INSURANCE DEPARTMENT [31 PA. CODE CH. 89] Medicare Supplement Insurance Minimum Standards [29 Pa.B. 650] The Insurance Department (Department) hereby proposes to amend § 89.790 and Appendix E and to add § 89.777a, to read as set forth in Annex A. The Department is publishing these amendments as a proposed rulemaking. The Department proposes the amendments under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412).
Purpose
Chapter 89, Subchapter K (relating to Medicare Supplement Insurance minimum standards), was initially promulgated to establish certain minimum standards for Medicare Supplement Insurance. The Department seeks to modify Subchapter K to allow for the sale of ''Medicare Select'' products (previously a Federal pilot program) which is intended to expand the health care choices of Medicare eligible insureds. Generally, Medicare Select will allow consumers to purchase Medicare Select products for lower premiums than standard Medicare supplement policies. The major difference between standard Medicare supplement policies and Medicare Select policies is that each Medicare Select issuer will have a network of specific hospitals, and possibly specific doctors, that must be utilized to receive full benefits, except in the case of an emergency. It is similar in concept to preferred provider organizations (PPOs) for accident and health insurance. The addition of Medicare Select products in this Commonwealth will allow consumers an additional choice in selecting a Medicare supplement product and will bring a Nationally marketed product to this Commonwealth. Lastly, the Department has received numerous inquiries and letters of support for Medicare Select from consumers, the insurance industry and providers alike. The Department has also clarified and revised language to improve the readability and understandability of the regulations.
Explanation of Regulatory Requirements
Section 89.777a (relating to Medicare Select policies and certificates) is being added to implement the policy requirements for Medicare Select. The Department is adopting the National Association of Insurance Commissioners' model regulation language. The addition of this product in this Commonwealth will allow greater selection of supplemental products for Medicare eligibles.
Section 89.790(b)(6) (relating to guaranteed issue for eligible persons) has been modified to ensure that this specific guaranteed issue protection applies to all Medicare supplement eligible individuals. This is consistent with the current regulatory requirement that Medicare supplement policies be offered to all eligible individuals when they qualify for coverage.
Appendix E (relating to Medicare supplement refund calculations) is being revised to incorporate minor format changes. These format changes are intended to eliminate confusion and improve understanding.
Fiscal Impact
The Department currently has the capacity to review the new Medicare Select filings in the course of normal business and should experience minimal or no cost increases in reviewing these new products.
The insurance industry will incur minimal additional costs in filing for the approval of the new forms, if they chose to offer Medicare Select products. Most issuers should be able to submit forms either identical, or very similar to, variations approved in other states because this regulation is adopting the NAIC model language.
Consumers could experience additional savings based on greater product availability.
Paperwork
Adoption of these proposed amendments will require additional paperwork in the product development area only if issuers choose to market Medicare Select products. Paperwork requirements should not be burdensome for the Department because the new Medicare Select products can be reviewed during the normal course of business.
Persons Regulated
These proposed amendments apply to all insurance companies who issue Medicare Supplement products in this Commonwealth.
Contact Person
Questions or comments regarding the proposed rulemaking may be addressed in writing to Peter J. Salvatore, Regulatory Coordinator, 1326 Strawberry Square, Harrisburg, PA 17120 within 30 days following the publication of this notice in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on January 27, 1999, the Department submitted a copy of these proposed amendments to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Insurance Committee and the Senate Banking and Insurance Committee. In addition to submitting the proposed amendments, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of that material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, if IRRC has objections to any portion of the proposed amendments, it will notify the Department within 10 days of the close of the Committees' review period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for the Department, the Governor and the General Assembly to review these objections before final publication of the amendments.
M. DIANE KOKEN,
Insurance Commissioner(Editor's Note: Section 89.790, proposed to be amended in this document, was added at 29 Pa.B. 172 (January 9, 1999) and will be codified in MTS 292 (March, 1999).)
Fiscal Note: 11-193. 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 § 89.777a. Medicare Select policies and certificates.
