RULES AND REGULATIONS
Title 31--INSURANCE
INSURANCE DEPARTMENT
[31 PA. CODE CH. 89]
Medicare Supplement Insurance Minimum Standards
[29 Pa.B. 172] The Insurance Department (Department) amends §§ 89.772, 89.774, 89.776--89.778, 89.780, 89.781, 89.783, 89.788 and 89.790, and Appendix I, 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 amendments will 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 (42 U.S.C.A. § 1395ss) and the Balanced Budget Act of 1997 (Pub. L. No. 105-33).
Notice of the 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)) (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 changes indicated to Subchapter K (relating to Medicare supplement insurance minimum standards) are Federally mandated under recent Federal legislation, the Balanced Budget Act of 1997 (Pub. L. No. 105-33, 111 Stat. 251), with an effective date of July 1, 1998. The Federal law also establishes a timetable under which these changes are to be implemented by the states if they are to remain in compliance with the Federal requirements and maintain regulatory authority in this area. To comply with Federal statutory minimum requirements for Medicare supplement policies, as mandated by section 4031 of the Balanced Budget Act of 1997, 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 the Balanced Budget Act of 1997. The Federal law mandates that many of its requirements become effective not later than July 1, 1998, including the new open enrollment and guarantee issue requirements contained in §§ 89.778 and 89.790 (relating to open enrollment; and guaranteed issue for eligible persons).
These amendments are necessary to maintain the Commonwealth's compliance with Federal requirements, which will ensure that the Commonwealth retains enforcement authority over these new requirements. These standards will be implemented through Federal preemption if the Commonwealth does not implement these changes through State regulation. The Federal legislation establishes that states which adopt the language of the NAIC Medicare Supplement model regulation which has been revised to address the Federal changes will be considered to be in compliance with the Federal requirements.
These amendments will protect the rights of the consumers in this Commonwealth purchasing Medicare supplement policies. In addition to the mandated changes, the Department has clarified and revised language to improve the readability of the regulations. The clarifications and revisions are not substantive in nature.
Explanation of Regulatory Requirements
Section 89.772 (relating to definitions) has been modified to include additional definitions necessary to implement the new Federal requirements under the Balanced Budget Act of 1997. The added definitions are based on the revised NAIC Medicare Supplement model regulation which, as indicated above, has been endorsed and supported by the Federal government.
Section 89.774 (relating to policy provisions) was previously inappropriately captioned. The Department seeks to correctly caption this provision to reflect the topic covered as ''Exclusions and Limitations.'' This section does not establish policy provisions; it explains acceptable policy exclusions and limitations.
Section 89.776 (relating to benefit standards) has been modified. Section 89.776 (3)(iv) and (v) has been revised to reflect that the Health Care Practitioners Medicare Fee Control Act (35 P. S. §§ 449.31--449.36), limits the amount that providers may bill Medicare patients.
Section 89.777(e)(7) and (12) (relating to standard Medicare supplement benefit plans) has been added to reflect the requirements for high deductible policies which can now be offered under Plans F and J. The new language is based on the revised NAIC Medicare Supplement model regulation.
Section 89.778(a) (relating to open enrollment) has been modified to clarify that insurance companies are not required to offer coverage in group plans to persons who are not members of the insured group.
Section 89.778(b) has been added to provide for the counting of ''prior creditable coverage'' which will be applied against any preexisting condition exclusion period otherwise applicable to individuals. The application of this concept, new to the Medicare supplement arena, reduces or eliminates the preexisting condition exclusion periods which individuals are otherwise subject to serving. This is similar in concept to the counting of creditable coverage and the reduction/elimination of preexisting condition exclusions in the commercial health insurance market under the Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104-191, 110 Stat. 1936) (HIPAA), which has been adopted and codified in this Commonwealth as the Pennsylvania Health Care Insurance Portability Act (40 P. S. §§ 1302.1--1302.7). This new language is also based on the revised NAIC Medicare Supplement model regulation.
Section 89.780(c)(1)(i) (relating to the loss ratio standards) was revised to clarify how the Department interprets this section. The revision does not alter how the Department has been interpreting this section since the effective date of this regulation.
