TITLE insurance

Part I. Texas Department of Insurance

Chapter 3. Life, Accident, and Health Insurance and Annuities

The Texas Department of Insurance proposes amendments to §§3.3303, 3.3306, 3.3308, 3.3309, and 3.3324 and new §3.3312 under Subchapter T and 3.3603 - 3.3609, and 3.3613 under Subchapter W, concerning minimum standards for Medicare supplement policies and miscellaneous rules for group and individual accident and health insurance. This proposal is necessary to bring Texas into compliance with the federal Public Law 105-33, the Balanced Budget Act of 1997 (BBA). Failure to comply with the federal mandates in the BBA will subject Texas to potential penalties including the loss of authority to regulate Medicare supplement coverage. The major changes brought about by the BBA specify additional situations in which Medicare beneficiaries, after other coverage ceases or terminates, will be guaranteed access to certain types of Medicare supplement policies on a guaranteed issue basis. The BBA also mandates protections for these persons against discrimination in the sale and pricing of Medicare supplement policies, as well as limitation of preexisting condition exclusions, and adds two new high deductible plans. These proposals will increase awareness and accessibility of Medicare supplement coverage, which will thus increase beneficiary access to health care services, particularly in areas with limited availability of Medicare+Choice plans. This proposal also provides the advantage of encouraging participation in a Medicare+Choice plan. Medicare+Choice offers a marketplace of options similar to those available to the non-Medicare population. Under this proposal, under certain circumstances Medicare beneficiaries are guaranteed the right to Medicare supplement coverage if they choose to enroll in original Medicare coverage after leaving a Medicare+Choice plan.

Amendments to §3.3303 add definitions for bankruptcy, continuous period of creditable coverage, creditable coverage, employee welfare benefit plan, health maintenance organization, insolvency, Medicare+Choice organization, Medicare+Choice plan, Medicare+Choice private fee-for-service plan, Medicare Select policy, point-of-service, provider-sponsored organization, and Secretary. Amendments to §3.3306 set out requirements for reduction of preexisting condition exclusions, coinsurance and copayments under Medicare Part B, and the composition of new high deductible plans "F" and "J," and revise the list of provided annual preventive services. Amendments to §3.3308 require forms to disclose the reduction of preexisting condition limitations in accordance with the new regulations. Amendments to §3.3309 require application forms to include questions to elicit information as to whether the applicant is eligible for guaranteed issuance of certain Medicare supplement plans, or reduction of any applicable preexisting condition limitation. New §3.3312 sets out requirements for guaranteed issue of certain Medicare supplement coverage for certain eligible persons. Amendments to §3.3324 set out requirements for reduction of preexisting condition exclusions for certain eligible persons based on their period of creditable coverage. The amendments to §§3.3603 through 3.3609 and 3.3613 relate to the required disclosure statements for policies that duplicate Medicare benefits. These sections codify notice requirements for the content and format of 7 disclosure statements which must be provided to inform prospective buyers of health insurance policies about the extent to which benefits under such policies duplicate Medicare benefits, pursuant to requirements approved by the U.S. Secretary of Health and Human Services. Proposed §3.3603 sets out the purpose and scope of the notice and disclosure. Proposed §3.3604 sets out the content and format of the notice for policies that provide benefits for expenses incurred for an accidental injury only. Proposed §3.3605 sets out the content and format of the notice for policies that provide benefits for specified limited services. Proposed §3.3606 sets out the content and format of the notice for policies that reimburse expenses incurred for specified disease or other specified impairments (including cancer policies, specified disease policies and other policies limiting reimbursement to named medical conditions). Proposed §3.3607 sets out the content and format of the notice for policies that pay fixed dollar amounts for specified disease or other specified impairments (including cancer, specified disease policies, and other policies that pay a scheduled benefit or specified payment based on diagnosis of the conditions named in the policy). Proposed §3.3608 sets out the content and format of the notice for indemnity or other policies (other than long-term care policies) that pay a fixed dollar amount per day. Proposed §3.3609 sets out the content and format of the notice for policies that provide benefits for both expenses incurred and fixed indemnity. Proposed §3.3613 sets out the content and format of the notice for other health insurance policies not specifically identified in §3.3604 through §3.3609. In conjunction with these proposed amendments and new section, the department is proposing the repeal of existing §§3.3610 - 3.3612. Notice of the proposed repeal is published elsewhere in this issue of the Texas Register .

The department will consider the adoption of amendments to §§3.3303, 3.3306, 3.3308, 3.3309, 3.3324, 3.3603 - 3.3609, and 3.3613 and new §3.3312, in a public hearing under Docket Number 2400, scheduled for 9:00 a.m. on March 30, 1999, in Room 100 of the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin, Texas.

Kim Stokes, associate commissioner for life/health and managed care, has determined that for each year of the first five years the proposed sections will be in effect, there will be no additional fiscal impact on state or local government as a result of enforcing or administering the sections. There will be no measurable effect on local employment or the local economy as a result of the proposal.

Ms. Stokes has also determined that for each year of the first five years the proposed sections are in effect, the public benefit anticipated as a result of enforcing the subchapter will be facilitation of the enrollment of eligible individuals in Medicare supplement coverage, including two new high deductible plans, compliance with federal laws relating to Medicare supplement coverage so that Texas will not lose its authority to regulate Medicare supplement coverage, and increased awareness of duplication of Medicare benefits by other types of policies.

Ms. Stokes estimates that the majority of cost to persons required to comply with these sections is the result of the federal enactment of the BBA and is not as a result of the adoption and implementation of these proposed sections. Any potential costs associated with the adoption, enforcement, or administration of the proposed amendments or new sections that do not result from the BBA arise from (1) §3.3312(b)(1) which provides for guaranteed issuance of coverage when an individual loses benefits in a plan that is primary to Medicare, (2) §3.3312(b)(6) which provides for guaranteed issuance of coverage under certain circumstances when an individual age 65 or older disenrolls from a Medicare+Choice plan, and (3) §3.3309(b), which requires applications to include questions to elicit information as to whether the applicant is eligible for guaranteed issuance of Medicare supplement coverage or reduction of any applicable preexisting condition limitation exclusion.