(a) This section applies to Medicare Select policies and certificates, as defined in this section.
(b) A policy or certificate may not be advertised as a Medicare Select policy or certificate unless it meets the requirements of this section.
(c) For the purposes of this section, the following words and terms have the following meanings, unless the context clearly indicates otherwise:
Complaint--Dissatisfaction expressed by an individual concerning a Medicare Select issuer or its network providers.
Grievance--Dissatisfaction expressed in writing by an individual insured under a Medicare Select policy or certificate concerning the administration, claims practices or provision of services with a Medicare Select issuer or its network providers.
Medicare Select issuer--An issuer offering, or seeking to offer, a Medicare Select policy or certificate.
Medicare Select policy or Medicare Select certificate--A Medicare supplement policy or certificate, respectively, that contains restricted network provisions.
Network provider--A provider of health care, or a group of providers of health care, which has entered into a written agreement with the issuer to provide benefits insured under a Medicare Select policy.
Restricted network provision--A provision which conditions the payment of benefits, in whole or in part, on the use of network providers.
Service area--The geographic area approved by the Commissioner within which an issuer is authorized to offer a Medicare Select policy.
(d) The Commissioner may authorize an issuer to offer a Medicare Select policy or certificate, under this section and section 4358 of the Omnibus Budget Reconciliation Act (OBRA) of 1990 (42 U.S.C.A. § 1395b-2) if the Commissioner finds that the issuer has satisfied the requirements of this section.
(e) A Medicare Select issuer may not issue a Medicare Select policy or certificate in this State until its plan of operation has been approved by the Commissioner.
(f) A Medicare Select issuer shall file a proposed plan of operation with the Commissioner in a format prescribed by the Commissioner. The plan of operation shall contain at least the following information:
(1) Evidence that all covered services that are subject to restricted network provisions are available and accessible through network providers, including a demonstration that:
(i) Services can be provided by network providers with reasonable promptness with respect to geographic location, hours of operation and after-hour care. The hours of operation and availability of after-hour care shall reflect the usual practice in the local area. Geographic availability shall reflect the usual travel times within the community.
(ii) The number of network providers in the service area is sufficient, with respect to current and expected policyholders, to either:
(A) Deliver adequately all services that are subject to a restricted network provision.
(B) Make appropriate referrals.
(iii) There are written agreements with network providers describing both parties' specific responsibilities.
(iv) Emergency care is available 24 hours per day and 7 days per week.
(v) In the case of covered services that are subject to a restricted network provision and are provided on a prepaid basis, there are written agreements with network providers prohibiting the providers from billing or otherwise seeking reimbursement from or recourse against an individual insured under a Medicare Select policy or certificate. This subparagraph does not apply to supplemental charges or coinsurance amounts as stated in the Medicare Select policy or certificate.
(2) A statement or map providing a clear description of the service area.
(3) A description of the grievance procedure to be utilized.
(4) A description of the quality assurance program, including the following:
(i) The formal organizational structure.
(ii) The written criteria for selection, retention and removal of network providers.
(iii) The procedures for evaluating quality of care provided by network providers, and the process to initiate corrective action when warranted.
(5) A list and description, by specialty, of the network providers.
(6) Copies of the written information proposed to be used by the issuer to comply with subsection (j).
(7) Other information requested by the Commissioner.
(g) A Medicare Select issuer shall file:
(1) Proposed changes to the plan of operation, except for changes to the list of network providers, with the Commissioner prior to implementing the changes. Changes shall be considered approved by the Commissioner after 30 days unless specifically disapproved.
(2) An updated list of network providers with the Commissioner at least quarterly, if changes occur.
(h) A Medicare Select policy or certificate may not restrict payment for covered services provided by nonnetwork providers if the following apply:
(1) The services are for symptoms requiring emergency care or are immediately required for an unforeseen illness, injury or a condition.
(2) It is not reasonable to obtain services through a network provider.
(i) A Medicare Select policy or certificate shall provide payment for full coverage under the policy for covered services that are not available through network providers.