Section 89.781(c)(2) (relating to filing and approval) was amended to define what constitutes a ''type'' for purposes of offering more than one policy for the same standard Medicare benefit plan. This amendment does not alter how the Department has been interpreting this section since the effective date of this regulation.
Section 89.783 (relating to required disclosure provisions) was amended to add clarifying language to subsection (a)(4) and (6). Additionally, the Department seeks to clarify the disclosure requirement under subsections (b) and (c). This change is intended to eliminate unnecessary filings and to reduce any administrative burden imposed by these filings on issuers.
Section 89.783 has also been modified for all plan specific Medicare supplement coverage charts for Plans A--J to reflect the current Federal Medicare deductibles. These deductibles are variables, which are changed by the Federal government on a regular basis. The deductibles can be updated by the Federal government and implemented by issuers in accordance with § 89.783(c)(4) (relating to required disclosure provisions) without modifications to this regulation. The Outline of Medicare supplement coverage--Cover Page, and Plans F and J, have been modified to add the new high deductible policies now allowed in Plans F and J. This new language is based on the revised NAIC Medicare Supplement model regulation.
The preventive benefits reflected in the charts for Plans E and J have been modified to address the new preventive benefits now covered under Medicare. This new language is based on the revised NAIC Medicare Supplement model regulation.
Section 89.788(a) (relating to reporting of multiple policies) is being modified to clarify the intended purpose and issuer responsibility.
Section 89.790 (relating to guaranteed issue for eligible persons) has been added to meet new Federal requirements under the Balanced Budget Act of 1997. The Balanced Budget Act created Medicare Part C known as ''Medicare+Choices.'' Medicare+Choices is designed to expand the coverage options for Medicare eligibles beyond traditional Medicare and the current coordinated care programs such as HMOs. The new coverage options in Medicare+Choices include HMOs, PPOs, Provider Sponsored Organizations, Medical Savings Accounts and private fee-for-service plans.
The Federal legislation allows individuals who have been enrolled in a Medicare+Choice product or a Medicare supplement policy to select or return to a Medicare supplement policy on a guaranteed issue basis under certain circumstances. These circumstances include the termination of the Medicare+Choice plan's certification to participate in the Medicare+Choice program, the subscriber moving out of the Medicare+Choice plan's service area and the bankruptcy or insolvency of a Medicare supplement issuer. This new language meets the Federal requirements and is based on the revised NAIC Medicare Supplement model regulation.
Appendix I (relating to disclosure statements) has been revised to incorporate changes made necessary by the Balanced Budget Act of 1997. The revised disclosure statements are based on the revised NAIC Medicare Supplement 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 incur additional costs associated with complying with the new Federal requirements. Specifically, the open enrollment and 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.
Issuers should see a potential cost reduction in the changed requirements for disclosure notices. However, this factor may be balanced against increased costs due to the new Federal open enrollment and guaranteed issue requirements.
Effectiveness/Sunset Date
This order is effective upon publication in the Pennsylvania Bulletin. No sunset date has been assigned.
Paperwork
Adoption of these amendments will require additional paperwork for insurance carriers' product development areas to implement the new Federal changes. The new notice requirements should, however, bring about decreased paperwork. Paperwork requirements for the Department will likely not change drastically.
Persons Regulated
These amendments apply to all insurance companies who issue Medicare supplement products in this Commonwealth.
Contact Person
The person to contact for information on the amendments is Peter J. Salvatore, Regulatory Coordinator, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429.
Regulatory Review
Under section 5.1(c) of the Regulatory Review Act (71 P. S. § 745.5a(c)), on November 10, 1998, the Department submitted a copy of the amendments with the proposed rulemaking omitted 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 amendments were submitted to the Office of Attorney General for review and approval under the Commonwealth Attorneys Act (71 P. S. §§ 732-101--732-506).
In accordance with section 5.1(d) of the Regulatory Review Act, the amendments were deemed approved by the Senate Banking and Insurance Committee and by the House Insurance Committee on November 30, 1998. IRRC met on December 10, 1998, and approved the amendments.
