course of
action was to begin the process of identifying a replacement insurer.

We, along with most of Unicare’s large group clients in the District of
Columbia, began seeking new insurers for our group health plans in late 2009 and
early 2010. The process for selecting a new insurer extended over several months
and involved drafting and distributing a request for proposals, carefully reviewing
proposals received from insurers, and negotiating with the selected insurer. Our
process was complicated by the fact that we wished to duplicate the coverage
provided by Unicare as much as possible so as to minimize disruption to plan
participants. For these reasons, we were not able to enter into an agreement with a
replacement insurer before March 24, 2010. Consequently, we cannot benefit from
the transition relief available to employers who entered into new insurance
contracts for their plans on or before March 23, 2010.8

We are also not eligible for the transition relief available to plans that
modify their terms after March 23, 2010 but before the interim final regulations
were issued on June 14, 2010.9 Although we began the process of identifying a
replacement insurer in early 2010, many of us did not enter into contracts with our
replacement insurer until it became clear that Unicare would not be able to locate a
buyer that would continue Unicare’s existing network of providers. This fact did not
become apparent until after the interim final regulations were issued. Moreover, to
be eligible for this transition relief, employers must rescind the offending change
before the next plan year.!0 Therefore, even if we had adopted new contracts before
June 14, 2010, we would not have been eligible for this relief because we could not
have rescinded our contracts with our replacement insurers without adversely
affecting our plan participants.

In the end, we were forced to change insurers because participants
would have been much worse off if we had continued to retain Unicare. Unicare
withdrew from the health insurance market in Virginia and effectively withdrew
from the health insurance markets in Maryland and the District of Columbia by
disbanding its network of providers and virtually eliminating sales and account

6 Treas. Reg. § 54.9815.1251T(g)(2)(i)(A); 29 C.F.R. § 2590.715-1251(g)(2)(3)(A); 45 C.F.R.
§ 147.140(g)(2)(4)(A).

® Treas. Reg. § 54.9815.1251T(g)(2)(i)(C); 29 C.F.R, § 2590.715-1251(e)(2)(i(C); 45 C.F.R.
§ 147,140(@)(2)GC).

1 id,


CovincTton & BURLING uP

policy, certificate, or contract of insurance after March 23, 2010.3 The loss of
grandfathered status occurs regardless of the employer’s reasons for entering into a
new arrangement or the level of benefits offered under the new arrangement.
Consequently, this regulation denies grandfathered status to group health plans
that have no choice but to enter into a new contract of insurance because their
current provider is withdrawing or effectively withdrawing from the health
insurance market.

This is precisely the situation that the undersigned law firms are
facing. The undersigned law firms sponsor group health plans that, until recently,
were insured by Unicare. As of early 2010, Unicare provided health insurance
coverage to at least twenty-two large group health plans in the District of Columbia
and to at least thirteen law firms in the Washington, D.C. metropolitan area. As of
July 1, 2010, Unicare provided coverage to only two large group health plans in the
District and only one law firm. A recent article in The Washington Post estimated
that at least 3,000 individuals in Virginia, most residents of Northern Virginia,
have lost coverage as a result of Unicare’s withdrawal from that market.*

Unicare made the strategic decision before the enactment of PPAC.A to
begin shifting its business away from the health insurance market in favor of
providing dental, vision, life insurance, and disability insurance products.6 Unicare
withdrew from the health insurance market in IIinois, Indiana, Michigan, and
Texas in 2009, which represented over eighty-five percent of Unicare’s health
insurance business.6 According to The Washington Post, approximately 400,000
covered individuals in Illinois and Texas alone were affected by the withdrawal.”

At the same time, Unicare began seeking a buyer for its business in
the mid-Atlantic region, which includes the Washington, D.C. metropolitan area.
Unicare informed us in December 2009 that, while Unicare was seeking a buyer for
its mid-Atlantic business, it had not yet been able to attract any potential buyers.
Unicare also indicated that it would begin downsizing its customer support services
for health insurance coverage provided to plan participants. Unicare, therefore, put

3 Treas. Reg. § 64.9815-1251T(a)(1)Gi); 29 C.F.R. § 2590.715-1251(a)(1)(ii); 45 C.F.R.
§ 147.140(a)(1)Gi); 75 Fed. Reg. 34541 (une 17, 2010).