The department does not believe that the adoption of these three requirements will result in cost to entities required to comply with the rule. With regard to the first two items, while both of these measures may require an entity to provide coverage to an eligible individual, the entity will also be able to charge the individual an actuarially sound premium for that coverage. The department recognizes, however, that any extension of Medicare supplement coverage entails an assumption of risk by the entity extending coverage, so it has undertaken to provide data regarding the number of persons who might qualify for guaranteed issuance of coverage under §3.3312(b). The Bureau of Census's Statistical Abstract of the U.S. shows the number of workers with employer or union provided group health plans, for firms employing less than 25 persons, to be 28.1%. Moreover, the Texas Workforce Commission reports that 1,613,218 persons in Texas work at firms that employ less than 20 persons. Accordingly, the estimated number of employees with health plans in Texas firms is 453, 314. The Bureau of Census, Statistical Abstract of the U.S., reports that 3.54% of the employed workforce is over the age of 65. Therefore, the total estimated number of Texas employees over the age of 65 who are covered by a group health plan is 16,047. Not all of these persons will qualify for guaranteed issuance of Medicare supplement coverage under §3.3312(b), however, and the number of potential enrollees will be further reduced as eligible individuals enroll in alternative coverages, such as a Medicare+Choice plan or retirement coverage offered through their employer.

Moreover, the rule does not require the extension of coverage to an individual who would not otherwise be entitled to coverage; it merely allows an individual participating in either a Medicare+Choice plan or an employee welfare benefit plan to take advantage of guaranteed issuance of coverage at later time. Accordingly, the rule may actually reduce costs for affected entities, since it may delay the requirement that the entity extend coverage to an individual.

Similarly, the department does not believe that the third requirement, concerning the application, will result in additional costs beyond that required by federal law. The BBA requires that entities providing Medicare supplement coverage ascertain whether applicants are eligible for guaranteed issuance of coverage or reduction of any applicable preexisting condition limitation. The department believes application questions are the most efficient method of obtaining the data necessary to make this determination. Application questions will also minimize the likelihood of disputes regarding the entity's attempt to obtain this information and corresponding enforcement action by regulatory authorities. The department recognizes that this change may add to the cost of the application and estimates that the cost of amending or supplementing applications to add additional appropriate questions will be no greater than $0.25 per applicant. The actual total cost to each affected entity will vary depending on the number of persons applying for Medicare supplement coverage with the entity.

Ms. Stokes has determined that, except as enumerated specifically below, any economic costs to any entity qualifying as a small business under Government Code §2006.001 that complies with the proposed requirements for each year of the first five years the proposed requirements will be in effect are the result of the federal enactment of the BBA and not as a result of the adoption, enforcement, or administration of the proposed requirements. With regard to the requirements not mandated by the BBA, as expressed above, the department does not believe the expansion of the guaranteed issue provisions of §3.3312(b)(1) and (6) will result in cost to entities required to provide Medicare supplement coverage. With regard to the requirement in §3.3309(b) to include questions to elicit information as to whether the applicant is eligible for guaranteed issuance of Medicare supplement coverage or reduction of any applicable preexisting condition limitation exclusion, the total cost to entities is not dependent upon the size of the business, but rather is dependent upon how the addition of these questions will change the application as well as how many applications the business produces. The cost per each $100 of sales would not vary between the smallest and largest businesses, assuming that small businesses and the largest businesses spend proportional amounts on producing applications. Therefore, it is the department's position that the adoption of this proposal will have no adverse economic effect on small businesses.

Comments on the proposal must be submitted within 30 days after publication of the proposed sections in the Texas Register to Lynda H. Nesenholtz, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be submitted to Linda von Quintus, Deputy Commissioner, Regulation and Safety Division, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

Subchapter T. Minimum Standards for Medicare Supplement Policies

28 TAC §§3.3303, 3.3306, 3.3308, 3.3309, 3.3312, 3.3324

The amendments and new section are proposed under the Insurance Code Articles 3.74, 3.70-3 and 1.03A. Article 3.74, §5(d) provides that the department may promulgate reasonable rules for captions or notice requirements determined to be in the public interest and designed to inform prospective insureds, subscribers, or enrollees that particular coverages are not Medicare supplement coverages. Article 3.74, §10 provides that the department shall adopt rules in accordance with federal law necessary for the state to retain certification under 42 U.S.C. Section 1395ss, as well as any other reasonable rules necessary and proper to enforce Texas' minimum statutory standards for Medicare supplement policies. Article 3.70-3 authorizes the department to adopt rules and regulations for the filing and submission of health insurance policies as are necessary, proper or advisable. Article 1.03A authorizes the commissioner to adopt rules and regulations for the conduct and execution of the duties and functions of the department as authorized by statute.

The following articles are affected by this proposal: Insurance Code Articles 3.70-3, 3.74, 21.21.

§3.3303.Definitions.

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1)

Applicant--

(A)

In the case of an individual Medicare supplement policy, the person who seeks to contract for insurance or other health benefits.

(B)

In the case of a group Medicare supplement policy, the proposed certificate holder.

(2)

Bankruptcy--The situation that occurs when a Medicare+Choice organization that is not an issuer has filed, or has had filed against it, a petition for declaration of bankruptcy and has ceased doing business in this state.

(3)

Certificate--Any certificate issued under a group Medicare supplement policy, which certificate has been delivered or issued for delivery in this state regardless of the place where the policy was delivered or issued for delivery.

(4)

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.

(5)

Creditable coverage--Any coverage of an individual as defined in (§21.1101 of this title (relating to Definitions).

(6)

Employee welfare benefit plan--A plan, fund or program of employee benefits as defined in 29 U.S.C. Section 1002 (Employee Retirement Income Security Act).

(7)

Health Maintenance Organization (HMO)--An entity as defined in 42 U.S.C. 300e(a).

(8)

Insolvency--The situation which occurs when an issuer has had an order of liquidation entered against it with a finding of insolvency by a court of competent jurisdiction in the issuer's state of domicile.

(9)

Issuer--An insurance company, fraternal benefit society, health care service plan, health maintenance organization, or any other entity delivering or issuing for delivery in this state Medicare supplement policies or certificates.

(10)

Medicare--The Health Insurance for the Aged Act, Title XVIII of the Social Security Act Amendments of 1965 as Then Constituted or Later Amended.

(11)

Medicare+Choice organization--An entity as defined in 42 U.S.C. ( 1395w-28(a)(1).

(12)

Medicare+Choice plan--A plan of coverage for health benefits under Medicare Part C as defined in 42 U.S.C. ( 1395w-28(b)(1), and includes:

(A)

coordinated care plans which provide health services, including but not limited to health maintenance organization plans (with or without a point-of-service option), plans offered by provider-sponsored organizations, and preferred provider organization plans;

(B)

medical savings account plans coupled with a contribution into a Medicare+Choice medical savings account; and

(C)

Medicare+Choice private fee-for-service plans.

(13)

Medicare+Choice private fee-for-service plan--An entity as defined in 42 U.S.C. (1395w-28(b)(2).

(14)

Medicare Select policy or Medicare Select certificate -- A Medicare supplement policy or certificate, respectively, that contains restricted network provisions.

