RULES AND REGULATIONS
Title 31--INSURANCE
INSURANCE DEPARTMENT
[31 PA. CODE CH. 89]
Medicare Supplement Insurance Minimum Standards
[35 Pa.B. 2729] The Insurance Department (Department) amends §§ 89.772--89.777, 89.777a, 89.778, 89.780--89.784, 89.786, 89.787 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 regarding 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 the Social Security Act (42 U.S.C.A. § 1395ss) and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), the act of December 8, 2003 (Pub. L. No. 108-173, 117 Stat. 2066).
Notice of proposed rulemaking is omitted in accordance with section 204(3) of the act of July 31, 1968 (P. L. 769, No. 240), known as the Commonwealth Documents Law (CDL), (45 P. S. § 1204(3)). 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 the MMA, enacted December 8, 2003. Federal law requires that these changes 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 National Association of Insurance Commissioners (NAIC) Medicare Supplement model regulation (NAIC model regulation) was adopted September 8, 2004, and the Department's new regulations must be adopted within 1 year following the NAIC 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, the Insurance 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 amend Subchapter K to meet the new Federal mandates for Medicare supplement policies as required under the MMA.
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 will be effective for Medicare Supplement issuers on January 1, 2006, under the MMA. 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 needs to adopt these revisions to the Medicare Supplement regulations by September 8, 2005, to avoid Federal intervention.
The final-omitted rulemaking will protect the rights of consumers purchasing Medicare supplement policies in this Commonwealth.
Explanation of Regulatory Requirements
Section 89.772 (relating to definitions) has been revised to reflect changes to definitions of the terms ''bankruptcy,'' ''employee welfare benefit plan,'' ''Medicare Advantage plan'' (formerly ''Medicare + Choice'') and ''Medicare supplement policy.'' The new language is based on the NAIC model regulation. The Department also defined the term ''producer'' to mean an insurance producer as defined in the act of December 6, 2002 (P. L. 1183, No. 147) (Act 147) (40 P. S. §§ 310.1--310.99a).
Section 89.773(4) (relating to policy definitions and terms) has been revised to relocate the definition of ''health care expenses'' to § 89.780 (relating to loss ratio standards and refund or credit of premium). This revision is based on the NAIC model regulation.
Section 89.773(7) has been revised to clarify that both Medicare Parts A and B as the types of Medicare expenses that are eligible and covered by Medicare. The new language is based on the NAIC model regulation.
Section 89.774(d) (relating to exclusions and limitations) has been revised to clarify the options available to policyholders after December 31, 2005, when outpatient prescription drug benefits for both prestandardized and standardized Medicare supplement policies will no longer be available for policyholders who enroll in Medicare Part D. The new language is based on the NAIC model regulation.
Section 89.775(1)(vi) (relating to minimum benefit standards for policies or certificates issued for delivery prior to July 30, 1992) has been revised to clarify that receipt of Medicare Part D benefits will not be considered in determining a continuous loss. The new language is based on the NAIC model regulation.
Section 89.775(1)(vii) has been revised to clarify a Medicare supplement policy that has eliminated an outpatient prescription drug benefit to conform with the MMA shall be deemed to satisfy the guarantee renewal requirements of this subparagraph. This revision is based on the NAIC model regulation.
Section 89.776(1)(v)(F) (relating to benefit standards for policies or certificates issued or delivered on or after July 30, 1992) has been revised to clarify a Medicare supplement policy that has eliminated an outpatient prescription drug benefit to conform with the MMA shall be deemed to satisfy the guarantee renewal requirements of this clause. This revision is based on the NAIC model regulation.
Section 89.776(1)(vi) has been revised to clarify that receipt of Medicare Part D benefits will not be considered in determining a continuous loss. This revision is based on the NAIC model regulation.
Section 89.776(1)(vii)(D)(II) has been revised to clarify that if the suspended Medicare supplement policy provided coverage for outpatient prescription drugs, the reinstitution of the policy for Medicare Part D enrollees will be without coverage for outpatient prescription drugs and will otherwise provide substantially equivalent coverage to the coverage in effect before the date of suspension. This revision is based on the NAIC model regulation.
