Title 31--INSURANCE INSURANCE DEPARTMENT [31 PA. CODE CH. 89] Medicare Supplement Insurance Minimum Standards [32 Pa.B. 5743] The Insurance Department (Department) amends §§ 89.775, 89.776, 89.783 and 89.790 to read as set forth in Annex A. Sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411, and 412) provide the Insurance Commissioner (Commissioner) with the authority and duty to promulgate regulations governing the enforcement of the laws relating to insurance. The final-omitted rulemaking will also bring the Department's regulations for the approval of Medicare supplement policies into compliance with the Federal statutory requirements of section 1882 of the Social Security Act (SSA) (42 U.S.C.A. § 1395ss) and the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (P. L. 106-554).
Notice of proposed rulemaking is omitted in accordance with section 204(3) of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. § 1204(3)), known as the Commonwealth Documents Law (CDL). Under section 204(3) of the CDL, notice of proposed rulemaking may be omitted when the agency for good cause finds that public notice of its intention to amend an administrative regulation is, under the circumstances, impracticable and unnecessary.
The amendments to Subchapter K (relating to Medicare supplement insurance minimum standards) are Federally mandated under recent Federal legislation, specifically BIPA, effective December 21, 2000. Federal law requires that these amendments be implemented by the states if they are to remain in compliance with the Federal requirements and maintain regulatory authority in this area. The revised NAIC Medicare Supplement model regulation (NAIC model regulation) was adopted October 24, 2001, and the Department's new regulations must be adopted within 1 year following the adoption of the NAIC model regulations for the Commonwealth to retain regulatory authority in this area. To comply with Federal statutory minimum requirements for Medicare supplement policies, as mandated by sections 111 and 618 of BIPA, the Commissioner finds that the proposed rulemaking procedures in sections 201 and 202 of the CDL (45 P. S. §§ 1201 and 1202) are impracticable and unnecessary in this situation and that the proposed rulemaking may be properly omitted under section 204(3) of the CDL.
Purpose
Subchapter K was initially promulgated to establish minimum standards for Medicare supplement insurance policies. Standardization of policies was Federally required under the Omnibus Budget Reconciliation Act of 1990. The Department currently seeks to modify Subchapter K to meet the new Federal mandates for Medicare supplement policies as required under BIPA.
The final-omitted rulemaking is necessary to maintain the Commonwealth's compliance with Federal requirements, which will ensure that the Commonwealth retains enforcement authority over Medicare Supplement policies and these new requirements. These standards were effective for Medicare Supplement issuers on December 21, 2000, under BIPA. The Federal legislation establishes that states that adopt the language of the NAIC model regulation that has been revised to address the Federal changes will be considered to be in compliance with the Federal requirements. The Commonwealth needed to adopt these revisions to the Medicare Supplement regulations by October 24, 2002, to avoid Federal intervention.
The final-omitted rulemaking will protect the rights of Commonwealth consumers purchasing Medicare Supplement policies.
Explanation of Regulatory Requirements
Section 89.775(2)(vi) (relating to minimum benefit standards for policies or certificates issued for delivery prior to July 30, 1992) has been modified to reflect the revised cost sharing structure requirements for hospital outpatient department services. The added language is based on the revised NAIC model regulation.
Section 89.776(1)(vii)(C) (relating to benefit standards for policies or certificates issued or delivered on or after July 30, 1992) has been revised to reflect the Federal requirements amending the suspension of benefits and premiums under a Medicare Supplement policy due to coverage under a group health plan. The new language is based on the NAIC model regulation.
Section 89.776(1)(vii)(D) has been revised to clarify that the reinstitution of Medicare Supplement coverage is applicable specifically to clauses (B) and (C). The new language is based on the revised NAIC model regulation.
Section 89.776(2)(v) has been amended to reflect the new payment system for Medicare outpatient hospital services. The new language is based on the revised NAIC model regulation.