(15)

Medicare supplement policy--A group or individual policy of accident and sickness insurance or a subscriber contract of a hospital service corporation subject to the Insurance Code, Chapter 20, or, to the extent [ covered ] required by federal law, an evidence of coverage issued by a health maintenance organization subject to the Texas Health Maintenance Organization Act, which policy, subscriber contract, or such evidence of coverage 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. The term does not include:

(A)

a policy, contract, subscriber contract, or evidence of coverage of one or more employers or labor organizations, or of the trustees of a fund established by one or more employers or labor organizations, or combination thereof, for employees or former employees, or combination thereof, or for members or former members, or combination thereof, of the labor organizations;

(B)

a policy or health care benefit plan including a policy or contract of group insurance or group contract of a hospital service corporation subject to the Insurance Code, Chapter 20, or group evidence of coverage issued by a health maintenance organization subject to the Texas Health Maintenance Organization Act, when such policy or plan is not marketed or held to be a Medicare supplement policy or benefit plan; or

(C)

an individual or group evidence of coverage issued pursuant to a contract under the Federal Social Security Act, §1876 (42 United States Code §§1395, et seq) by a health maintenance organization subject to the Texas Health Maintenance Organization Act (Texas Insurance Code, Chapter 20A).

(16)

Point-of-service--A benefit option as defined in 42 C.F.R. ( 422.2.

(17)

Provider-Sponsored organization--An entity as defined in 42 U.S.C. ( 1395w-25(d)(1).

(18)

Qualified actuary--An actuary who is a member of either the Society of Actuaries or the American Academy of Actuaries.

(19)

Secretary--The Secretary of the United States Department of Health and Human Services.

§3.3306.Minimum Benefit Standards.

No insurance policy, subscriber contract, certificate, or evidence of coverage may be advertised, solicited, or issued for delivery in this state as a Medicare supplement policy unless the policy, contract, certificate, or evidence of coverage meets the applicable standards in paragraphs (1)-(3) of this section. These are minimum standards and do not preclude the inclusion of other provisions or benefits which are not inconsistent with these standards.

(1)

General standards. The following standards apply to Medicare supplement policies and are in addition to all other requirements of this subchapter, the Insurance Code, Article 3.74, and any other applicable law.

(A)

A Medicare supplement policy shall not exclude or limit benefits for losses incurred more than six months from the effective date of coverage because they involved a pre-existing condition. The policy or certificate may not define a pre-existing condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within six months before the effective date of coverage.

(i)- (ii)

(No change.)

(iii)

If a Medicare supplement policy or certificate is issued to an applicant who qualifies under §3.3312(b) of this title (relating to Guaranteed Issue for Eligible Persons) or (3.3324(a) of this title (relating to Open Enrollment), the issuer shall reduce the period of any preexisting condition exclusion as required by §3.3312(a)(2) of this title and §3.3324(c) and (d) of this title.

(B) - (G)

(No change.)

(2)

Standards for the basic (core) benefits common to all benefit plans. Every issuer shall make available a policy or certificate including only the basic "core" package of benefits described in subparagraphs (A)-(E) of this paragraph to each prospective insured. An issuer may make available to prospective insureds any of the other Medicare supplement insurance benefit plans in addition to the basic core package, but not in lieu of it. The basic core benefits shall consist of the following:

(A) - (D)

(No change.)

(E)

coverage for the coinsurance amount (or in the case of hospital outpatient department services, the copayment amount) of Medicare eligible expenses under Part B regardless of hospital confinement, subject to the Medicare Part B deductible.

(3)

Standards for Additional Benefits. The additional benefits as uniformly defined in subparagraphs (A)-(K) of this paragraph shall be included in Medicare Supplement Benefit Plans "B" through "J" only as provided in paragraph (5)(A)-(l) [ (5)(A)-(J) ] of this section.

(A) - (H)

(No change.)

(I)

Preventive Medical Care Benefit or Services--Coverage for the preventive health services described in clauses (i)-(iv) of this subparagraph. Coverage for preventive medical care benefits or services shall be for the actual charges up to 100% of the Medicare-approved amount for each service, as if Medicare were to cover the service as identified in American Medical Association Current Procedural Terminology (AMA CPT) codes, to a maximum of $120 annually under this benefit. This benefit shall not include payment for any procedure covered by Medicare:

(i)

(No change.)

(ii)

any one or a combination of the following preventive screening tests or preventive services, the frequency of which is considered medically appropriate:

(I)

[ fecal occult blood test and/or ] digital rectal examination[ , or both ];

(II)

[ mammogram; ]

[ (III) ]

dipstick urinalysis for hematuria, bacteriuria, and proteinauria;

(III)

[ ( IV ) ] pure tone (air only) hearing screening test, administered or ordered by a physician;

(IV)

[ ( V ) ] serum cholesterol screening (every five years);

(V)

[ ( VI ) ] thyroid function test; or

(VI)

[ ( VII ) ] diabetes screening;

(iii)

[ influenza vaccine administered at any appropriate time during the year and ] tetanus and diphtheria booster (every 10 years);

(iv)

any other tests or preventive measures determined appropriate by the attending physician.

(J) - (K)

(No change.)

(4)

Requirement of uniformity for all Medicare supplement benefit plans. An issuer shall make available only those groups, packages or combinations of Medicare supplement benefits as described in this section, unless otherwise permitted by provisions of paragraph (3)(K) of this section and in §3.3325 of this title (relating to Medicare Select Policies, Certificates and Plans of Operation). Benefit plans shall be uniform in structure, language, designation and format to the standard benefit plan "A," defined as the basic core plan of benefits in paragraph (2) of this section and described in paragraph (5)(A) of this section, and benefit plans "B" through "J", described in paragraph (5)(B)-(L) [ (5)(B)-(J) ] of this section. All benefit plans shall conform to the definitions set out in §3.3303 of this title (relating to Definitions) and §3.3304 of this title (relating to Policy Definitions and Terms). Each benefit shall be structured in accordance with the format provided in paragraphs (2) and (3) of this section. Each benefit plan shall list the benefits in the order shown in paragraph (5)(A)-(L) [ (5)(A)-(J) ] of this section. For purposes of this paragraph, "structure, language, and format" means style, arrangement and overall content of a benefit. In addition to the benefit plan designations required in this paragraph, an issuer may use other designations to the extent permitted by law.

(5)

Make-up of Benefit Plans. Subparagraphs (A)-(L) [ (A)-(J) ] of this paragraph set out the composition of benefit plans. Each benefit plan shall meet the requirements of this subchapter.

(A) - (F)

(No change.)