(j) A Medicare Select issuer shall make full and fair disclosure in writing of the provisions, restrictions and limitations of the Medicare Select policy or certificate to each applicant. This disclosure shall include at least the following:
(1) An outline of coverage sufficient to permit the applicant to compare the coverage and premiums of the Medicare Select policy or certificate with other:
(i) Medicare supplement policies or certificates offered by the issuer.
(ii) Medicare Select policies or certificates.
(2) A description, including address, phone number and hours of operation, of the network providers, including primary care physicians, specialty physicians, hospitals and other providers.
(3) A description of the restricted network provisions, including payments for coinsurance and deductibles when providers other than network providers are utilized.
(4) A description of coverage for emergency and urgently needed care and other out-of-service area coverage.
(5) A description of limitations on referrals to restricted network providers and to other providers.
(6) A description of the policyholder's rights to purchase another Medicare supplement policy or certificate otherwise offered by the issuer.
(7) A description of the Medicare Select issuer's quality assurance program and grievance procedure.
(k) Prior to the sale of a Medicare Select policy or certificate, a Medicare Select issuer shall obtain from the applicant a signed and dated form stating that the applicant has received the information provided under subsection (j) and that the applicant understands the restrictions of the Medicare Select policy or certificate.
(l) A Medicare Select issuer shall have and use procedures for hearing complaints and resolving written grievances from the subscribers. The procedures shall be aimed at mutual agreement for settlement and may include arbitration procedures.
(1) The grievance procedure shall be described in the policy and certificates and in the outline of coverage.
(2) At the time the policy or certificate is issued, the issuer shall provide detailed information to the policyholder describing how a grievance may be registered with the issuer.
(3) Grievances shall be considered in a timely manner and shall be transmitted to appropriate decision-makers who have authority to fully investigate the issue and take corrective action.
(4) If a grievance is found to be valid, corrective action shall be taken promptly.
(5) The concerned parties shall be notified about the results of a grievance.
(6) The issuer shall report by each March 31st to the Commissioner regarding its grievance procedure. The report shall be in a format prescribed by the Commissioner and shall contain the number of grievances filed in the past year and a summary of the subject, nature and resolution of the grievances.
(m) At the time of initial purchase, a Medicare Select issuer shall make available to each applicant for a Medicare Select policy or certificate the opportunity to purchase any Medicare supplement policy or certificate otherwise offered by the issuer.
(n) For purposes of this section, the following apply.
(1) At the request of an individual insured under a Medicare Select policy or certificate, a Medicare Select issuer shall make available to the individual insured the opportunity to purchase a Medicare supplement policy or certificate offered by the issuer which has comparable or lesser benefits and which does not contain a restricted network provision. The issuer shall make the policies or certificates available without requiring evidence of insurability after the Medicare Select policy or certificate has been in force for 6 months.
(2) For the purposes of this subsection, a Medicare supplement policy or certificate will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare Select policy or certificate being replaced. For the purposes of this paragraph, a ''significant benefit'' means coverage for the Medicare Part A deductible, coverage for prescription drugs, coverage for at-home recovery services or coverage for Part B excess charges.
(o) Medicare Select policies and certificates shall provide for continuation of coverage in the event the HHS Secretary determines that Medicare Select policies and certificates issued under this section should be discontinued due to either the failure of the Medicare Select Program to be reauthorized under law or its substantial amendment.
(1) Each Medicare Select issuer shall make available to each individual insured under a Medicare Select policy or certificate the opportunity to purchase any Medicare supplement policy or certificate offered by the issuer which has comparable or lesser benefits and which does not contain a restricted network provision. The issuer shall make the policies and certificates available without requiring evidence of insurability.
(2) For the purposes of this subsection, a Medicare supplement policy or certificate will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare Select policy or certificate being replaced. For the purposes of this paragraph, a ''significant benefit'' means coverage for the Medicare Part A deductible, coverage for prescription drugs, coverage for at-home recovery services or coverage for Part B excess charges.