Findings
The Insurance Commissioner finds that:
(a) There is good cause to amend Chapter 89, Subchapter K, effective upon publication with the proposed rulemaking omitted. Deferral of the effective date of these amendments 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.
(b) There is good cause to forego public notice of the intention to amend Chapter 89, Subchapter K, because prior notice of the amendments under the circumstances is unnecessary and impractical (45 P. S. § 1204(3)) for the following reasons:
(1) The changes mandated by Federal law will go into effect with or without Commonwealth regulatory action.
(2) If the amendments are not implemented within the time frame 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. The dual regulation would negatively impact consumers of this Commonwealth due to a shortage in Federal enforcement staffing. Accordingly, it would be more difficult for consumers of this Commonwealth to have complaints concerning the new requirements addressed by the Federal government in a timely manner.
(3) 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 Insurance Commissioner, acting under the authority orders that:
(a) The regulations of the Department, 31 Pa. Code Chapter 89, are amended by amending §§ 89.772, 89.774, 89.776--89.778, 89.780, 89.781, 89.783 and 89.788 and by adding § 89.790 to read as set forth in Annex A, with ellipses referring to the existing text of the regulations.
(b) 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.
(c) The Department shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) This order shall take effect upon its publication in the Pennsylvania Bulletin.
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 28 Pa.B. 6359 (December 26, 1998).)
Fiscal Note: 11-177. 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 § 89.772. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
Applicant--
(i) In the case of an individual Medicare supplement policy, the person who seeks to contract for insurance benefits.
(ii) In the case of a group Medicare supplement policy, the proposed certificateholder.
Bankruptcy--The condition under which a Medicare+Choice plan that is not an issuer has filed, or has had filed against it, a petition or other action seeking a declaration of bankruptcy under the provisions of the United States Bankruptcy Code (11 U.S.C.) and has ceased doing business in this Commonwealth.
Certificate--A certificate delivered or issued for delivery in this Commonwealth under a group Medicare supplement policy.
Certificate form--The form on which the certificate is delivered or issued for delivery by the issuer.
Commissioner--The Insurance Commissioner of the Commonwealth.
Continuous period of creditable coverage--The period during which an individual was covered by creditable coverage, if during the period of the coverage the individual had no breaks in coverage greater than 63 days.
Creditable coverage--The definition contained in the Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191, 110 Stat. 1936), as adopted by the Commonwealth under the Pennsylvania Health Care Insurance Portability Act (40 P. S. §§ 1302.1--1302.7), is incorporated herein by reference.
Employe welfare benefit plan--A plan, fund or program of employe benefits as defined in section 3 of the Employee Retirement Income Security Act or ERISA (29 U.S.C.A. § 1002).
HHS Secretary--The Secretary of the United States Department of Health and Human Services.
Insolvency--The condition under which an issuer, licensed to transact business in this Commonwealth by the Commissioner, has had a final order of liquidation entered against it, or a finding of insolvency by a court of competent jurisdiction in the issuer's state of domicile.
Issuer--The term includes insurance companies, fraternal benefit societies and nonprofit corporations subject to 40 Pa.C.S. Chapters 61 and 63 (relating to hospital plan corporations; and professional health services plan corporations) and other entities delivering or issuing for delivery Medicare supplement policies or certificates in this Commonwealth.
Medicare--The program established by the Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 (42 U.S.C.A. §§ 1395--1395b-4) as then constituted or later amended.
Medicare+Choice plan--A plan of coverage for health benefits under Medicare Part C as defined in section 1859 of the Social Security Act (42 U.S.C.A. § 1395w-28).
(i) Coordinated care plans which provide health care services, including health maintenance organization plans (with or without a point-of-service option), plans offered by provider-sponsored organizations and preferred provider organization plan.
(ii) Medicare medical savings account plans coupled with a contribution into a Medicare+Choice medical savings account.
(iii) Medicare+Choice private fee-for-service plans.
Medicare supplement policy--A group or individual policy of insurance or a subscriber contract other than a policy issued under a contract under section 1876 of the Social Security Act (42 U.S.C.A. §§ 1395--139mm or a policy issued under a demonstration project specified in section 1882 of the SSA (42 U.S.C.A. § 1395ss(g)(1)), which is advertised, marketed or designed primarily as a supplement to reimbursements under Medicare for the hospital, medical or surgical expenses of persons eligible for Medicare.
