California's Insurance Commissioner Issues Public Comment on Employee Benefits Security Administration Proposed Rule

WASHINGTON, Aug. 20 -- California Insurance Commissioner Ricardo Lara has issued a public comment on the Employee Benefits Security Administration's proposed rule entitled "Grandfathered Group Health Plans and Grandfathered Group Health Insurance Coverage". The comment was written on Aug. 13, 2020, and posted on Aug. 17, 2020:

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As California's Insurance Commissioner, it is my privilege and responsibility to regulate the nation's largest insurance market and lead the largest consumer protection agency in the state. The Affordable Care Act (ACA) became law 10 years ago and the California Department of Insurance (CDI) implements and enforces the consumer protections provided by the ACA. The ACA was monumental in improving the health and economic security of millions of Californians by giving them access to comprehensive and affordable health insurance. But because grandfathered health insurance policies are not required to fully comply with the ACA, I am concerned about some of the proposals outlined in the "Grandfathered Group Health Plans and Grandfathered Group Health Insurance Coverage" proposed rule.

CDI opposes amending the definition of "maximum percentage increase" proposed in 26 C.F.R. Sec. 54.9815-1251(g)(4)(ii), 29 C.F.R. Sec. 2590.715-1251(g)(4)(ii), and 45 C.F.R. Sec. 147.140(g)(4)(ii)./1

If adopted, the proposed amendment will permit grandfathered group health plans and grandfathered group health insurance coverage to implement greater increases to fixed-amount cost sharing requirements, including increasing deductibles and out-of-pocket maximums, without losing grandfather status. The proposed amendment to the definition of "maximum percentage increase" will likely result in less favorable coverage for many consumers due to increased cost sharing requirements, to the detriment of many consumers who rely on employment-based health coverage and who may not have the option to enroll in ACA-compliant coverage.

The stated purpose of this change is primarily to preserve and extend the life of grandfathered coverage beyond what is permitted under current federal law, "in ways that would benefit plan participants and beneficiaries, employers, employee organizations, and other stakeholders."/2

Extending grandfathered coverage, however, deprives those insured by these policies from many of the consumer protections set forth in the ACA. For example, grandfathered policies are not required to provide coverage of essential health benefits (Public Health Service Act (PHSA) Sec. 2707), limit out-of-pocket costs (Sec. 2711), or adhere to certain non-discrimination requirements (Sec. 2705). Such coverage is also not subject to the internal appeals and external review process requirements (Sec. 2719), or the requirement to cover preventive care without cost sharing (Sec. 2713).

The COVID-19 pandemic has compounded concerns regarding the inadequacy of grandfathered policies and underscores the importance of the protections granted by the ACA to ensure Americans have access to quality, affordable health care when they need it most. The failure of grandfathered policies to cover preventive services under PHSA Sec. 2713 is particularly problematic during the current public health emergency resulting from the COVID-19 pandemic. Section 6001 of the Families First Coronavirus Response Act (FFCRA) (P.L. 116-127), as amended by section 3203 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (P.L. 116-136), requires insurers to cover, without cost sharing, any qualifying coronavirus preventive services if the policy is required to cover preventive services under PHSA Sec. 2713. Such services include vaccines and other COVID-related preventive services as specified by the CARES Act. Since grandfathered policies are not required to cover preventive services under PHSA Sec. 2713, this provision of the CARES Act does not apply to these policies.

The COVID-19 pandemic has made clear that we still have more work to do in making health care accessible. Instead of extending non-ACA compliant coverage and making remaining on this coverage more onerous and costly for consumers, the federal government should focus on ensuring that Americans have access to comprehensive and meaningful coverage.

Thank you for the opportunity to comment on this proposed rule.

RICARDO LARA

Insurance Commissioner

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Footnotes:

1/ 85 Fed. Reg. 42782, 42798, 42800 & 42802 (Jul. 15, 2020) (to be codified at 45 C.F.R. pt. 147).

2/ Id. at 42783.

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The proposed rule can be viewed at: https://beta.regulations.gov/document/EBSA-2020-0006-0001

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