Section 89.776(2)(iii) has been revised to clarify Medicare supplement Plans A--J and the change of payment method to applicable prospective payment system rate as required by the MMA. This revision is based on the NAIC model regulation.
Section 89.776(3)(vi) has been revised to clarify that for basic outpatient prescription drug benefit, the outpatient prescription drug benefit may be included for sale or issuance in a Medicare supplement policy until January 1, 2006. This revision is based on the NAIC model regulation.
Section 89.776(3)(vii) has been revised to clarify that for extended outpatient prescription drug benefit, the outpatient prescription drug benefit may be included for sale or issuance in a Medicare supplement policy until January 1, 2006. This revision is based on the NAIC model regulation.
Section 89.776(3)(ix) has been revised to delete specific references to preventive screening tests or preventive services. This language has been replaced by general language to contemplate any future changes that Medicare may make in coverage to specific preventive services. This revision is based on the NAIC model regulation.
Section 89.776(3)(xi) has been revised and moved to § 89.777(g) (relating to standard Medicare supplement benefit plans). This revision is based on the NAIC model regulation.
Section 89.776(4) has been added to set forth benefit standards for Medicare supplement Plans K and L. This revision is based on the NAIC model regulation.
Section 89.777(b) (relating to standard Medicare supplement benefit plans) has been revised to clarify the language which sets forth requirements for sale of Medicare Supplement policies in this Commonwealth and provide specific reference to subsection (g) and § 89.777a (relating to Medicare Select policies and certificates). This revision is based on the NAIC model regulation.
Section 89.777(c) has been revised to include reference to the new Medicare supplement plans available as required by the MMA. This revision is based on the NAIC model regulation.
Section 89.777(e)(9) has been revised to specify that outpatient prescription drug benefit may not be included in a Medicare supplement Plan H sold after December 31, 2005. This revision is based on the NAIC model regulation.
Section 89.777(e)(10) has been revised to specify that outpatient prescription drug benefit may not be included in a Medicare supplement Plan I sold after December 31, 2005. This revision is based on the NAIC model regulation.
Section 89.777(e)(11) has been revised to specify that outpatient prescription drug benefit may not be included in a Medicare supplement Plan J and high deductible Plan J sold after December 31, 2005. This revision is based on the NAIC model regulation.
Section 89.777(e)(12) has been revised to specify that outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.
Section 89.777(e)(13) has been revised to add requirements for Standardized Medicare Supplement benefit Plan K. This revision is based on the NAIC model regulation.
Section 89.777(e)(14) has been revised to add requirements for Standardized Medicare Supplement benefit Plan L. This revision is based on the NAIC model regulation.
Section 89.777(g) has been added to set forth the requirements for new or innovative benefits, previously under § 89.776(3)(xi). Effective December 31, 2005, the outpatient prescription drug program will not constitute an innovative benefit. This revision is based on the NAIC model regulation.
Section 89.777a(j)(3) (relating to Medicare select policies and certificates) has been revised to clarify that expenses incurred when using an out-of-network provider in a Medicare Select policy do not count toward the out-of-pocket annual limit contained in Plans K and L. This revision is based on the NAIC model regulation.
Section 89.777a(n)(2) and (o)(2) has been revised to clarify that coverage for prescription drugs does not constitute a ''significant benefit'' for the purposes of comparing Medicare supplement policies or certificates being replaced. This revision is based on the NAIC model regulation.
Section 89.778(d) (relating to open enrollment) has been revised to clarify that §§ 89.789(b) and (c) and 89.790(a) (relating to prohibition against preexisting conditions, waiting periods, elimination periods and probationary periods in replacement policies or certificates; and guaranteed issue for eligible persons) are not to be construed as preventing the exclusions of benefits. This revision is based on the NAIC model regulation.
Section 89.780(a)(2) (relating to loss ratio standards and refund or credit premiums) has been revised to include language relating to home health care expenses previously in § 89.773(4). This revision is based on the NAIC model regulation.
Section 89.780(b)(1) has been revised to delete the reference to Appendix E and to provide this data shall be filed using an applicable Refund Calculation Form prescribed by the Department.