Policy form--The form on which the policy is delivered or issued for delivery by the issuer.
§ 89.774. Exclusions and limitations.
(a) Except for permitted preexisting condition clauses as described in §§ 89.775(1)(i) and 89.776(1)(i) (relating to minimum benefit standards for policies or certificates issued for delivery prior to July 30, 1992; and benefits standards for policies or certificates issued or delivered on or after July 30, 1992), a policy or certificate may not be advertised, solicited or issued for delivery in this Commonwealth as a Medicare supplement policy if the policy or certificate contains limitations or exclusions on coverage that are more restrictive than those of Medicare.
(b) A Medicare supplement policy or certificate may not use waivers to exclude, limit or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions.
(c) A Medicare supplement policy or certificate in force in this Commonwealth may not contain benefits which duplicate benefits provided by Medicare.
§ 89.776. Benefits standards for policies or certificates issued or delivered on or after July 30, 1992.
The following standards are applicable 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.
* * * * * (3) Standards for additional benefits. The following additional benefits shall be included in Medicare Supplement Benefit Plans B, C, D, E, F, G, H, I and J only as provided by § 89.777.
(i) Medicare Part A deductible. Coverage for the Medicare Part A inpatient hospital deductible amount per benefit period.
(ii) Skilled nursing facility care. Coverage for the actual billed charges up to the coinsurance amount from the 21st day through the 100th day in a Medicare benefit period for posthospital skilled nursing facility care eligible under Medicare Part A.
(iii) Medicare Part B deductible. Coverage for all of the Medicare Part B deductible amount per calendar year regardless of hospital confinement.
(iv) Eighty percent of the Medicare Part B excess charges. Coverage for 80% of the difference between the actual Medicare Part B charges as billed, not to exceed a charge limitation established by the Medicare Program, State Law, including, but not limited, to the Health Care Practitioner Medicare Fee Control Act (35 P. S. §§ 449.31--449.36), and the Medicare-approved Part B charge.
(v) Medicare Part B excess charges. One hundred percent of the Medicare Part B excess charges: coverage for all of the difference between the actual Medicare Part B charge as billed, not to exceed a charge limitation established by the Medicare Program, State law, including, but not limited to, the Health Care Practitioner Medicare Fee Control Act and the Medicare-approved Part B charge.
* * * * * § 89.777. Standard Medicare supplement benefit plans.
(a) An issuer shall make available to each prospective policyholder and certificateholder a policy form or certificate form containing only the basic core benefits, as defined in § 89.776(2) (relating to benefits standards for policies or certificates issued for delivery on or after July 30, 1992). An issuer shall also offer a policy or certificate to prospective insureds meeting the Plan B benefit plan.
(b) Groups, packages or combinations of Medicare supplement benefits other than those listed in this section may be offered for sale in this Commonwealth except as may be permitted in § 89.776(3)(xi).
(c) Benefit plans shall be uniform in structure, language, designation and format to the standard benefit plans A, B, C, D, E, F, G, H, I and J listed in this section and conform to the definitions in § 89.773 (relating to policy definitions and terms). Each benefit shall be structured in accordance with the format in §§ 89.776(2) and (3) and list the benefits in the order shown in this section. For purposes of this section, ''structure, language and format'' means style, arrangement and overall content of a benefit.
(d) An issuer may use, in addition to the benefit plan designations required in subsection (c), other designations to the extent permitted by law.
(e) The make-up of benefit plans shall be as follows:
(1) Standardized Medicare supplement benefit Plan A shall be limited to the basic (core) benefits common to all benefit plans, as defined in § 89.776(2).
(2) Standardized Medicare supplement benefit Plan B shall include only the following: the core benefit as defined in § 89.776(2), plus the Medicare Part A Deductible as defined in § 89.776(3)(i).
(3) Standardized Medicare supplement benefit Plan C shall include only the following: the core benefit as defined in § 89.776(2), plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible and medically necessary emergency care in a foreign country as defined in § 89.776(3)(i)--(iii) and (viii).
