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And Compliance Assistance
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Page 5

and without any supporting contribution due from employers, as employers are not
required to pay contributions for ineligible employees. Indeed, Example 2 in the
regulations, 29 CFR 2590.715-2712(a)(3), seems to contemplate this very scenario,
except that in the example, the employer mistakenly paid contributions during a period of
ineligibility. Under the terms of most plans I have worked with, in Example 2 the
employer would be able to have the mistakenly paid contributions restored to him or
credited against future contributions, with the result being that the health plan would have
to provide the coverage to an ineligible employee for a period of several months without
supporting contributions, thereby depleting the assets of the plan available to provide
coverage for other eligible employees. This is unreasonable and not a true “rescission” as
that practice is widely understood.

A fair and reasonable way to address the situation is to modify Section 2590.715-
2712(a)(2)(ii) to read as follows:

The cancellation or discontinuance of coverage is effective retroactively to.
the extent it is attributable to an absence of payment of premiums or
contributions towards the cost of coverage.

This makes clear that rescission does not include retroactive cancellation of coverage for
nonpayment of premiums or contributions regardless of whether the employee or the
employer was responsible to pay, and where contributions are not “required” because the
employee was not eligible.

In addition, it would be helpful if the Departments clarified what constitutes an
“omission that constitutes fraud” in Section 2590.715-2712(a)(1), and specifically,
whether that can include a failure to timely inform the plan of events that would trigger
loss of eligibility, such as divorce for dependent spouses, which is a recurring problem
for my multiemployer plan clients. The marital status of a dependent spouse is
undoubtedly material, but the question is whether the failure to inform the plan of
changes in marital status is deemed to be intentional or inadvertent, such that it
constitutes fraud. In either case, though, the plan is required to continue coverage for a
person who clearly was not eligible for coverage.

This distinguishes this scenario from that given in Example 1 of Section 2590.715-
2712(a)(3), which addresses an inadvertent failure to disclose long-ago medical
treatment. Since enrollees in multiemployer plans do not disclose any medical history or
health status, as it is irrelevant to whether they are eligible or coverage, it seems a clearer
distinction in the regulations itself is in order to address situations where enrollees are
required to but fail to inform the plan of events that trigger loss of eligibility for
coverage. I urge the Departments to draft regulations indicating that a failure to report a


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And Compliance Assistance
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covered by the plan except where the person performs an act or practice that constitutes
fraud or makes an intentional misrepresentation of material fact. “Rescind” is not defined
by the Act.

“Rescission” is widely understood to be a practice used by health insurance
companies in the private market whereby they retroactively cancel coverage of policy-
holders who incur substantial medical claims, often because of a purported failure to
disclose a preexisting condition. While Section 2717 now prohibits group health plans
from engaging in “rescission” as well, in drafting regulations under Section 2717, the
Departments must be mindful of the differences between group health plans, especially
multiemployer group health plans, and insurers in the private market, so as to not unduly
create burdens on group health plans to continue coverage for persons who would not
otherwise be eligible for coverage.

One major difference between coverage under multiemployer health plans and
coverage in the private market is that participants and their dependents in multiemployer
health plans are eligible for coverage solely on the basis of their employment with
contributing employers; they do not apply for coverage as a policy-holder does in the
private market. As a result, when they become eligible for coverage, they are not
required to provide any information as to their health status or prior claims history.

Another major difference between coverage under multiemployer health plans and
coverage in the private market is that often participants are eligible for coverage under
multiemployer health plans only upon working a certain number of hours in a month or
over a period of time, and coverage ends when the employee’s employment with a
contributing employer ends (or at the end of the month in which the employment ends).
Typically there is a separate “hours worked” requirement for full-time coverage and part-
time coverage, with corresponding contribution rates to be paid by contributing
employers.

Multiemployer health plans do not have access to employer records; they rely
upon the contributing employers to report the hours worked and the termination dates.
Typically the hours worked are reported when the contributions are due, and often
contributions are not due until the month after the hours worked (for example,
contributions for hours worked in January are due by February 15). Thus, where a
participant has not worked sufficient hours in a month to be eligible for coverage, the
multiemployer plan does not learn about it until after-the-fact.

If retroactive termination of coverage in these situations is included in the
definition of “rescission,” multiemployer plans will be required to provide coverage for
periods of time when employees are ineligible for coverage under the terms of the plan,


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And Compliance Assistance
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Page 6

divorce or other event that would trigger loss of eligibility is the type of omission that
would constitute fraud for purposes of rescission.

3. Medicare rates should not be part of formula in determining payment of out-of-
network emergency services.

Section 2719A(b)(1)(C) of the PHS Act, as added by Section 1001 of the Act,
provides that where non-grandfathered group health plans and health insurance issuers
cover emergency services, they must cover them when provided by out-of-network
service providers without any limitation on coverage that is, more restrictive than the
limitations applicable to in-network service providers, and without imposing any
additional cost-sharing requirements for participants than those that would apply if the
services were provided in-network.