4 Lena H. Sun, UniCare to Drop About 3,000 Virginians from Health Insurance Plans, THE WASH.
Post, June 29, 2010, at B04.

5 Letter from Robert O'Hara, Director of Sales and Account Management, Unicare, Inc., to Nicole
Lark, Firm Wide Compensation and Benefits Director, Covington & Burling LLP (undated) (on file
with Covington & Burling LLP).

6 Id.

7 See note 4, above.


COVINGTON & BURLING LLP

services in these markets.) (At the end of 2009, Unicare had approximately 28
service managers and 25 to 30 account managers. As of August 16, 2010, Unicare
had eliminated all service managers and retained only two account managers.)
Unicare did not find a buyer for its health insurance coverage in our region and
replaced its existing network of providers with a significantly smaller provider
network for the Washington, D.C. metropolitan area on July 1, 2010.'3 Accordingly,
our plan participants would have suffered from significant network disruption and
increased out-of-pocket costs if we continued to retain Unicare. In addition, due to
employee attrition, Unicare outsourced its first-level customer service
responsibilities in April 2010, thereby reducing the quality and responsiveness of its
customer service for our participants.!4

We took all reasonable steps necessary to act in our participants’ best
interests — we met with Unicare to determine the likelihood that a buyer would be
located, invested significant time and expense in selecting a replacement insurer
who could provide comparable health benefits, and refrained from entering into an
agreement with a replacement insurer until we were certain that Unicare would be
unable to continue providing the same level of benefits and customer service to
participants. We also ensured that the change from Unicare to the new insurer did
not result in any other changes to our group health plan that could lead to a loss of
grandfathered status. Nevertheless, the interim final regulations penalize us by
providing that our plan has lost grandfathered status because Unicare decided to
effectively withdraw (and in some cases formally withdraw) from the mid-Atlantic
health insurance market.

In our case, the interim final regulations produce a nonsensical result.
If we had chosen to retain Unicare as the insurer of our plan in the District of
Columbia and Maryland, our plan would have grandfathered status despite
significant adverse effects on plan participants in the form of a drastically reduced
provider network, increased out-of-pocket costs, and outsourced customer service.
By changing to a replacement insurer, we have preserved the original coverage that
our participants received from Unicare and their access to a substantial network of
providers but, because those benefits are being provided by a different insurer, our
plans have lost grandfathered status.

11 E-mail from Pennie Hinds, Senior Vice President, Willis Group, to Mary C. DeYoung, Associate,
Covington & Burling LLP (August 11, 2010, 4:41pm EDT) (on file with Covington & Burling LLP).

12 Email from Pennie Hinds, Senior Vice President, Willis Group, to Nicole Lark, Firm Wide
Compensation and Benefits Director, Covington & Burling LLP (August 16, 2010, 9:44am EDT) (on
file with Covington & Burling LLP).

18 See note 5, above.
"Ta.


Page 1 of 1

REENTHI2-/6

LEGAL PROCESSING DIVISION
PUBLICATION & REGULATIONS Ra i SS TS DOT

N i :
PuBLic Sour toned
Posted: September 09,
SUBMISSION Comments Due: August 16, 2910

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-2010-0010-0928
Comment on FR Doc # 2010-14488

Sohn Writers = Submitter Information

Address:
Covington & Burling LLP
1201 Pennsylvania Avenue, NW
Washington, DC, 20004

Phone: 202-662-6000

Organization: Covington & Burling LLP

General Comment

Comment attached

Attachments

IRS-2010-0010-0928.1: Comment on FR Doc # 2010-14488

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


Covington & BURLING ite

We respectfully request that the interim final regulations be amended
to provide that a group health plan will not cease to be grandfathered under PPACA
for entering into a new policy, certificate, or contract of insurance after March 23,
2010, if (1) the change was necessitated by the withdrawal or effective withdrawal
of the plan’s existing insurer from the health insurance market in the region; and
(2) the replacement policy, certificate, or contract of insurance does not make any
changes to benefits under the plan that would otherwise result in the loss of
grandfathered status. For this purpose, an effective withdrawal occurs when an
insurer reduces its coverage and participant services so significantly that the
insurer can no longer provide competitive health care coverage to participants and
no longer maintains an effective presence in the regional insurance market.