(4) Standardized Medicare supplement benefit Plan D shall include only the following: the core benefit (as defined in § 89.776(2)), plus the Medicare Part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country and the at-home recovery benefit as defined in § 89.776(3)(i), (ii), (viii) and (x).
(5) Standardized Medicare supplement benefit Plan E shall include only the following: the core benefit as defined in § 89.776(2), plus the Medicare Part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country and preventive medical care as defined in § 89.776(3)(i), (ii), (viii) and (ix).
(6) Standardized Medicare supplement benefit Plan F shall consist of only the following: the core benefit as defined in § 89.776(2), plus the Medicare Part A deductible, skilled nursing facility care, the Medicare Part B deductible, 100% of the Medicare Part B excess charges and medically necessary emergency care in a foreign country as defined in § 89.776(3)(i)--(iii), (v) and (viii).
(7) Standardized Medicare supplement benefit high deductible plan ''F'' shall include only the following: 100% of covered expenses following the payment of the annual high deductible plan ''F'' deductible. The covered expenses include the core benefit as defined in § 89.776(2), plus the Medicare Part A deductible, skilled nursing facility care, the Medicare Part B deductible, 100% of the Medicare Part B excess charges and medically necessary emergency care in a foreign country as defined in § 89.776(3)(i)--(iii), (v) and (viii) respectively. The annual high deductible plan ''F'' deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan ''F'' policy, and shall be in addition to any other specific benefit deductibles. The annual high deductible Plan ''F'' deductible shall be $1,500 for 1998 and 1999, and shall be based on the calendar year. It shall be adjusted annually thereafter by the HHS Secretary to reflect the change in the Consumer Price Index for all urban consumers for the 12-month period ending with August of the preceding year, and rounded to the nearest multiple of $10.
(8) Standardized Medicare supplemental benefit Plan G shall include only the following: the core benefit as defined in § 89.776(2), plus the Medicare Part A deductible, skilled nursing facility care, 80% of the Medicare Part B excess charges, medically necessary emergency care in a foreign country and the at-home recovery benefit as defined in § 89.776(3)(i), (ii), (iv), (viii) and (x).
(9) Standardized Medicare supplement benefit Plan H shall consist of only the following: the core benefit as defined in § 89.776(2), plus the Medicare Part A deductible, skilled nursing facility care, basic prescription drug benefit and medically necessary emergency care in a foreign country as defined in § 89.776(3)(i), (ii), (vi) and (viii).
(10) Standardized Medicare supplement benefit Plan I shall consist of only the following: the core benefit as defined in § 89.776(2), plus the Medicare Part A deductible, skilled nursing facility care, 100% of the Medicare Part B excess charges, basic prescription drug benefit, medically necessary emergency care in a foreign country and at-home recovery benefit as defined in § 89.776(3)(i), (ii), (v), (vi), (viii) and (x).
(11) Standardized Medicare supplement benefit Plan J shall consist of only the following: the core benefit as defined in § 89.776(2), plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, 100% of the Medicare Part B excess charges, extended prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care and at-home recovery benefit as defined in § 89.776(3)(i)--(iii), (v) and (vii)--(x).
(12) Standardized Medicare supplement benefit high deductible plan ''J'' shall consist of only the following: 100% of covered expenses following the payment of the annual high deductible plan ''J'' deductible. The covered expenses include the core benefit as defined in § 89.776(2) plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, 100% of the Medicare Part B excess charges, extended outpatient prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care benefit and at-home recovery benefit as defined in § 89.776(3)(i)--(iii), (v) and (vii)--(x) respectively. The annual high deductible plan ''J'' deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan ''J'' policy, and shall be in addition to any other specific benefit deductibles. The annual deductible shall be $1,500 for 1998 and 1999, and shall be based on a calendar year. It shall be adjusted annually thereafter by the HHS Secretary to reflect the change in the Consumer Price Index for all urban consumers for the 12-month period ending with August of the preceding year, and rounded to the nearest multiple of $10.
§ 89.778. Open enrollment.