In issuing regulations under this provision, the Departments believe it is necessary
to protect participants from excessive “balance billing” by imposing a requirement that a
“reasonable amount” be paid to the service provider before a participant may be
“balanced billed.” See 75 Fed.Reg. No. 123, p. 37194. Such reasonable amount must be
the greater of the following: (a) the amount negotiated with in-network providers for the
emergency services furnished; (b) the amount for the emergency service calculated using
the method applicable to out-of-network services, but substituting the in-network cost-
sharing provisions for any out-of-network cost-sharing provisions; or (c) the amount that
would be paid by Medicare. Id.; see also 29 CFR § 2590.715-2719A(b)(3)(i).. The first
two amounts make sense, but the third amount will do little to protect participants from
excessive balance billing, but will increase the administrative burdens of health plans,
and should be discarded.

The danger of excessive balanced billing is more a function of what out-of-
network providers charge than what health plans pay.’ Health plans have no control over
the fees charged by out-of-network providers. Their ability to exert a modicum of control
is limited to enacting plan terms providing that the plan will pay only the “usual,
customary and reasonable fee” (“UCR”) for any service provided. A participant or
provider (standing in the shoes of the participant through an assignment of benefits) may
challenge the health plan’s determination of UCR through the plan’s claims appeal
process. Yet while paying UCR protects health plans from exorbitant billings from out-

5 Typically, in exchange for being included in the network, providers agree to accept the

negotiated rates and forego balance billing the participants for any difference between their
standard rates and the network rate, and so there is no balance billing when in-network providers
are used.


Washington Cincinnati

M r hy ‘Ander on ‘pork Soest, Sule 210 os huburn Avenue
Washington, DC 20006 Cincinnati, OH 45219

PLLC see ce oaaasasst —‘Ssuniso. ece77748.449

Boston www.murphyplic.com:
111 Devonshire Street, 5th Floor
Boston, MA 02109
eisai. aot7.2975767

Reply to Washington

August 25, 2010

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

Attn: RIN 1210-AB42

Re: |Comments on Patient Protection and Affordable Care Act: Preexisting
Condition Exclusions, Lifetime and Annual Limits, Rescissions and Patient
Protections, Issued June 28, 2010, Fed. Reg. Vol. 75, No. 123

To Whom It May Concern:

T represent and work with Taft-Hartley welfare benefit funds that provide welfare
benefits to tens of thousands of employees pursuant to collective bargaining agreements
in the retail grocery and other industries.

I write to comment on the recently issued regulations enacting Section 2711 of the
Public Health Service Act (“the PHS Act”), as added by the Patient Protection and
Affordable Care Act (“the Act”).

1. The Act prohibits “establishment”—not application—of lifetime and annual
limits.

Section 1251 of the Act reflects Congress’s intent to exempt existing health plans
from the Act, with limited exceptions. One of those exceptions is Section 2711 of the
PHS Act, added by Section 1001 of the Act, which provides:

(a) Prohibition —

(1) In General. A group health plan and a health insurance issuer offering
group or individual health insurance coverage may not establish—

ED


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And Compliance Assistance
August 25, 2010

Page 7

of-network providers, plans have no ability to prevent out-of-network providers from
balance billing a participant for the difference between a reasonable fee paid either to in-
network providers or the UCR rates for comparable services, and whatever exorbitant fee
the provider may seek to charge.

Similarly, requiring plans to pay Medicare rates to out-of-network providers does
nothing to protect participants from excessive balance billing, as the plans have no
control over how much above Medicare rates out-of-network providers choose to bill the
plans. However, unlike when paying UCR, plans have no control over what Medicare
rates are, and so they have even less ability to control costs than when paying based on
UCR.

On the other hand, to a large extent, Medicare rates are completely irrelevant to
the operation of health plans that cover active employees eligible for Medicare (as the
plan pays primary in these situations), as well as for plans that do not offer retiree health
care benefit. Requiring plans to check the Medicare rates before paying any claim for
out-of-network emergency service adds to the administrative costs and burdens of the
plan. Far from providing a comprehensive list of rates for emergency services, the
website referenced in the regulations links the viewer to a 24-page document explaining
general rules for Medicare payments for all services, not just emergency services, and
without any list of rates for out-of-network emergency service. Wherever the list is
located, it will add a needless work to require plans to check the most recent version in
order to determine how much to pay a claim for out-of-network emergency services,
when they will readily have information available to them to calculate the amounts under
(a) and (b), and paying the greater of those will protect participants from unfair balance
billing.

The burden of requiring plans to pay the Medicare rates far outweighs any benefit
to participants. I respectfully request that the Departments delete subparagraph (c) to 29
CFR § 2590.715-2719A(b)(3)¢i) and the corresponding regulations.

I appreciate your consideration of these issues. Thank you.