Section 89.781(b) (relating to filing and approval of policies and certificates and premium rates) has been revised to allow issuers to file riders or amendments to delete outpatient prescription drug benefits as required by the MMA. This revision is based on the NAIC model regulation.
Section 89.781(c)(2)(ii) has been renumbered as (d)(2)(ii) and revised to change ''agent'' to ''producer.'' This revision reflects the changes made by Act 147.
Section 89.782(a) and (b) (relating to permitted compensation agreements) has been revised to change ''agent'' to ''producer.'' This revision reflects the changes made by Act 147.
Section 89.783(a)(6) (relating to required disclosure provisions) has been revised to change ''Health Care Financing Administration'' to ''Centers for Medicare & Medicaid Services.'' This revision is based on the NAIC model regulation.
Section 89.783(a)(8) has been deleted to promote National uniformity and consistency in Medicare supplement standards. This revision is based on the NAIC model regulation.
Section 89.783(c) has been revised to reflect notice requirements for issuers as required by the MMA. This revision is based on the NAIC model regulation.
Section 89.783(c)(3) has been renumbered as subsection (d)(3) and revised to reflect the availability of new Medicare supplement plans. This revision is based on the NAIC model regulation.
Section 89.783(c)(5) has been renumbered as subsection (d)(5) and revised to change ''agent'' to ''producer.'' This revision reflects the changes made by Act 147.
Section 89.783(c)(6) has been renumbered as subsection (d)(6) and revised to reflect the availability of new Medicare supplement plans. This revision is based on the NAIC model regulation.
Section 89.783(d)(2) has been renumbered as subsection (e)(2), revised to delete the reference to Appendix I and to provide that the disclosure statement shall be on a form prescribed by the Department.
Section 89.783(f) has been added to provide that the Department will maintain all forms regarding Medicare Supplement Chapter 89 in written and electronic form. These forms will be available upon 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 forms formerly in Appendices E, F and I 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, not just when the Department is open for business. Furthermore, the Department will publish notice in the Pennsylvania Bulletin of the availability of the amended forms when revisions are made available to the Department by the United States Department of Health and Human Services.
Section 89.784 (relating to requirements for application forms and replacement coverage) has been renumbered throughout. This revision was made to clarify and maintain consistency within the regulation.
Section 89.784 has been revised to require application forms to inquire whether the applicant currently has Medicare Advantage or Medicaid coverage. This revision is based on the NAIC model regulation.
Section 89.784(1) has been revised to inform the applicant of important rights and modified the questions to be asked by the issuer to reflect those changes required by the MMA. This revision is based on the NAIC model regulation.
Section 89.784(1)(iv) has been revised to inform the applicant of important rights regarding suspension of coverage as it relates to the changes required by the MMA. This revision is based on the NAIC model regulation.
Section 89.784(1)(v) has been revised to inform the applicant of important rights regarding suspension of coverage in circumstances when, by reason of disability, an individual later becomes covered by an employer or union-based group health plan as it relates to the changes required by the MMA. This revision is based on the NAIC model regulation.
Section 89.784(1)(vi) has been renumbered to accommodate changes required by the MMA.
Section 89.784(2) has been revised to add questions designed to elicit whether an applicant is eligible for guaranteed issue of a Medicare supplement insurance policy. This revision reflects changes required by the MMA. This revision is based on the NAIC model regulation.
Section 89.784(3) has been revised to move the requirement formerly in subsection (d). This revision is based on the NAIC model regulation.
Section 89.784(4) has been revised to add Medicare Advantage insurance. Revisions were made to clarify reasons for replacement of Medicare supplement policies. This revision reflects changes required by the MMA. This revision is based on the NAIC model regulation.
Section 89.786(a)(1) and (b)(3) (relating to standards for marketing) has been revised to change ''agent'' to ''producer.'' This revision reflects the changes made by Act 147.
Section 89.787(a) (relating to appropriateness of recommended purchase and excessive insurance) has been revised to change ''agent'' to ''producer.'' This revision reflects the changes made by Act 147.
Section 89.787(c) has been revised to clarify the appropriateness for enrollment in a Medicare supplement policy upon termination of Medicare Part C coverage. This revision is based on the NAIC model regulation.