(G)

Standardized Medicare Supplement Benefit High Deductible Plan "F." 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 paragraph (2) of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility Care, Medicare Part B Deductible, 100% of the Medicare Part B Excess Charges, and Medically Necessary Emergency Care in a Foreign Country as defined in paragraph (3) of this section. 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 $1500 for 1998 and 1999, and shall be based on the calendar year. It shall be adjusted annually thereafter by the Secretary to reflect the change in the Consumer Price Index for all urban consumers for the twelve-month period ending with August of the preceding year, and rounded to the nearest multiple of $10.

(H)

[ (G) ] Standardized Medicare Supplement Benefit Plan "G." Medicare supplement benefit Plan "G" shall include only the Core Benefit as defined in paragraph (2) of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility Care, Eighty Percent of the Medicare Part B Excess Charges, Medically Necessary Emergency Care in a Foreign Country, and the At-Home Recovery Benefit as defined in paragraph (3) of this section.

(I)

[ (H) ] Standardized Medicare Supplement Benefit Plan "H." Medicare supplement benefit Plan "H" shall include only the Core Benefit as defined in paragraph (2) of this section, 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 paragraph (3) of this section.

(J)

[ (I) ] Standardized Medicare Supplement Benefit Plan "I." Medicare supplement benefit Plan "I" shall include only the Core Benefit as defined in paragraph (2) of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility Care, One Hundred Percent 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 paragraph (3) of this section.

(K)

[ (J) ] Standardized Medicare Supplement Benefit Plan "J." Medicare supplement benefit Plan "J" shall include only the Core Benefit as defined in paragraph (2) of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility Care, Medicare Part B Deductible, One Hundred Percent 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 paragraph (3) of this section.

(L)

Standardized Medicare Supplement Benefit High Deductible Plan "J." Medicare supplement benefit high deductible Plan "J" shall include 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 paragraph (2) of this section, 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 and At-Home Recovery Benefit as defined in paragraph (3) of this section. 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 high deductible Plan "J" deductible shall be $1500 for 1998 and 1999, and shall be based on the calendar year. It shall be adjusted annually thereafter by the Secretary to reflect the change in the Consumer Price Index for all urban consumers for the twelve-month period ending with August of the preceding year, and rounded to the nearest multiple of $10.

§3.3308.Required Disclosure Provisions.

(a)

General rules.

(1) - (3)

(No change.)

(4)

If a Medicare supplement policy or certificate contains any limitations with respect to preexisting conditions : [ , ]

(A)

the limitations shall appear as a separate paragraph of the policy or certificate and be labeled as "Preexisting Condition Limitations ; [ . ]"

(B)

the policy or certificate shall define the [ The ] term "preexisting condition" [ shall be defined when used in a Medicare supplement policy or certificate ] and shall provide an explanation of the term [ shall appear ] in its accompanying outline of coverage ; and [ . ]

(C)

the policy or certificate shall include a provision explaining the reduction of the preexisting condition limitation for individuals that qualify under §3.3306(1)(A) of this title (relating to Minimum Benefit Standards), §3.3312(a)(2) of this title (relating to Guaranteed Issue to Eligible Persons), or §3.3324(c) and (d) of this title (relating to Open Enrollment).

(5) - (7)

(No change.)

(b)

(No change.)

(c)

Form for outline of coverage. In providing outlines of coverage to applicants pursuant to the requirements of subsection (b)(1) of this section, insurers shall use a form which complies with the requirements of this subsection. The outline of coverage must contain each of the following four parts in the following order: a cover page, premium information, disclosure pages, and charts displaying the features of each benefit plan offered by the issuer. The outline of coverage shall be in the language and format prescribed in paragraphs (1) and (2) of this subsection in no less than 12-point type.

(1)

(No change.)

(2)

The items in subparagraphs (A)-(C) of this paragraph shall be included in the outline of coverage in addition to the items specified in the plan-specific outline-of-coverage forms.

(A) - (C)

(No change.)

(D)

The outline of coverage for Medicare Select policies or certificates shall include information regarding grievance procedures which meet the requirements of §3.3325(m) of this title (relating to Medicare Select Policies, Certificates and Plans of Operation).

Figure: 28 TAC §3.3308(c)(2)(D)

(d)

(No change.)

§3.3309.Requirements for Application Forms and Replacement Coverage.

(a)

(No change.)

(b)

Application forms shall include questions to elicit information as to whether the applicant is an eligible person as defined in §3.3312(b) of this title (relating to Guaranteed Issue for Eligible Persons), or whether the applicant is eligible for reduction of any applicable preexisting condition limitation under §3.3324(c) and (d) of this title (relating to Open Enrollment).

(c)

[ (b) ] Agents shall list the following:

(1)

any other health insurance policies or coverages sold to the applicant which are still in force; and

(2)

any other health insurance policies or coverages sold to the applicant in the past five years which are no longer in force.

(d)

[ (c) ] In the case of a direct response issuer, a copy of the application or supplemental form, signed by the applicant, and acknowledged by the issuer, shall be returned to the applicant by the issuer upon delivery of the policy.

(e)

[ (d) ] Upon determining that a sale will involve replacement of Medicare supplement coverage, any issuer, other than a direct response issuer, or its agent, shall furnish the applicant, prior to issuance or delivery of the Medicare supplement policy or certificate, a notice regarding replacement of Medicare supplement coverage. One copy of such notice signed by the applicant and the agent, except where the coverage is sold without an agent, shall be provided to the applicant and an additional signed copy shall be retained by the issuer. A direct response issuer shall deliver to the applicant at the time of the issuance of the policy the notice regarding replacement of Medicare supplement coverage.

(f)

[ (e) ] The notice required by subsection (e) [ (d) ] of this section shall be provided in substantially the following form and shall be in a typeface no smaller than 12-point type.

Figure: 28 TAC §3.3309(f) [ Figure: 28 TAC §3.3309 (e) ]

(g)

[ (f) ] Subsection (f) [ (e) ](1) and (2) of this section (applicable to preexisting conditions) may be deleted by an issuer if the replacement does not involve application of a new preexisting condition limitation.

§3.3312.Guaranteed Issue for Eligible Persons.

(a)

Guaranteed Issue.

(1)

Eligible persons are those individuals described in subsection (b) of this section who apply to enroll under the policy not later than 63 days after the date of the termination of enrollment described in subsection (b) of this section, and who submit evidence of the date of termination or disenrollment with the application for a Medicare supplement policy.

(2)

With respect to eligible persons, an issuer shall not deny or condition the issuance or effectiveness of a Medicare supplement policy described in subsection (c) of this section that is offered and is available for issuance to newly enrolled individuals by the issuer, and shall not discriminate in the pricing of such a Medicare supplement policy because of health status, claims experience, receipt of health care, or medical condition, and shall not impose an exclusion of benefits based on a preexisting condition under such a Medicare supplement policy.