Very truly yours,

2 . re,
Joni S. Jacobs

JSJ:oc


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And Compliance Assistance
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Page 2

(A) Lifetime limits on the dollar value of benefits for any participant or
beneficiary; or

(B) Except as provided in paragraph (2), annual limits on the dollar
value of benefits for any participant or beneficiary. (Emphasis added).

The common usage of the term “establish” is to put in place. One is generally
understood to have established something, such as a college or a business, as of a
particular date. The first definition of “establish” found in The Merriam-Webster
Dictionary (2004 Ed.) is “to institute permanently,” and the second is “to found,” as in
“to take the first steps in building.” When we speak of something that has been “long
established,” it is understood that we are referring to something that happened in the past,
and has continued into the present. Thus, the plain meaning of Section 2711 of the PHS
Act is that a group health plan cannot put into place an annual or lifetime limit on
benefits.

In Section 1251(a)(4)(A)Gi), Congress applied the lifetime limits provisions of
Section 2711 to grandfathered plans, and in 1251(a)(4)(B)(i) of the Act, Congress applied
the annual limit provisions of Section 2711 to grandfathered plans that are group health
plans. Since Section 2711 says that lifetime and annual limits may not be “established,”
the most logical, straight-forward application of Section 2711 to grandfathered group
health plans is that where they did not have annual or lifetime limits prior to enactment,
they cannot establish them subsequently—meaning they cannot put them in place after
enactment of the Act.

However, in drafting regulations to implement Section 2711, the Departments
have interpreted it to mean that grandfathered group health plans may not apply annual or
lifetime limits after the effective date of the Act. This interpretation is inconsistent with
the statutory language of Section 2711.

The Departments state that Section 2711 provides that group health plans may not
“impose” annual or lifetime limits. (See, e.g., 75 Fed.Reg. No. 123, p. 37190 (“Section
2711 ... generally prohibit group health plans ... from imposing lifetime or annual limits
on the dollar value of health benefits.”) (Emphasis added.) This is incorrect. Section
2711 does not use the term “impose”—it uses the term “establish,” both in subsection
(a)(1) and in subsection (a)(2).

1 By contrast, Section 109 of the Affordable Health Care For Americans Act, H.R. 3962,
which was not passed by the Senate, would have amended the PHS Act, and similar laws, to
provide that group health plans and health insurance issuers “may not impose an aggregate dollar
lifetime limit.” (Emphasis added.) See also Section 222(a)(1)(3) of H.R. 3962, made applicable
to existing employer-based group health plans via Section 202(b)(1)(A) (“essential benefits


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By using the word “impose” rather than “establish,” the Departments have
changed the meaning of Section 2711. The main definition of “impose” is “to establish
or apply by authority.” See The Merriam-Webster Dictionary (2004 Ed.) (emphasis
added). It is this second meaning of “impose” that the Departments have used in drafting
the regulations under Section 2711, such that grandfathered plans may not apply lifetime
and annual limits that were established prior to the Act. See, e.g., 75 Fed. Reg. No. 123,
p. 37191 (“a plan could not both apply a lifetime limit to a particular benefit ... and at the
same time treat that particular benefit as an essential health benefit for purposes of
applying the restricted annual limit”) (emphasis added). Thus, the Departments have
issued regulations requiring grandfathered plans to notify participants of the opportunity
to re-enroll in coverage where they have already exceed the lifetime limits that “no longer
apply.” 75 Fed. Reg. No. 123, p. 37191-92; 29 CFR §2590.715-2711(e)(2)(i).

The Departments’ interpretation of Section 2711 is contradicted by the
unambiguous, plain language of the statute: Section 2711 does not say that group health
plans may not apply annual and lifetime limits—it says they may not establish them.”

I respectfully request that regulations be drafted in line with the actual language of
the Act, which is that grandfathered plans that did not have lifetime or annual limits in
place before the Act may not put them into place afterward. This will require deleting the
regulations that give participants who already exceed the pre-Act lifetime limits the
opportunity to re-enroll. It will also require changes to the regulations on whether
applying annual limits will cause loss of grandfathered status, as well as changes to the
model notice grandfathered plans must provide to participants with respect to not being
able to apply annual and lifetime limits.

2. Rescissions should not include retroactive cancellation of coverage where
contributions not paid due to ineligibility for coverage or individual not
otherwise eligible for coverage.

Section 2712 of the PHS Act, as added by Section 1001 of the Act, provides that
group health plans may not “rescind” such plan or coverage with respect to a person

package” “does not impose any annual or lifetime limit on the coverage of covered health care
items and services.”) (Emphasis added.)

2

Notably, Section 2711(b) uses the term “placing” when providing that nothing in the Act
prohibits a group health plan from “placing” annual or lifetime benefits on specific covered
benefits that are not essential health benefits. The plain meaning of placing is consistent with
“establish” as meaning “to put into place,” not “to apply.”