Section 89.790(a)(1) and (b)(7) (relating to guaranteed issue for eligible persons) has been revised to deem an eligible person as one who has enrolled in Medicare Part D. This revision is based on the NAIC model regulation.
Section 89.790(b)(2), (5) and (6) has been revised to change ''Medicare+Choice'' to ''Medicare Advantage.'' This revision reflects changes required by the MMA. This revision is based on the NAIC model regulation.
Section 89.790(b)(2)(iv)(B) and (4)(iii) has been revised to change ''agent'' to ''producer.'' This revision reflects the changes made by Act 147.
Section 89.790(c)(1) has been revised to clarify the time frame for the guarantee issue period. This revision is based on the NAIC model regulation.
Section 89.790(c)(4) has been revised to change ''section'' to ''subsection.'' This revision was made to clarify and maintain consistency within the regulation.
Section 89.790(c)(5) has been added to provide clarification regarding the guarantee issue period relating to those individuals who enroll in Medicare Part D. This revision is based on the NAIC model regulation.
Section 89.790(e)(1), (2) and (4) has been added to provide clarification regarding products to which an eligible person may be entitled as required by the MMA. This revision is based on the 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.
Insurers are required to comply with the new Federal requirements to sell Medicare Supplement insurance. Therefore, the insurance industry will not incur additional costs due to the promulgation of this final-omitted rulemaking.
Effectiveness/Sunset Date
The final-omitted rulemaking will become effective upon publication in the Pennsylvania Bulletin. The Department continues to monitor the effectiveness of regulations on a triennial basis. Therefore, no sunset date has been assigned.
Contact Person
Questions regarding the final-omitted rulemaking should be addressed to Peter J. Salvatore, Regulatory Coordinator, Insurance Department, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429, fax (717) 772-1969, psalvatore@state.pa.us.
Regulatory Review
Under section 5.1(a) of the Regulatory Review Act (71 P. S. § 745.5a(a)), on February 11, 2005, the Department submitted a copy of the final-omitted rulemaking and a copy of a Regulatory Analysis Form 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. A copy of this material is available to the public upon request.
Under section 5.1(j.2) of the Regulatory Review Act, on April 13, 2005, the final-form rulemaking was deemed approved by the House and Senate Committees. The Attorney General approved the regulation on February 28, 2005. Under section 5.1(e) of the Regulatory Review Act, IRRC met on April 14, 2004, and approved the final-omitted rulemaking.
Findings
The Commissioner finds that:
(1) There is good cause to amend Subchapter K, effective upon publication with the proposed rulemaking omitted. Deferral of the effective date of these regulations 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 changes mandated by Federal law will go into effect with or without 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 consumers in this Commonwealth due to a shortage in Federal enforcement staffing. Accordingly, it would be more difficult for consumers in this Commonwealth 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 of 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 §§ 89.772--89.777, 89.777a, 89.778, 89.780--89.784, 89.786, 89.787 and 89.790 and Appendix E to read as set forth in Annex A.
(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.
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 35 Pa.B. 5019 (April 30, 2005).)
Fiscal Note: 11-224. 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 Advantage organization 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.
Employee welfare benefit plan--A plan, fund or program of employee 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 Advantage plan--A plan of coverage for health benefits under Medicare Part C as defined in section 1859 (b)(1) of the Social Security Act (42 U.S.C.A. § 1395w-28(b)(1)) and includes:
(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 plans.
(ii) Medicare medical savings account plans coupled with a contribution into a Medicare Advantage plan medical savings account.
(iii) Medicare Advantage private fee-for-service plans.
Medicare supplement policy--
(i) 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--1395mm) 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.
(ii) The term does not include Medicare Advantage plans established under Medicare Part C, Outpatient Prescription Drug Plans established under Medicare Part D, or any Health Care Prepayment Plan (HCPP) that provides benefits pursuant to an agreement under section 1833 (a)(1)(A) of the Social Security Act (42 U.S.C.A. 13951 (a)(1)(A)).
Policy form--The form on which the policy is delivered or issued for delivery by the issuer.
Producer--An insurance producer as defined by the act of December 6, 2002 (P. L. 1183, No. 147) (40 P. S. §§ 310.1--310.99a), known as the Producer Licensing Modernization Act.