(a) An issuer may not deny or condition the issuance or effectiveness of a Medicare supplement policy or certificate available for sale in this Commonwealth, nor discriminate in the pricing of a policy or certificate because of the health status, claims experience, receipt of health care or medical condition of an applicant in the case of an application for a policy or certificate that is submitted prior to or during the 6-month period beginning with the first day of the first month in which an individual enrolled for benefits under Medicare Part B. Each Medicare supplement policy and certificate currently available from an issuer shall be made available to applicants who qualify under this subsection without regard to age. In the case of group policies, an issuer may condition issuance on whether an applicant is a member or is eligible for membership in the insured group.
(b) If an applicant qualifies under subsection (a) and submits an application during the time period referenced in subsection (a) and, as of the date of application, has had a continuous period of creditable coverage of at least 6 months, the issuer may not exclude benefits based on a preexisting condition.
(c) If the applicant qualifies under subsection (a) and submits an application during the time period referenced in subsection (a) and, as of the date of application, has had a continuous period of creditable coverage that is less than 6 months, the issuer shall reduce the period of any preexisting condition exclusion by the aggregate of the period of creditable coverage applicable to the applicant as of the enrollment date. The HHS Secretary shall specify the manner of the reduction under this subsection.
(d) Except as provided in § 89.789, subsection (a) will not be construed as preventing the exclusion of benefits under a policy, during the first 6 months, based on a preexisting condition for which the policyholder or certificateholder received treatment or was otherwise diagnosed during the 6 months before it became effective.
§ 89.780. Loss ratio standards and refund or credit of premium.
* * * * * (c) Annual filing of premium rates. An issuer of Medicare supplement policies and certificates issued before, on or after July 30, 1992, in this Commonwealth shall file annually its rates, rating schedule and supporting documentation, including ratios of incurred losses to earned premiums by policy duration for approval by the Commissioner in accordance with the filing requirements and procedures prescribed by the Commissioner. The supporting documentation shall also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. That demonstration shall exclude active life reserves. An expected 3rd-year loss ratio which is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than 3 years. As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare polices or certificates in this Commonwealth shall file with the Commissioner, in accordance with the applicable filing procedures of the Commonwealth:
(1) Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. Supporting documents as necessary to justify the adjustment shall accompany the filing.
(i) An issuer shall make premium adjustments as necessary to produce an expected loss ratio under the policy or certificate that will conform with minimum loss ratio standards for the Medicare supplement policies, and that will result in an expected loss ratio at least as great as that originally anticipated by the issuer for that policy or certificate. A premium adjustment which would modify the loss ratio experience under the policy other than the adjustments described in this section may not be made with respect to a policy at any time other than upon its renewal date or anniversary date.
* * * * * § 89.781. Filing and approval of policies and certificates and premium rates.
(a) Approval of policy or certificate. An issuer may not deliver or issue for delivery a policy or certificate to a resident of this Commonwealth, unless the policy form or certificate form has been filed with and approved by the Commissioner in accordance with filing requirements and procedures prescribed by the Commissioner.
(b) Filing of rating schedule and supporting documentation. An issuer may not use or change premium rates for a Medicare supplement policy or certificate unless the rates, rating schedule and supporting documentation have been filed with and approved by the Commissioner in accordance with the filing requirements and procedures prescribed by the Commissioner.
(c) Exceptions.
(1) Except as provided in paragraph (2), an issuer may not file for approval more than one form of a policy or certificate of each type for each standard Medicare supplement benefit plan.
(2) An issuer may offer, with the approval of the Commissioner, up to three additional policy forms or certificate forms of the same type for the same standard Medicare supplement benefit plan. These additional forms may include one or more of the following three variations. Forms with only these variations will be regarded as new policy forms under each type:
(i) The inclusion of new or innovative benefits.
(ii) The addition of either direct response or agent marketing methods.
(iii) The addition of either guaranteed issue or underwritten coverage.
(3) For the purpose of this section, a ''type'' means an individual policy, a group policy, an individual Medicare Select Policy or a group Medicare Select Policy.
(d) Availability of policy form.
