<nobr>Aug 16, 2010</nobr>

ERIC Urges Adoption of More Flexible Standard to Maintain Grandfathered Status Under PPACA

ERIC News Release
For Immediate Release: August 16, 2010

Washington, D.C. -- The ERISA Industry Committee (ERIC), the Washington, D.C.-based trade association representing America's major employers, today submitted comments on the interim final regulation for group health plans and health insurance coverage relating to status as a grandfathered health plan under the Patient Protection and Affordable Care Act (PPACA). The Departments of Health and Human Services (HHS), Labor, and Treasury published the interim final regulation in the Federal Register on June 17, 2010.

ERIC's letter expresses concern over the impact of the grandfather regulation on ERIC members' ability to provide high-quality, affordable health care, and argues that the loss of grandfather status should be limited to significant and fundamental plan changes. In addition, ERIC urges that the final rule should provide more flexibility to plan sponsors to accommodate their need both to control costs and to tailor plan changes to the needs of plan participants.

"Employers must have sufficient flexibility to reflect increasing medical costs in a manner that is most suitable for their employees and their own ability to continue to maintain their plans. What may be appropriate for the demographics of one population could be completely inappropriate for another. The unintended result of imposing an inflexible and unnecessarily narrow interpretation of grandfathering will likely be to generate more plan curtailments and cutbacks and increased costs for participants, all inconsistent with the objectives of PPACA," said Gretchen Young, ERIC Senior Vice President for Health Policy.

ERIC urges that a more general standard be used to maintain grandfather status, rather than relying on a series of rules restricting nearly all changes in benefit structures or contributions. For instance, plans should be able to maintain their grandfather status if they do not significantly decrease the benefits provided to the average plan participant from one year to the next based on the expected average out-of-pocket costs for participants. This would allow for a more flexible allocation of costs among all plan participants, as appropriate, while still maintaining the sponsors overall support of the plan, the letter explained.

Alternatively, the standard could be based on actuarial equivalence; in this case, the plan would be considered to have retained grandfather status if it were still the actuarial equivalent of the plan in existence on March 23, 2010.

ERIC also contends that collectively bargained plans, whether insured or self-funded, should have a delayed effective date that treats the plan's coverage as grandfathered until termination of the last of the collective bargaining agreements relating to the coverage that was in effect on March 23, 2010.

ERIC further specified that elimination of a "non-essential" health benefit should not result in the loss of a plan's grandfather status. Young noted, "This requirement goes well beyond the basic thrust of PPACA, which, when fully implemented, will not require any health plans to provide benefits that are not 'essential' health benefits."

ERIC also strongly urged that the portion of the regulation tying the elimination of a "necessary element" to diagnose or treat a condition to a loss of grandfather status be removed. "There simply is no uniformly accepted method or procedure available for plans to use to determine what constitutes a 'necessary element' to diagnose or treat a condition," stated Young.

Among ERIC's other suggestions are that:

• The exemption for retiree-only plans should be clarified.


• The disclosure requirement with respect to grandfathered plans should be modified to limit the frequency with which the new grandfather statements must be distributed as well as to delete any requirement that contact information for a plan administrator be included.


• Changes to a provider network outside of the plan sponsor's control should not result in the loss of grandfather status.


• No changes to a plans' prescription drug formulary should result in a loss of grandfather status.

A link to ERIC's comment letter appears below.

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For more information:
Ted Godbout
Director, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
Fax: (202) 789-1120
tgodbout@eric.org
www.eric.org
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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

ERIC Comments on Grandfathered Status

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