§ 89.773. Policy definitions and terms.
A policy or certificate may not be advertised, solicited or issued for delivery in this Commonwealth as a Medicare supplement policy or certificate, unless the policy or certificate contains definitions or terms which conform to the requirements of this section.
(1) The terms ''accident,'' ''accidental injury'' or ''accidental means'' shall be defined to employ ''result'' language and may not include words which establish an accidental means test or use words, such as ''external, violent, visible wounds'' or similar words of description or characterization.
(i) The definition may not be more restrictive than the following: ''Injury or injuries for which benefits are provided means accidental bodily injury sustained by the insured person which is the direct result of an accident, independent of disease or bodily infirmity or any other cause, and occurs while insurance coverage is in force.''
(ii) The definition may provide that injuries may not include injuries for which benefits are provided or available under workers' compensation, employer's liability or similar law or motor vehicle no-fault plan, unless prohibited by law.
(2) The terms ''benefit period'' or ''Medicare benefit period'' may not be defined more restrictively than as defined in the Medicare Program.
(3) The terms ''convalescent nursing home,'' ''extended care facility'' or ''skilled nursing facility'' may not be defined more restrictively than as defined in the Medicare Program.
(4) The term ''health care expenses'' for purposes of § 89.780 (relating to loss ratio standards and refund or credit of premium), shall be defined to mean expenses of health maintenance organizations associated with the delivery of health care services, which expenses are analogous to incurred losses of insurers.
(5) The term ''hospital'' may be defined in relation to its status, facilities and available services or to reflect its accreditation by the Joint Commission on Accreditation of Hospitals, but not more restrictively than as defined in the Medicare Program.
(6) The term ''Medicare'' shall be defined in the policy and certificate. Medicare may be substantially defined as ''The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended,'' or ''Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof,'' or words of similar import.
(7) The term ''Medicare eligible expenses'' shall be defined to mean expenses of the kinds covered by Medicare Parts A and B, to the extent recognized as reasonable and medically necessary by Medicare.
(8) The term ''physician'' may not be defined more restrictively than as defined in the Medicare Program.
(9) The term ''sickness'' may not be defined to be more restrictive than the following: ''Sickness means illness or disease of an insured person which is diagnosed or treated after the effective date of insurance and while the insurance is in force.'' The definition may be further modified to exclude sicknesses or diseases for which benefits are provided under any workers' compensation, occupational disease, employer's liability or similar law.
§ 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.
(d) The following applies to issuance and renewal limitations of Medicare supplement policies:
(1) Subject to §§ 89.775 (1)(iv), (v) and (vii) and 89.776 (1)(iv) and (v) (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 Medicare supplement policy with benefits for outpatient prescription drugs in existence prior to January 1, 2006, shall be renewed for current policyholders who do not enroll in Part D at the option of the policyholder.
(2) A Medicare supplement policy with benefits for outpatient prescription drugs may not be issued after December 31, 2005.
(3) After December 31, 2005, a Medicare supplement policy with benefits for outpatient prescription drugs may not be renewed after the policyholder enrolls in Medicare Part D unless the following conditions apply:
(i) The policy is modified to eliminate outpatient prescription coverage for expenses of outpatient prescription drugs incurred after the effective date of the individual's coverage under a Part D plan.
(ii) Premiums are adjusted to reflect the elimination of outpatient prescription drug coverage at the time of Medicare Part D enrollment, accounting for any claims paid, if applicable.
§ 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.
(1) General standards. The following standards apply to Medicare supplement policies and certificates and are in addition to the other requirements of this subchapter:
(i) Exclusion/limitation of benefits. A Medicare supplement policy or certificate may not exclude or limit benefits for losses incurred more than 6 months from the effective date of coverage because it involved a preexisting condition. The policy or certificate may not define a preexisting condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within 6 months before the effective date of coverage.
(ii) Indemnification of sickness and accidents. A Medicare supplement policy or certificate may not indemnify against losses resulting from sickness on a different basis than losses resulting from accidents.