(b)

Eligible Persons. An eligible person is an individual described in any of the following paragraphs:

(1)

The individual is enrolled under an employee welfare benefit plan that provides health benefits that supplement the benefits under Medicare, and the plan terminates, or the plan ceases to provide all such supplemental health benefits to the individual; or the individual is enrolled under an employee welfare benefit plan that is primary to Medicare and the plan terminates or the plan ceases to provide all health benefits to the individual because the individual leaves the plan.

(2)

The individual is enrolled with a Medicare+Choice organization under a Medicare+Choice plan under Part C of Medicare, and any of the following circumstances apply:

(A)

The organization's or plan's certification (under U.S.C. Title 42, Chapter 7, Subchapter XVIII, Part D) has been terminated or the organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides;

(B)

The individual is no longer eligible to elect the plan because of a change in the individual's place of residence or other change in circumstances specified by the Secretary, but not including termination of the individual's enrollment on the basis described in section 1851(g)(3)(B) of the federal Social Security Act (where the individual has not paid premiums on a timely basis or has engaged in disruptive behavior as specified in standards under section 1856), or the plan is terminated for all individuals within a residence area;

(C)

The individual demonstrates, in accordance with guidelines established by the Secretary, that:

(i)

The organization offering the plan substantially violated a material provision of the organization's contract under U.S.C. Title 42, Chapter 7, Subchapter XVIII, Part D in relation to the individual, including the failure to provide an individual on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide such covered care in accordance with applicable quality standards; or

(ii)

The organization, or agent or other entity acting on the organization's behalf, materially misrepresented the plan's provisions in marketing the plan to the individual; or

(D)

The individual meets such other exceptional conditions as the Secretary may provide.

(3)

The individual is enrolled with an entity listed in subparagraphs (A) - (D) of this paragraph and enrollment ceases under the same circumstances that would permit discontinuance of an individual's election of coverage under §3.3312(b)(2) of this title (relating to Guaranteed Issue for Eligible Persons):

(A)

An eligible organization under a contract under Section 1876 (Medicare risk or cost);

(B)

A similar organization operating under demonstration project authority, effective for periods before April 1,1999;

(C)

An organization under an agreement under Section 1833(a)(1)(A) (health care prepayment plan); or

(D)

An organization under a Medicare Select policy; and

(4)

The individual is enrolled under a Medicare supplement policy and the enrollment ceases because:

(A)

Of the insolvency of the issuer or bankruptcy of the nonissuer organization; or of other involuntary termination of coverage or enrollment under the policy;

(B)

The issuer of the policy substantially violated a material provision of the policy; or

(C)

The issuer, or an agent or other entity acting on the issuer's behalf, materially misrepresented the policy's provisions in marketing the policy to the individual;

(5)

The individual was enrolled under a Medicare supplement policy and terminates enrollment and subsequently enrolls, for the first time, with any Medicare+Choice organization under a Medicare+Choice plan under Part C of Medicare, any eligible organization under a contract under Section 1876 (Medicare risk or cost), any similar organization operating under demonstration project authority, an organization under an agreement under section 1833(a)(1)(A) (health care prepayment plan), or a Medicare Select policy; and the subsequent enrollment is terminated by the individual during any period within the first 12 months of such subsequent enrollment (during which the individual is permitted to terminate such subsequent enrollment under section 1851(e) of the federal Social Security Act); or

(6)

The individual, upon first becoming enrolled in Medicare Part B for benefits at age 65 or older, enrolls in a Medicare+Choice plan under Part C of Medicare, and disenrolls from the plan no later than 12 months after the effective date of enrollment.

(c)

Products to Which Eligible Persons are Entitled. The Medicare supplement policy to which eligible persons are entitled under:

(1)

Subsection (b)(1), (2), (3) and (4) of this section is a Medicare supplement policy which has a benefit package classified as Plan A, B, C, or F offered by any issuer.

(2)

Subsection (b)(5) of this section is the same Medicare supplement policy in which the individual was most recently previously enrolled, if available from the same issuer, or, if not so available, a policy described in paragraph (1) of this subsection.

(3)

Subsection (b)(6) of this section shall include any Medicare supplement policy offered by any issuer.

§3.3324.Open Enrollment.

(a) - (b)

(No change.)

(c)

If an applicant qualifies under subsection (a) of this section, is 65 years of age or older, and submits an application during the time period referenced in subsection (a) of this section and, as of the date of application:

(1)

has had a continuous period of creditable coverage of at least six months, the issuer shall not exclude benefits based on a preexisting condition; or

(2)

has had a continuous period of creditable coverage that is less than six 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.

(d)

[ (c) ] Except as provided in subsection (c) of this section and §3.3306(1)(A) of this title (relating to Minimum Benefit Standards), subsection [ Subsection ] (a) of this section shall not be construed as preventing the exclusion of benefits under a policy during the first six months, based on a preexisting condition for which the policyholder or certificate holder received treatment or was otherwise diagnosed during the six months before the coverage became effective.

(e)

The following examples illustrate the application of subsection (c)(1) and (2) of this section, as prescribed by the Secretary:

(1)

Individual A: No preexisting condition exclusion period. Relevant creditable coverage history: Individual A had coverage under an individual policy for four months beginning on May 1, 1998, through August 31, 1998, followed by a gap in coverage of 61 days until October 31, 1998. Individual A had coverage under an individual health plan beginning on November 1, 1998, for three months through January 31, 1999, followed by a gap in coverage of 59 days or until March 31, 1999 on which date Individual A submitted an application for a Medicare supplement policy. Under this example, the Medicare supplement issuer may not apply a preexisting condition exclusion period because Individual A has seven months of creditable coverage without a gap in coverage greater than 63 days.

(2)

Individual B: Subject to a three months preexisting condition exclusion period. Relevant creditable coverage history: Individual B is covered under an individual health insurance policy for one month beginning May 1, 1998 through May 31, 1998, followed by a gap in coverage of 61 days from June 1, 1998 through July 31, 1998. On August 1, 1998, Individual B is covered under an association health plan for two months through September 30, 1998, followed by a gap in coverage of 31 days or until October 31, 1998 on which date Individual B's submitted an application for Medicare supplement coverage. Individual B has three months of creditable coverage. Under this example, the issuer of a Medicare supplement policy must give Individual B a three-month credit against any preexisting condition exclusion period.