Section 89.783(c) (relating to required disclosure provisions) has been amended to delete the specific outlines of coverage disclosure for Plans A--J. These outlines of coverage contain information on the specific benefits that must be provided under each standardized Medicare Supplement policy. The inclusion of these outlines of coverage is not required by the NAIC model regulation. The outlines of coverage include deductibles and subscriber cost sharing amounts that change every year based on changes in the Medicare program cost sharing requirements. It is impracticable to continue to change these outlines of coverage every year with a regulation. The Department will instead maintain these outlines of coverage in written and electronic forms that will be available on request to assure that Medicare Supplement issuers and subscribers have access to the most up-to-date information and coverage requirements. The Department will also incorporate the chart (Plans A--J) into the Department's website to provide consumers and insurers with easier access to the plans. This will allow both consumers and insurers access to the plans 24-hours-a-day, 7-days-a-week and not just when the Department is open for business. Furthermore, the Department will publish a notice in the Pennsylvania Bulletin of the availability of the amended outlines when revisions are made available to the Department by the United States Department of Health and Human Services.
Section 89.790(a)(1) (relating to guaranteed issue for eligible persons) has been revised to change the definition of an eligible person for guaranteed issue rights under the regulation. The new language is based on the revised NAIC model regulation.
Section 89.790(b)(2)(i) has been revised to clarify the permitted discontinuation of an individual's enrollment in a Medicare+Choice plan. The modified language is a result of BIPA. This language is based on the revised NAIC model regulation.
Section 89.790(b)(2)(ii) has been revised to clarify the permitted discontinuation of an individual's enrollment in a Medicare+Choice plan. The modified language is a result of BIPA. This language is based on the revised NAIC model regulation.
Section 89.790(b)(2)(vi) and (vii) has been deleted to conform the final-omitted rulemaking to new eligibility periods for Medicare+Choice enrollees created by BIPA. This language is based on the revised NAIC model regulation.
Section 89.790(b)(3)(i) has been modified to remove the reference to Medicare risk contracts under section 1876 of the SSA (42 U.S.C.A. § 1395mm) as required by BIPA. This language is based on the revised NAIC model regulation.
Section 89.790(b)(5) and (6) has been modified to conform to changes in the SSA as a result of BIPA. This language was adopted by the NAIC model regulation.
Section 89.790(c) has been added to set forth the guaranteed issue time periods for individuals required by BIPA. This language was adopted by the NAIC model regulation.
Section 89.790(d) has been added to define the enrollment periods for individuals whose enrollment in a Medicare+Choice plan is interrupted within the first 12 months of enrollment. This section is necessary to meet requirements set by BIPA. This language was adopted in the revised NAIC model regulation.
Fiscal Impact
The Department can review revised Medicare supplement filings in the course of normal business and anticipates that it will experience minimal or no increase in cost in its review.
The insurance industry will likely not incur additional costs associated with complying with the new Federal requirements. The guaranteed eligibility provisions may increase the utilization of services and therefore, the cost of policies. There is currently no way to assess these potential costs.
Effectiveness/Sunset Date
This final-omitted rulemaking is effective upon publication in the Pennsylvania Bulletin. No sunset date has been assigned.
Paperwork
Adoption of this final-omitted rulemaking should not require significant paperwork for insurance carriers' product development areas to implement the new Federal changes.
Persons Regulated
This final-omitted rulemaking applies to all insurance companies who issue Medicare supplement products in this Commonwealth.
Contact Person
For information on this final-omitted rulemaking, contact Peter J. Salvatore, Regulatory Coordinator, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429, fax (717) 772-1969, e-mail psalvatore@state.pa.us.
Regulatory Review
Under section 5.1(c) of the Regulatory Review Act (71 P. S. § 745.5a(c)), on September 13, 2002, the Department submitted copies of this final-omitted rulemaking to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Insurance and the Senate Committee on Banking and Insurance. On the same date, the final-omitted rulemaking was submitted to the Office of the Attorney General for review and approval under the Commonwealth Attorneys Act (71 P. S. §§ 732-101--732-506).