(p) A Medicare Select issuer shall comply with reasonable requests for data made by State or Federal agencies, including the United States Department of Health and Human Services, for the purpose of evaluating the Medicare Select Program.
§ 89.790. Guaranteed issue for eligible persons.
* * * * * (b) Eligible persons. An eligible person is an individual described in paragraphs (1)--(6):
* * * * * (6) The individual, upon first becoming eligible for benefits under Part A [or] and enrolled in Part B, if eligible, of Medicare [at age 65 or older], enrolls in a Medicare+Choice plan under Part C of Medicare, and disenrolls from the plan within 12 months after the effective date of enrollment.
* * * * *
APPENDIX EMEDICARE SUPPLEMENT REFUND CALCULATION FORM FOR CALENDAR YEAR __________
TYPE1 _________________ SMSBP2 __________
For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code __________
Person Completing This Exhibit __________
Title _________________ Telephone Number __________
(a) Earned (b) Incurred Premium3 Claims4 1 Current Year's Experience a. Total (all policy years) ______ ______ b. Current year's issues5 ______ ______ c. Net (for reporting purposes = 1a - 1b) ______ ______ 2 Past Years' Experience (All Policy Years) ______ ______ 3 Total Experience (Net Current Year + Past Years' Experience) ______ ______ 4 Refunds Last Year (Excluding Interest) ______ 5 Previous Since Inception (Excluding Interest) ______ 6 Refunds Since Inception (Excluding Interest) ______ 7 Benchmark Ratio Since Inception (SEE WORKSHEET FOR RATIO 1) ______ 8 Experienced Ratio Since Inception (Ratio 2) ______ Ratio 2 = Total Actual Incurred Claims (line 3, col b) [= Ratio 2]
Total Earned Premium (line 3, col a) - Refunds Since Inception (line 6)
9 Life Years Exposed Since Inception ______ If the Experienced Ratio is less than the Benchmark Ratio, and there are more than 500 life years exposure, then proceed to calculation of refund. 10 Tolerance Permitted (obtained from credibility table) ______ 11 Adjustment to Incurred Claims for Credibility (Ratio 3) ______ Ratio 3 = Ratio 2 + Tolerance If Ratio 3 is more than benchmark ratio (ratio 1), a refund or credit to premium is not required. If Ratio 3 is less than the benchmark ratio, then proceed. 12 Adjusted Incurred Claims = (Total Earned Premiums (line 3, col a) - Refunds Since Inception (line 6)) × Ratio 3 (line 11) 13 Refund = Total Earned Premiums (line 3, col a) - Refunds Since Inception (line 6) -
{Adjusted Incurred Claims (line 12)}[÷]/{Benchmark Ratio (Ratio 1) (line 7)}If the amount on line 13 is less than .005 times the annualized premium in force as of December 31 of the reporting year, then no refund is made. Otherwise, the amount on line 13 is to be refunded or credited, and a description of the refund and/or credit against premium to be used must be attached to this form. Medicare Supplement Credibility Table Life Years Exposed Since Inception Tolerance 10,000 + 0.0% 5,000--9,999 5.0% 2,500--4,999 7.5% 1,000--2,499 10.0% 500--999 15.0% If less than 500, no credibility. [MEDICARE SUPPLEMENT REFUND CALCULATION FORM FOR CALENDAR YEAR ____
TYPE1 _________________ SMSBP2__________For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code _________________]
1 Individual [and], Group, Individual Medicare Select and Group Medicare Select only.
1 ''SMSBP'' = Standardized Medicare Supplement Benefit Plan--Use ''P'' for prestandardized plans.
3 Includes modal [model] loadings and fees charged.
4 Excludes Active Life Reserves.
5 This is to be used as ''Issue Year Earned Premium'' for Year 1 of next year's '' Worksheet for Calculation of Benchmark Ratios.''I certify that the above information and calculations are true and accurate to the best of my knowledge and belief.