(3)

Individual C: Subject to a six month preexisting condition exclusion period. Relevant creditable coverage history: Individual C is covered under an individual health insurance policy for one month beginning May 1, 1998 through May 31, 1998, followed by a gap in coverage of 61 days from June 1, 1998 through July 31, 1998. On August 1, 1998, Individual C is covered under an association health plan for two months through September 30, 1998, followed by a gap in coverage of 64 days or until November 4, 1998 on which date Individual C submitted an application for Medicare supplement coverage. Individual C has a gap in coverage of greater than 63 days. As a result, under this example, the Medicare supplement issuer can fully apply the preexisting condition exclusion provision to Individual C.

(f)

[ (d) ] Invitation to contract advertisements, as defined in §21.113(b) of this title (relating to Rules Pertaining Specifically to Accident and Health Insurance Advertising and Health Maintenance Organization Advertising) shall include the following statement: "Benefits and premiums under this policy may be suspended for up to 24 months if you become entitled to benefits under Medicaid. You must request that your policy be suspended within 90 days of becoming entitled to Medicaid. If you lose (are no longer entitled to) benefits from Medicaid, this policy can be reinstated if you request reinstatement within 90 days of the loss of such benefits and pay the required premium."

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on February 12, 1999.

TRD-9900931

Lynda H. Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: March 28, 1999

For further information, please call: (512) 463-6327


Subchapter W. Miscellaneous Rules for Group and Individual Accident and Health Insurance

28 TAC §§3.3603-3.3609, 3.3613

The amendments are proposed under the Insurance Code Articles 3.74, 3.70-3 and 1.03A. Article 3.74, §5(d) provides that the department may promulgate reasonable rules for captions or notice requirements determined to be in the public interest and designed to inform prospective insureds, subscribers, or enrollees that particular coverages are not Medicare supplement coverages. Article 3.74, §10 provides that the department shall adopt rules in accordance with federal law necessary for the state to retain certification under 42 U.S.C. Section 1395ss, as well as any other reasonable rules necessary and proper to enforce Texas' minimum statutory standards for Medicare supplement policies. Article 3.70-3 authorizes the department to adopt rules and regulations for the filing and submission of health insurance policies as are necessary, proper or advisable. Article 1.03A authorizes the commissioner to adopt rules and regulations for the conduct and execution of the duties and functions of the department as authorized by statute.

The following articles are affected by this proposal: Insurance Code Articles 3.70-3, 3.74, 21.21.

§3.3603.Purpose and Scope.

(a)

The purpose and scope of these sections is to codify the notice requirements for the content and format of seven [ ten ] disclosure statements which must be provided to inform prospective buyers of health insurance policies about the extent to which benefits under such policies duplicate Medicare benefits. The disclosure statements in these sections have been developed by the National Association of Insurance Commissioners and approved by the U.S. Secretary of Health and Human Services. Health insurance policy issuers subject to the requirements to provide such disclosure must comply with such requirements on and after August 11, 1995. These sections in no way impact the effective date on which issuers must provide affirmative disclosure of Medicare duplication to prospective insureds.

(b)

On and after the effective date set out by federal requirements, issuers of the policies that duplicate Medicare benefits must display the applicable statement in a prominent manner as part of, or together with, the application for the policy. [ On and after the effective date of these sections, issuers of policies that duplicate Medicare benefits must also include such notices along with any filings which contain applications filings. ]

(c)

Each of the statements applies to one of seven [ ten ] different types of health insurance policy identified as needing a disclosure based on its potential to duplicate Medicare benefits, even if only incidentally.

(d)

Issuers who fail to provide the duplication notice are in violation of both federal and state law, and subject to both federal and state penalties.

(e)

The seven [ ten ] separate types of health insurance policies which must be accompanied by an individualized statement of the extent to which the policy duplicates Medicare are listed in paragraphs (1)- (7) [ (10) ] of this subsection. Each of these listed policy types must contain the disclosure statement, which may not vary from the statements set out in sections 3.3604- 3.3309 and 3.3613 of this title (relating to Required Disclosure Statements for Policies That Duplicate Medicare) in terms of language or format, including type size, spacing, boldfacing, line spacing, and use of boxes to surround text. The specific policy types are:

(1)

policies that provide benefits for expenses incurred for an accidental injury only;

(2)

policies that provide benefits for specified limited services;

(3)

policies that reimburse expenses incurred for specified disease or other specified impairments (including cancer policies, specified disease policies and other policies that limit reimbursement to named medical conditions);

(4)

policies that pay fixed dollar amounts for specified disease or other specified impairments (including cancer, specified disease policies and other policies that pay a scheduled benefit or specified payment based on diagnosis of the conditions named in the policy);

(5)

indemnity policies and other policies that pay a fixed dollar amount per day, excluding long-term care policies;

(6)

policies that provide benefits for both expenses incurred and fixed indemnity;

(7)

[ long-term care policies providing both nursing home and non-institutional coverage; ]

[ (8)

long-term care policies primarily providing nursing home benefits only; ]

[ (9)

home care policies; and ]

[ (10) ]

other health insurance policies not specifically identified in paragraphs (1)- (6) [ (9) ] of this subsection.

(f)

(No change.)

§3.3604.Notice for Policies That Provide Benefits for Expenses Incurred for an Accidental Injury Only.

The notice in this section is for policies that provide benefits for expenses incurred for an accidental injury only , and shall follow the content and format of one of the two statements (but not both simultaneously) set out in this section, as follows: [ . ]

(1)

Original disclosure statement:

Figure: 28 TAC §3.3604(1)

(2)

Alternative disclosure statement:

Figure: 28 TAC §3.3604(2)

[ Figure: 28 TAC §3.3604 ]

§3.3605.Policies That Provide Benefits For Specified Limited Services.

The notice in this section is for policies that provide benefits for specified limited services , and shall follow the content and format of one of the two statements (but not both simultaneously) set out in this section, as follows: [ . ]

(1)

Original disclosure statement:

Figure: 28 TAC §3.3605(1)

(2)

Alternative disclosure statement:

Figure: 28 TAC §3.3605(2)

[ Figure: 28 TAC §3.3605 ]

§3.3606.Policies That Reimburse Expenses Incurred for Specified Diseases or Impairments.

The notice in this section is for policies that reimburse expenses incurred for specified diseases or other specified impairments (including expense-incurred cancer, specified disease and other types of health insurance policies that limit reimbursement to named medical conditions) , and shall follow the content and format of one of the two statements (but not both simultaneously) of this section as follows: [ . ]

(1)

Original disclosure statement:

Figure: 28 TAC §3.3606(1)

(2)

Alternative disclosure statement:

Figure: 28 TAC §3.3606(2)

[ Figure: 28 TAC §3.3606 ]

§3.3607.Policies that Pay Fixed Dollar Amounts for Specified Diseases or Impairments.