On October 2, 2002, the Department requested a tolling of the final-omitted rulemaking for clarification. IRRC did not object to the tolling. On October 10, 2002, the Department resubmitted the final-omitted rulemaking to IRRC and the Chairpersons of the House and Senate Committees. On the same date, the final-omitted rulemaking was resubmitted to the Office of Attorney General for review and approval under the Commonwealth Attorneys Act.
Under section 5.1(d) of the Regulatory Review Act, on October 22, 2002, this final-omitted rulemaking was deemed approved by the House and Senate Committees. Under section 5.1(e) of the Regulatory Review Act, on October 24, 2002, IRRC met and approved this final-omitted rulemaking.
Findings
The Insurance Commissioner finds that:
(1) There is good cause to amend Subchapter K. Deferral of the effective date of the rulemaking would be impractical and not serve the public interest. Under section 204(3) of the CDL, there is no purpose to be served by deferring the effective date. An immediate effective date will best serve the public interest by ensuring the Commonwealth's compliance with the new Federal requirements and retention of enforcement authority over all aspects of Medicare supplement policies.
(2) There is good cause to forego public notice of the intention to amend Subchapter K, because notice of the amendment under the circumstances is unnecessary and impractical under section 204(3) of the CDL for the following reasons:
(i) The amendments mandated by Federal law will go into effect with or without Commonwealth regulatory action.
(ii) If the amendments are not implemented as established by the Federal law, regulatory oversight of these requirements will be assumed by the Federal government. If this were to occur, it would split regulation of Medicare supplement policies between the Commonwealth and the Federal government. Dual regulation would negatively impact Commonwealth consumers due to a shortage in Federal enforcement staffing. Accordingly, it would be more difficult for Commonwealth consumers to have complaints concerning the new requirements addressed by the Federal government in a timely manner.
(iii) Public comment cannot change the fact that these Federal requirements will be implemented either by the Commonwealth or the Federal government. Nor can public comment have any impact upon the content of the new Federal mandates.
Order
The Commissioner, acting under the authority in sections 206, 506, 1501 and 1502 of The Administrative Code of 1929, orders that:
(1) The regulations of the Department, 31 Pa. Code Chapter 89, are amended by amending §§ 89.775, 89.776, 89.783 and 89.790 to read as set forth in Annex A, with ellipses referring to the existing text of the regulation.
(2) The Department shall submit this order and Annex A to the Office of Attorney General and the Office of General Counsel for approval as to form and legality as required by law.
(3) The Department shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(4) This order shall take effect upon its publication in the Pennsylvania Bulletin and apply retroactively to October 24, 2002.
M. DIANE KOKEN,
Insurance Commissioner(Editor's Note: For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 32 Pa.B. 5582 (November 9, 2002).)
Fiscal Note: 11-212. No fiscal impact; (8) recommends adoption.
Annex A TITLE 31. INSURANCE PART IV. LIFE INSURANCE CHAPTER 89. APPROVAL OF LIFE, ACCIDENT AND HEALTH INSURANCE Subchapter K. MEDICARE SUPPLEMENT INSURANCE MINIMUM STANDARDS § 89.775. Minimum benefit standards for policies or certificates issued for delivery prior to July 30, 1992.
A policy or certificate may not be advertised, solicited or issued for delivery in this Commonwealth as a Medicare supplement policy or certificate unless it meets or exceeds the following minimum standards. These are minimum standards and do not preclude the inclusion of other provisions or benefits which are consistent with this subchapter.
* * * * * (2) Minimum benefit standards. The following represent minimum benefit standards:
* * * * * (vi) Coverage for the coinsurance amount, or in the case of hospital outpatient department services paid under a prospective payment system, the copayment amount, of Medicare eligible expenses under Part B regardless of hospital confinement, subject to a maximum calendar year out-of-pocket amount equal to the Medicare Part B deductible.