__________Signature
__________Name-Please Type
__________Title
__________DateREPORTING FORM FOR THE CALCULATION OF BENCHMARK RATIO SINCE INCEPTION FOR INDIVIDUAL POLICIES FOR CALENDAR YEAR ______ TYPE1 _________________ SMSBP2 __________
For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code __________
Address __________
Person Completing This Exhibit __________
Title _________________ Telephone Number __________
(a)3 (b)4 (c) (d) (e) (f) (g) (h) (i) (j) (o)5 Earned Cumulative Cumulative PolicyYear Year Premium Factor (b) × (c) Loss Ratio (d) × (e) Factor (b) × (g) Loss Ratio (h) × (i) Loss Ratio 1 2.770 0.442 0.000 0.000 0.40 2 4.175 0.493 0.000 0.000 0.55 3 4.175 0.493 1.194 0.659 0.65 4 4.175 0.493 2.245 0.669 0.67 5 4.175 0.493 3.170 0.678 0.69 6 [1.175] 4.175 0.493 3.998 0.686 0.71 7 4.175 0.493 4.754 0.695 0.73 8 4.175 0.493 5.445 0.702 0.75 9 4.175 0.493 6.075 0.708 0.76 10 4.175 0.493 6.650 0.713 0.76 11 4.175 0.493 7.176 0.717 0.76 12 4.175 0.493 7.655 0.720 0.77 13 4.175 0.493 8.093 0.723 0.77 14 4.175 0.493 8.493 0.725 0.77 15 4.175 0.493 8.684 0.725 0.77 ______ ______ ______ ______ Total: (k): (l): (m): (n): Benchmark Ratio Since Inception (Ratio 1): (l + n)/(k + m):
1 Individual [and], Group, Individual Medicare Select and Group Medicare Select only.
2 ''SMSBP'' = Standardized Medicare Supplement Benefit Plan--Use ''P'' for prestandardized plans.
3 Year 1 is the current calendar year--1
Year 2 is the current calendar year--2 (etc.)
(Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.)
4 For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.
5 These loss ratios are not explicitly used in computing the benchmark loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown for informational purposes only.REPORTING FORM FOR THE CALCULATION OF BENCHMARK RATIO SINCE INCEPTION FOR GROUP POLICIES FOR CALENDAR YEAR ______ TYPE1 _________________ SMSBP2 __________
For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code __________
Address __________
Person Completing This Exhibit __________
Title _________________ Telephone Number __________
(a)3 (b)4 (c) (d) (e) (f) (g) (h) (i) (j) (o)5 Earned Cumulative Cumulative PolicyYear Year Premium Factor (b) × (c) Loss Ratio (d) × (e) Factor (b) × (g) Loss Ratio (h) × (i) Loss Ratio 1 2.770 0.507 0.000 0.000 0.46 2 4.175 0.567 0.000 0.000 0.63 3 4.175 0.567 1.194 0.759 0.75 4 4.175 0.567 2.245 0.771 0.77 5 4.175 0.567 3.170 0.782 0.80 6 4.175 0.567 3.998 0.792 0.82 7 4.175 0.567 4.754 0.802 0.84 8 4.175 0.567 6.075 0.818 0.88 10 4.175 0.567 6.650 0.824 0.88 11 4.175 0.567 7.176 0.828 0.88 12 4.175 0.567 7.655 0.831 0.88 13 4.175 0.567 8.093 0.834 0.89 14 4.175 0.567 8.493 0.837 0.89 15 4.175 0.567 8.684 0.838 0.89 ______ ______ ______ ______ Total: (k): (l): (m): (n): Benchmark Ratio Since Inception (Ratio 1): (l + n)/(k + m):
1 Individual [and], Group, Individual Medicare Select and Group Medicare Select only.
2 ''SMSBP'' = Standardized Medicare Supplement Benefit Plan-Use ''P'' for prestandardized plans.
3 Year 1 is the current calendar year--1
Year 2 is the current calendar year--2 (etc.)
(Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.)
4 For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.
5 These loss ratios are not explicitly used in computing the benchmark loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown for informational purposes only.[Pa.B. Doc. No. 99-185. Filed for public inspection February 5, 1999, 9:00 a.m.]