(1) Except as provided in clause (A), an issuer shall continue to make available for purchase any policy form or certificate form issued after July 30, 1992, that has been approved by the Commissioner. A policy form or certificate form may not be considered to be available for purchase, unless the issuer has actively offered it for sale in the previous 12 months.
(A) An issuer may discontinue the availability of a policy form or certificate form if the issuer provides to the Commissioner in writing its decision at least 30 days prior to discontinuing the availability of the form of the policy or certificate. After receipt of the notice by the Commissioner, the issuer may not offer for sale the policy form or certificate form in this Commonwealth.
(B) An issuer that discontinues the availability of a policy form or certificate form under clause (A) may not file for approval a new policy form or certificate form of the same type for the same standard Medicare supplement benefit plan as the discontinued form for 5 years after the issuer provides notice to the Commissioner of the discontinuance. The period of discontinuance may be reduced if the Commissioner determines that a shorter period is appropriate.
(2) The sale or other transfer of Medicare supplement business to another issuer shall be considered a discontinuance for the purposes of this section.
(3) A change in the rating structure or methodology shall be considered a discontinuance under paragraph (1), unless the issuer complies with the following requirements:
(i) The issuer provides an actuarial memorandum, in a form and manner prescribed by the Commissioner, describing the manner in which the revised rating methodology and resultant rates differ from the existing rating methodology and existing rates.
(ii) The issuer does not subsequently put into effect a change of rates or rating factors that would cause the percentage differential between the discontinued and subsequent rates as described in the actuarial memorandum to change. The Commissioner may approve a change to the differential which is in the public interest.
(e) Combination of forms.
(1) Except as provided in paragraph (2), the experience of all policy forms or certificate forms of the same type in a standard Medicare supplement benefit plan shall be combined for purposes of the refund or credit calculation prescribed in § 89.780 (relating to loss ratio standards and refund or credit of premium).
(2) Forms assumed under an assumption reinsurance agreement may not be combined with the experience of other forms for purposes of the refund or credit calculation.
§ 89.783. Required disclosure provisions.
(a) General rules.
* * * * * (4) If a Medicare supplement policy or certificate contains any limitations with respect to preexisting conditions, these limitations shall appear as a separate paragraph of the policy and be labeled as ''Preexisting Condition Limitations.''
* * * * * (6) Issuers of accident and sickness policies or certificates which provide hospital or medical expense coverage on an expense incurred or indemnity basis to a person eligible for Medicare, shall provide to these applicants a Guide to Health Insurance for People with Medicare (Guide) in the form developed jointly by the National Association of Insurance Commissioners and the Health Care Financing Administration and in a type size no smaller than 12 point type. Delivery of the Guide shall be made whether or not these policies or certificates are advertised, solicited or issued as Medicare supplement policies or certificates as defined in this subchapter. Except in the case of direct response issuers, delivery of the Guide shall be made to the applicant at the time of application and acknowledgment of receipt of the Guide shall be obtained by the issuers. Direct response issuers shall deliver the Guide to the applicant upon request but not later than at the time the policy is delivered.
* * * * * (b) Notice requirements.
* * * * * (1) As soon as practicable, but no later than 30 days prior to the annual effective date of Medicare benefit changes, an issuer shall notify its policyholders and certificateholders of modifications it has made to Medicare supplement insurance policies or certificates in a format acceptable to the Commissioner. The notice shall:
(i) Include a description of revisions to the Medicare Program and a description of each modification made to the coverage provided under the Medicare supplement policy or certificate.
(ii) Inform each policyholder or certificateholder as to when a premium adjustment is to be made due to changes in Medicare.
* * * * * (4) Once the Department has approved the form, a ''Notice of Change'' can be used to modify the deductible and co-payment amounts to reflect Medicare changes without submitting the notice for additional approval. Once the Department has approved the form, only format changes are required to be submitted for review.
(c) Outline of coverage requirements for Medicare supplement policies.
* * * * * (4) Once the Department has approved the format, an ''Outline of Coverage'' can be modified to have the deductible and co-payment requirements reflect Medicare changes, and the rate changes reflected, without submitting the Outline of Coverage for review. Only those forms containing a format change are required to be submitted for review.
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