* * * * * § 89.776. Benefits standards for policies or certificates issued or delivered on or after July 30, 1992.
The following standards apply to Medicare supplement policies or certificates delivered or issued for delivery in this Commonwealth on or after July 30, 1992. A policy or certificate may not be advertised, solicited, delivered or issued for delivery in this Commonwealth as a Medicare supplement policy or certificate unless it complies with these benefit standards.
(1) General standards. The following standards apply to Medicare supplement policies and certificates and are in addition to other requirements of this subchapter:
* * * * * (vii) Suspension by policyholder.
* * * * * (C) Each Medicare supplement policy shall provide that benefits and premiums under the policy shall be suspended at the request of the policyholder if the policyholder is entitled to benefits under section 226(b) of the Social Security Act (42 U.S.C.A. § 426(b)) and is covered under a group health plan (as defined in section 1862 (b)(1)(A)(v) of the Social Security Act (42 U.S.C.A. § 1395y (b)(1)(A)(v)). If suspension occurs and if the policyholder or certificateholder loses coverage under the group health plan, the policy shall be automatically reinstituted (effective as of the date of loss of coverage) if the policyholder provides notice of loss of coverage within 90 days after the date of the loss and pays the premium attributable to the period, effective as of the date of termination of enrollment in the group health plan.
(D) Reinstitution of these coverages as described in clauses (B) and (C):
* * * * * (2) Standards for basic (core) benefits common to all benefit plans. Every issuer shall make available a policy or certificate, including only the following basic core package of benefits to each prospective insured. An issuer shall also offer a policy or certificate to prospective insureds meeting the Plan B benefit plan. An issuer may make available to prospective insureds Medicare Supplement Insurance Benefit Plans C, D, E, F, G, H, I and J as listed in § 89.777(e) (relating to standard Medicare supplement benefit plans). The core packages are as follows:
* * * * * (v) Coverage for the coinsurance amount, or in the case of hospital outpatient department services paid under a prospective payment system, the copayment amount, of Medicare eligible expenses under Part B regardless of hospital confinement, subject to the Medicare Part B deductible.
* * * * * § 89.783. Required disclosure provisions.
* * * * * (c) Outline of coverage requirements for Medicare supplement policies.
* * * * * (6) The cover page and the accompanying charts for Plan A to Plan J of the Outlines of Coverage are available upon request from the Department in printed and electronic formats. In addition, notice will be published, in the Pennsylvania Bulletin, of the availability of the amended outlines when revisions are made available to the Department by the United States Department of Health and Human Services as published in the Federal Register. The Outlines of Coverages will be made available on the Department's website at http://www.insurance.state.pa.us.
(d) Notice regarding policies or certificates which are not Medicare supplement policies.
(1) An accident and sickness insurance policy or certificate, other than a Medicare supplement policy; a policy issued under a contract under section 1876 of the Social Security Act (42 U.S.C.A. § 1395mm), disability income policy; or other policy identified in § 89.771(b) (relating to applicability and scope) issued for delivery in this Commonwealth to persons eligible for Medicare, shall notify insured under the policy that the policy is not a Medicare supplement policy or certificate. The notice shall be printed or attached to the first page of the outline of coverage delivered to insureds under the policy, or if no outline of coverage is delivered, to the first page of the policy, or certificate delivered to insureds.
The notice shall be at least 12 point type and shall contain the following language:
''THIS (POLICY OR CERTIFICATE) IS NOT A MEDICARE SUPPLEMENT (POLICY OR CONTRACT). If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare available from the company.''
(2) Applications provided to persons eligible for Medicare for the health insurance policies or certificates described in subsection (d)(1) shall disclose, using the applicable statement in Appendix I (relating to Instructions for Use of the Disclosure Statements for Health Insurance Policies Sold to Medicare Beneficiaries that Duplicate Medicare), the extent to which the policy duplicates Medicare. The disclosure statement shall be provided as a part of, or together with, the application for the policy or certificate.