The notice in this section is for policies that pay fixed dollar amounts for specified diseases or other specified impairments (including cancer, specified disease, and other health insurance policies that pay a scheduled benefit or specific payment based on diagnosis of the conditions named in the policy) , and shall follow the content and format of one of the two statements (but not both simultaneously) set out in this section, as follows: [ . ]

(1)

Original disclosure statement:

Figure: 28 TAC §3.3607(1)

(2)

Alternative disclosure statement:

Figure: 28 TAC §3.3607(2)

[ Figure: 28 TAC §3.3607 ]

§3.3608.Indemnity or Other Policies that Pay a Fixed Dollar Amount Per Day.

The notice in this section is for indemnity policies and other policies that pay a fixed dollar amount per day, excluding long-term care policies , and shall follow the content and format of one of the two statements (but not both simultaneously) set out in this section, as follows: [ . ]

(1)

Original disclosure statement:

Figure: 28 TAC §3.3608(1)

(2)

Alternative disclosure statement:

Figure: 28 TAC §3.3608(2)

[ Figure: 28 TAC §3.3608 ]

§3.3609.Policies that Provide Benefits Upon Both an Expense-Incurred and Fixed Indemnity Basis.

The notice in this section is for policies that provide benefits upon both an expense-incurred and fixed indemnity basis , and shall follow the content and format of one of the two statements (but not both simultaneously) set out in this section, as follows: [ . ]

(1)

Original disclosure statement:

Figure: 28 TAC §3.3609(1)

(2)

Alternative disclosure statement:

Figure: 28 TAC §3.3609(2)

[ Figure: 28 TAC §3.3609 ]

§3.3613.Other Health Insurance Policies.

The notice in this section is for other health insurance policies not specifically identified in §§3.3604 - 3.3609 [ §§3.3604 - 3.3612 ] of this title (relating to Required Disclosure Statements for Policies that Duplicate Medicare) , and shall follow the content and format of one of the two statements (but not both simultaneously) set out in this section, as follows: [ . ]

(1)

Original disclosure statement:

Figure: 28 TAC §3.3613(1)

(2)

Alternative disclosure statement:

Figure: 28 TAC §3.3613(2)

[ Figure: 28 TAC §3.3613 ]

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on February 12, 1999.

TRD-9900932

Lynda H. Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: March 28, 1999

For further information, please call: (512) 463-6327


28 TAC §§3.3610-3.3612

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Department of Insurance or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Texas Department of Insurance proposes the repeal of §§3.3610 - 3.3612, concerning notices for Medicare supplement policies. Repeal of these sections are necessary to bring Texas into compliance with the federal Balanced Budget Act of 1997 (BBA). Disclosure notices are no longer necessary for these referenced policies because changes to the BBA clarify that the policies are not considered to provide benefits that duplicate Medicare. Simultaneous to this proposed repeal, proposed amendments to Subchapter W of Chapter 3 are published elsewhere in this issue of the Texas Register . The department will consider the repeal of §§3.3610 - 3.3612, in a public hearing under Docket Number 2400, scheduled for 9:00 a.m. on March 30, 1999, in Room 100 of the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin, Texas.

Kim Stokes, associate commissioner for life/health and managed care, has determined that for each year of the first five years the proposed sections will be in effect, there will be no additional fiscal impact on state or local government nor to as a result of enforcing or administering the sections. There will be no measurable effect on local employment or the local economy as a result of the proposal.

Ms. Stokes has also determined that for each year of the first five years the proposed sections are in effect, the public benefit anticipated as a result of this repeal will be compliance with federal laws relating to disclosure relating to Medicare supplement coverage so that the state will maintain its regulatory authority over Medicare supplement coverage.

Ms. Stokes estimates that this repeal will not result in any cost to persons affected by these sections, but should cost occur it is the result of the federal enactment of the Balanced Budget Act of 1997 (Public Law 105-33) and is not as a result of the repeal of these proposed sections.

Comments on the proposal must be submitted within 30 days after publication of the proposed section in the Texas Register to Lynda H. Nesenholtz, General Counsel and Chief Clerk, Mail Code 113-1C, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be submitted to Linda von Quintus, Deputy Commissioner, Regulation and Safety Division, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

The repeals are proposed under the Insurance Code Articles 3.70-3, 3.74, and 1.03A. Article 3.70-3 authorizes the department to adopt rules and regulations for the filing and submission of health insurance policies as are necessary, proper or advisable. Article 3.74, §5(d) provides that the department may promulgate reasonable rules for captions or notice requirements determined to be in the public interest and designed to inform prospective insureds, subscribers, or enrollees that particular coverages are not Medicare supplement coverages. Article 3.74, §10 provides that the department shall adopt rules in accordance with federal law as necessary for the state to retain certification under 42 U.S.C. Section 1395ss, as well as any other reasonable rules necessary and proper to enforce Texas' minimum statutory standards for Medicare supplement policies. Article 1.03A authorizes the commissioner to adopt rules and regulations for the conduct and execution of the duties and functions of the department as authorized by statute.

The proposed repeals affect the following statutes: Insurance Code Articles 3.74 and 3.70-3

§3.3610.Long-Term Care Policies Providing Nursing Home and Non-institutional Coverage.

§3.3611.Policies Providing Nursing Home Benefits Only.

§3.3612.Policies Providing Home Care Benefits Only.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on February 12, 1999.

TRD-9900933

Lynda H. Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: March 28, 1999

For further information, please call: (512) 463-6327


Chapter 21. Trade Practices

Subchapter M. Mandatory [Benefit] Notice Requirements

28 TAC §§21.2101, 21.2103, 21.2105-21.2107

The Texas Department of Insurance proposes amendments to §§21.2101, 21.2103, 21.2105, 21.2106, and new §21.2107 concerning mandatory notice requirements. This proposal is necessary to bring Texas into compliance with the federal Public Law 105-33, the Balanced Budget Act of 1997 (BBA). Failure to comply with the federal mandates in the BBA will subject Texas to potential penalties including the loss of regulatory authority over Medicare supplement coverage. The proposal will increase awareness of the types of Medicare supplement coverages and protections available to persons whose coverage under certain health benefit plans is ending. The amendments make corrections necessary to broaden the scope of the subchapter to include new requirements for notice to certain individuals of their right to guaranteed issuance of Medicare supplement coverage; the new section details those notice requirements. The proposed amendment to §21.2101 broadens the scope of this subchapter. The proposed amendment to §21.2103 redefines the notices described in that section to clarify that they are benefit notices. The proposed amendment to §21.2105 limits the application of that section to benefit notices required by (21.2103 of the subchapter. The proposed amendment to §21.2106 updates the proposed title change to §21.2103. New §21.2107 adds a requirement to provide notice to certain enrollees of their right to Medicare supplement coverage and related protections. The department will consider the adoption of amendments to §§21.2101, 21.2103, 21.2105, 21.2106, and new §21.2107, in a public hearing under Docket Number 2401, scheduled for 9:00 a.m. on March 30, 1999, in Room 100 of the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin, Texas.