The undersigned law firms appreciate the opportunity to provide these
comments on the interim final regulations. If the Departments have any questions
concerning our comments, or if we can be of further assistance, please contact John
B. Waters at (202) 662-6000.

Sincerely,

v

n B. Waters
ecutive Director
Covington & Burling LLP

Additional Signatory:

Wiley Rein LLP


COVINGTON & BURLING iP

3201 PENNSYLVANIA AVENUE NW @euiNa

WASHINGTON, OC 20004-2401 erussets
LONDON

TEL 202.662.6000 pean

FAX 202.662.6201 SAN O1EGO.

Www.Cov.com ‘SAN FRANCISCO

SILICON vaLLeY
WASHINGTON

August 16, 2010

Submitted through the Federal eRulemaking Portal

CC:PA:LPD:PR (Reg-118412-10), Room 5205
Internal Revenue Service

P.O. Box 7604

Ben Franklin Station

Washington, D.C. 20044

Attention: RIN 1545-BJ51
Ladies and Gentlemen:

The undersigned employers are pleased to submit this response to the
request for comments on the interim final rules for group health plans and health
insurance coverage in the group and individual markets under provisions of the
Patient Protection and Affordable Care Act (“PPACA”) regarding status as
grandfathered health plans. The request was published by the Departments of
Labor, Health and Human Services, and the Treasury (collectively, the
“Departments”) in the Federal Register on June 17, 2010.

The undersigned employers are law firms with at least one office in the

Washington D.C. metropolitan area who have been affected by the decision of our
group health plan insurer, Unicare, Inc. (“Unicare”), to withdraw from the health
insurance market in Virginia and effectively withdraw from the health insurance
market in Maryland and the District of Columbia. The interim fina) regulations
provide that a group health plan will lose its grandfathered status if the employer
maintaining the plan enters into a new policy, certificate, or contract of insurance
after March 23, 2010.! The interim final regulations do not provide an exceptior. to
this rule for employers who are forced to change insurers because the insurer of

' Treas, Reg. § 54.9815-1251T(a)(1)(ii); 29 C.F.R, § 2590.715-1251(a)(1)(ii); 45 C.F.R.
§ 147.140(a)(1)Gi); 75 Fed. Reg. 34541 (une 17, 2010).


CovincTon & BURLING uP

their group health plans either withdraws from the health insurance market or
effectively withdraws from the health insurance market by reducing its coverage
and participant services so significantly that the insurer can no longer provide
competitive health care coverage and no longer maintains an effective presence in
the regional insurance market. Because Unicare was unable to find a successor to
assume and maintain its existing network of providers in the region, we were forced
to choose between replacing Unicare with a new provider or maintaining our
coverage with Unicare in the face of significant reductions in network coverage and
customer service that would have adversely affected plan participants. In making
the decision to move to a new insurer, we entered into new contracts with insurers
who agreed to provide the same coverage as Unicare on the same terms. But for the
replacement of Unicare with a new insurer, our group health plans would be eligible
for grandfathered status because we have not changed the terms of our plans that
were in effect on March 23, 2010, in any way that would otherwise cause a loss of
grandfathered status. :

We respectfully request that the Departments revise the interim final
rule to provide that the grandfathered status of our group health plans will not be
lost solely because our insurer chose to withdraw or effectively withdraw from the
health insurance market in our region.

The interim final rules define grandfathered health coverage and
describe the types of changes that will cause a group health plan or health
insurance coverage to lose grandfathered status. Grandfathered status provides
group health plans with valuable assistance as they begin to implement the new
requirements under PPACA. Grandfathered health plans remain exempt from
certain PPACA mandates, including requirements for an expanded claims and
appeals process, application of the nondiscrimination requirements to insured
plans, and coverage of specified preventive care without cost-sharing requirements.”
By maintaining the grandfathered status of their plans for at least another one or
two years, employers will have the advantage of more guidance interpreting these
complicated PPACA mandates, more time to make plan design decisions in response
to this guidance through a thoughtful and reasoned process, and the ability to
implement this guidance and communicate changes resulting from implementation
of it in an orderly manner that minimizes disruption and confusion for plan
participants.

The interim final regulations provide that a group health plan will lose
its grandfathered status if the employer maintaining the plan enters into a new

2 Treas. Reg. § 54.9815-1251T(c); 29 C.F.R. § 2590.715-1251(c); 45 C.F.R. § 147.140(c).