§ 89.790. Guaranteed issue for eligible persons.
(a) Guaranteed issue.
(1) Eligible persons are those individuals described in subsection (b) who, seek to enroll under the policy during the period specified in subsection (c), and who submit evidence of the date of termination or disenrollment with the application for a Medicare supplement policy.
(2) With respect to eligible persons, an issuer may not:
(i) Deny or condition the issuance or effectiveness of a Medicare supplement policy described in subsection (e) that is offered and is available for issuance to new enrollees by the issuer.
* * * * * (b) Eligible persons. An eligible person is an individual described in paragraphs (1)--(6):
* * * * * (2) The individual is enrolled with a Medicare + Choice organization under a Medicare + Choice plan under Part C of Medicare, and any of the following circumstances apply, or the individual is 65 years of age or older and is enrolled with a Program of All-Inclusive Care for the Elderly (PACE) provider under section 1894 of the Social Security Act (42 U.S.C.A. § 1395eee), and there are circumstances similar to those described as follows that would permit discontinuance of the individual's enrollment with the provider if the individual were enrolled in a Medicare+Choice plan:
(i) The certification of the organization or plan under this part has been terminated.
(ii) The organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides.
(iii) The individual is no longer eligible to elect the plan because of a change in the individual's place of residence or other change in circumstances specified by the HHS Secretary, but not including termination of the individual's enrollment on the basis described in section 1851(g)(3)(B) of the Social Security Act (42 U.S.C.A. § 1395w-21(g)(3)(B)) (when the individual has not paid premiums on a timely basis or has engaged in disruptive behavior as specified in standards under section 1856 of the Social Security Act (42 U.S.C.A. § 1395w-26), or the plan is terminated for all individuals within a residence area).
(iv) The individual demonstrates, in accordance with guidelines established by the HHS Secretary, that one of the following applies:
(A) The organization offering the plan substantially violated a material provision of the organization's contract under this part in relation to the individual, including the failure to provide an enrollee on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide the covered care in accordance with applicable quality standards.
(B) The organization, or agent or other entity acting on the organization's behalf, materially misrepresented the plan's provisions in marketing the plan to the individual.
(v) The individual meets other exceptional conditions the HHS Secretary may provide.
(3) The individual's enrollment ceases under the same circumstances that would permit discontinuance of an individual's election of coverage under paragraph (2) and the individual is enrolled with one of the following:
(i) An eligible organization under a contract under section 1876 of the Social Security Act (42 U.S.C.A. § 1395mm) (Medicare cost).
(ii) A similar organization operating under demonstration project authority, effective for periods before April 1, 1999.
(iii) An organization under an agreement under section 1833(a)(1)(A) of the Social Security Act (42 U.S.C.A. § 1395l(a)(1)(A)) (health care prepayment plan).
(iv) An organization under a Medicare Select policy.
* * * * * (5) The individual was enrolled under a Medicare supplement policy and terminates enrollment and subsequently enrolls, for the first time, with any Medicare + Choice organization under a Medicare + Choice plan under Part C of Medicare, any eligible organization under a contract under section 1876 of the Social Security Act (Medicare cost) (42 U.S.C.A. § 1395mm), any similar organization operating under demonstration project authority, any PACE provider under section 1894 of the Social Security Act, or any Medicare Select policy and the subsequent enrollment under this paragraph is terminated by the enrollee during the first 12 months of the subsequent enrollment (during which the enrollee is permitted to terminate the subsequent enrollment under section 1851(e) of the Social Security Act).
(6) The individual, upon first becoming eligible for benefits under Part A and enrolled in Part B, if eligible, of Medicare, enrolls in a Medicare + Choice plan under Part C of Medicare, or with a PACE provider under section 1894 of the Social Security Act, and disenrolls from the plan or program within 12 months after the effective date of enrollment.
(c) Guaranteed issue time periods.