Kim Stokes, associate commissioner for life/health and managed care, has determined that for each year of the first five years the proposed sections will be in effect, there will be no additional fiscal impact on state or local government as a result of enforcing or administering the sections. There will be no measurable effect on local employment or the local economy as a result of the proposal.

Ms. Stokes has also determined that for each year of the first five years the proposed sections are in effect, the public benefit anticipated as a result of enforcing the subchapter will be facilitation of public awareness of the availability of Medicare supplement coverage to eligible individuals and their subsequent enrollment in that coverage. Ms. Stokes estimates that the majority of cost to persons required to comply with these sections is the result of the federal enactment of the BBA and is not as a result of the adoption and implementation of these proposed sections. The only requirement imposed by this proposal that is not mandated by the BBA is the requirement of notice to individuals in an employee welfare benefit plan that is primary to Medicare, pursuant to §3.3312(b)(1) of this title (relating to Guaranteed Issue for Eligible Persons). The cost of compliance for entities affected by this section will be between $0.10 and $0.25 per notice. The actual total cost to each entity will vary depending on the number of individuals to whom the notice must be sent. In an effort to minimize costs, an entity may deliver the notice along with other correspondence.

Ms. Stokes has determined that, except as enumerated specifically below, any economic costs to any entity qualifying as a small business under Government Code §2006.001 that complies with the proposed sections for each year of the first five years the proposed new sections will be in effect are the result of the federal enactment of the BBA and not as a result of the adoption, enforcement, or administration of the proposed sections. With regard to the requirement in §3.3312(b)(1) relating to plans primary to Medicare, the total cost to entities is not dependent upon the size of the business, but rather is dependent upon the number of persons to whom the business must provide notice of their rights to Medicare supplement coverage under the rule. The cost per hour of labor would not vary between the smallest and largest businesses, assuming that small businesses and the largest businesses have to provide this notice to approximately the same percentage of their insured or enrolled populations. Therefore, it is the department's position that the adoption of these proposed sections will have no adverse economic effect on small businesses. Regardless of the fiscal effect, the department does not believe it legal or feasible to waive the requirements of these rules for small businesses. To do so would allow differentiation of notices between the insureds/enrollees of small businesses compared to those notices provided to the insureds/enrollees of large businesses.

Comments on the proposal must be submitted within 30 days after publication of the proposed sections in the Texas Register to Lynda H. Nesenholtz, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be submitted to Linda von Quintus, Deputy Commissioner, Regulation and Safety Division, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

The amendments and new section are proposed under the Insurance Code Articles 3.51-6, 3.74, 3.95-15, 20A.22(c), 26.04, and 1.03A. Article 3.51-6, §5 authorizes the department to issue such rules as may be necessary to carry out the article. Article 3.74, §10 provides that the department shall adopt rules in accordance with federal law as necessary for the state to retain certification under 42 U.S.C. Section 1395ss, as well as any other reasonable rules necessary and proper to enforce Texas' minimum statutory standards for Medicare supplement policies. Article 3.95-15 directs the commissioner to adopt rules as necessary to meet the minimum requirements of federal law. Article 20A.22(c) authorizes the commissioner to promulgate rules as are necessary and proper to meet the requirements of federal law. Article 26.04 directs the commissioner to adopt rules as necessary to meet the minimum requirements of federal law. Article 1.03A authorizes the commissioner to adopt rules and regulations for the conduct and execution of the duties and functions of the department as authorized by statute.

The following articles are affected by this proposal: Insurance Code Articles 3.51-6, 3.74, 3.70-3, 3.95, and 26.04

§21.2101.Scope.

The purpose of this subchapter is:

(1)

to require notice to enrollees in a health benefit plan of coverage and/or benefits for prostate cancer examinations, minimum inpatient stays for maternity and childbirth, and/or mastectomies. Sections 21.2102 through 21.2106 of this [ This ] subchapter apply [ applies ] to all carriers issuing, delivering or renewing health benefit plans as defined in this subchapter as of January 1, 1998.

(2)

to require notice to individuals who become eligible for certain protections regarding Medicare supplement coverage pursuant to §3.3312 of this title (relating to Guaranteed Issue for Eligible Persons). Section 21.2107 of this subchapter applies to all entities, as defined in §3.3312 of this title, that terminate coverage or have covered individuals who cease coverage on or after July 1, 1998, as described in §3.3312 of this title.

Mandatory Benefit Notices.

(a)

Prescribed mandatory benefit notices consist of the following:

(1) - (4)

(b) - (d)

(No change.)

§21.2105.Delivery of Mandatory Benefit Notices.

The notices required by §21.2103 of this title (relating to Mandatory Benefit Notices) [ this subchapter ] shall be issued to enrollees of a health benefit plan that is delivered, issued for delivery, or renewed on or after January 1, 1998, and shall be provided according to the following paragraphs:

(1) - (6)

(No change.)

§21.2106.Forms.

(a)

The forms identified in §21.2103 of this title (relating to Mandatory Benefit Notices) for notices of mandatory benefits are included in subsection (b) of this section in their entirety and have been filed with the Office of the Secretary of State. The forms can be obtained from the Texas Department of Insurance, Life/Health Group, MC 106-1A, P.O. Box 149104, Austin, Texas, 78714-9104.

(b)

(No change.)

§21.2107.Right To Medicare Supplement Coverage Notice.

(a)

At the time of an event described in §3.3312(b) of this title (relating to Guaranteed Issue for Eligible Persons) because of which an individual loses coverage or benefits due to the termination of a contract, agreement, policy, or plan, the entity, as defined in and pursuant to §3.3312 of this title, shall notify the individual of his or her rights under §3.3312(a) and (c) of this title, and of the obligations of issuers of Medicare supplement policies under §3.3312(a) of this title. The entity shall communicate such notice contemporaneously with the notification of termination.

(b)

At the time of an event described in §3.3312(b) of this title because of which an individual ceases enrollment under a contract, agreement, policy, or plan, the entity, as defined in §3.3312 of this title that offers the contract or agreement, regardless of the basis for the cessation of enrollment, the entity offering the plan, or the licensed third party administrator of the plan, respectively, shall notify the individual of his or her rights under §3.3312(a) and (c) of this title, and of the obligations of issuers of Medicare supplement policies under §3.3312(a) of this title. The entity shall communicate such notice within ten working days of the entity's receipt of notification of disenrollment.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on February 12, 1999.

TRD-9900930

Lynda H. Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: March 28, 1999

For further information, please call: (512) 463-6327