(iii) Cost sharing amounts under Medicare. A Medicare supplement policy or certificate shall provide that benefits designed to cover cost sharing amounts under Medicare will be changed automatically to coincide with changes in the applicable Medicare deductible amount and copayment percentage factors. Premiums may be modified to correspond with these changes.
(iv) Termination of coverage. A noncancellable, guaranteed renewable or noncancellable and guaranteed renewable Medicare supplement policy may not:
(A) Provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium.
(B) Be cancelled or nonrenewed by the issuer solely on the grounds of deterioration of health.
(v) Restrictions on termination of policies and certificates.
(A) Except as authorized by the Commissioner, an issuer may neither cancel nor nonrenew a Medicare supplement policy or certificate for any reason other than nonpayment of premium or material misrepresentation.
(B) If a group Medicare supplement insurance policy is terminated by the group policyholder and not replaced as provided in clause (D), the issuer shall offer certificateholders an individual Medicare supplement policy. The issuer shall offer the certificateholder at least the following choices:
(I) An individual Medicare supplement policy currently offered by the issuer having comparable benefits to those contained in the terminated group Medicare supplement policy.
(II) An individual Medicare supplement policy which provides only benefits that are required to meet the minimum standards as defined in § 89.776(2) (relating to benefits standards for policies or certificates issued or delivered on or after July 30, 1992).
(C) If membership in a group is terminated, the issuer shall do one of the following:
(I) Offer the certificateholder conversion opportunities that are described in clause (B).
(II) At the option of the group policyholder, offer the certificateholder continuation of coverage under the group policy.
(D) If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the issuer of the replacement policy shall offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new group policy will not result in an exclusion for preexisting conditions that would have been covered under the group policy being replaced.
(vi) Termination of a Medicare supplement policy or certificate shall be without prejudice to a continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be predicated upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or to payment of the maximum benefits. Receipt of Medicare Part D benefits will not be considered in determining a continuous loss.
(vii) If a Medicare supplement policy eliminates an outpatient prescription drug benefit as a result of requirements imposed by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the act of December 8, 2003 (Pub. L. 108-173, 117 Stat. 2066), the modified policy shall be deemed to satisfy the guaranteed renewal requirement of this subsection.
(viii) If a hospital plan corporation or a professional health services plan corporation issues a subscriber contract which does not include the required benefits, the contract shall be issued in conjunction with another contract, including at least the remainder of the benefits in this subchapter, to qualify as Medicare supplement insurance. In the alternative, two or more corporations may act jointly and issue a single contract which contains the required benefits.
(2) Minimum benefit standards. The following represent minimum benefit standards:
(i) Coverage of Part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the 61st day through the 90th day in any Medicare benefit period.
(ii) Coverage for all or none of the Medicare Part A inpatient hospital deductible amount. If the insurer desires, in consideration of a reduced premium, to offer a contract without coverage for the initial deductible under Part A, it may do so only if the insured is given the option of purchasing the contract from that insurer with coverage for all of the Part A deductible.
(iii) Coverage of Part A Medicare eligible expenses incurred as daily hospital charges during the use of Medicare's lifetime hospital inpatient reserve days.
(iv) Upon exhaustion of Medicare hospital inpatient coverage, including the lifetime reserve days, coverage of 90% of all Medicare Part A eligible expenses for hospitalization not covered by Medicare subject to a lifetime maximum benefit of an additional 365 days.
(v) Coverage under Medicare Part A for the reasonable cost of the first three pints of blood, or equivalent quantities of packed red blood cells, as defined under Federal regulations, unless replaced in accordance with Federal regulations or already paid for under Part B.
(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.
(vii) Effective January 1, 1990, coverage under Medicare Part B for the reasonable cost of the first 3 pints of blood, or equivalent quantities of packed red blood cells, as defined under Federal regulations, unless replaced in accordance with Federal regulations or already paid for under Part A, subject to the Medicare deductible amount.
(viii) If a hospital plan corporation or a professional health service plan corporation issues a subscriber contract which does not include the required benefits, the contract shall be issued in conjunction with another contract, including at least the remainder of the benefits in this subchapter, to qualify as Medicare supplement insurance. In the alternative, two or more corporations may act jointly and issue a single contract which contains the required benefits.
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