(1) In the case of an individual described in subsection (b)(1), the guaranteed issue period begins on the date the individual receives a notice of termination or cessation of all supplemental health benefits (or, if a notice is not received, notice that a claim has been denied because of such a termination or cessation) and ends 63 days after the date of the applicable notice.
(2) In the case of an individual described in subsection (b)(2), (3), (5) or (6) whose enrollment is terminated involuntarily, the guaranteed issue period begins on the date that the individual receives a notice of termination and ends 63 days after the date the applicable coverage is terminated.
(3) In the case of an individual described in subsection (b)(4)(i), the guaranteed issue period begins on the earlier of the following:
(i) The date that the individual receives a notice of termination, a notice of the issuer's bankruptcy or insolvency, or other such similar notice if any.
(ii) The date that the applicable coverage is terminated, and ends on the date that is 63 days after the date the coverage is terminated.
(4) In the case of an individual described in section (b)(2), (4)(ii), (4)(iii), (5) or (6) who disenrolls voluntarily, the guaranteed issue period begins on the date that is 60 days before the effective date of the disenrollment and ends on the date that is 63 days after the effective date.
(5) In the case of an individual described in subsection (b) but not described in subsections (d)--(f), the guaranteed issue period begins on the effective date of disenrollment and ends on the date that is 63 days after the effective date.
(d) Extended medigap access for interrupted trial periods.
(1) In the case of an individual described in subsection (b)(5) (or deemed to be so described, under this paragraph) whose enrollment with an organization or provider described in subsection (b)(5) is involuntarily terminated within the first 12 months of enrollment, and who, without an intervening enrollment, enrolls with another organization or provider, the subsequent enrollment shall be deemed to be an initial enrollment described in subsection (b)(5).
(2) In the case of an individual described in subsection (b)(6) (or deemed to be so described, under this paragraph) whose enrollment with a plan or in a program described in subsection (b)(6) is involuntarily terminated within the first 12 months of enrollment, and who, without an intervening enrollment, enrolls in another such plan or program, the subsequent enrollment shall be deemed to be an initial enrollment described in subsection (b)(6).
(3) For the purposes of subsection (b)(5) and (6), no enrollment of an individual with an organization or provider described in subsection (b)(5), or with a plan or in a program described in subsection (b)(6), may be deemed to be an initial enrollment under this paragraph after the 2-year period beginning on the date on which the individual first enrolled with such an organization, provider, plan or program.
(e) Products to which eligible persons are entitled. The Medicare supplement policy to which eligible persons are entitled under:
(1) Subsection (b)(1)--(4) is a Medicare supplement policy which has a benefit package classified as Plan A, B, C or F offered by an issuer.
(2) Subsection (b)(5) is the same Medicare supplement policy in which the individual was most recently previously enrolled, if available from the same issuer, or, if not so available, a policy described in paragraph (1).
(3) Subsection (b)(6) includes any Medicare supplement policy offered by an issuer.
(f) Notification provisions.
(1) At the time of an event described in subsection (b) because of which an individual loses coverage or benefits due to the termination of a contract or agreement, policy or plan, the organization that terminates the contract or agreement, the issuer terminating the policy or the administrator of the plan being terminated, respectively, shall notify individuals of their rights under this section, and of the obligations of issuers of Medicare supplement policies under subsection (a). The notice shall be communicated contemporaneously with the notification of termination.
(2) At the time of an event described in subsection (b) because of which an individual ceases enrollment under a contract or agreement, policy or plan, the organization that offers the contract or agreement, regardless of the basis for the cessation of enrollment, the issuer offering the policy, or the administrator of the plan, respectively, shall notify individuals of their rights under this section, and of the obligations of issuers of Medicare supplement policies under subsection (a). The notice shall be communicated within 10 working days of the issuer receiving notification of disenrollment.
[Pa.B. Doc. No. 02-2094. Filed for public inspection November 22, 2002, 9:00 a.m.]
