INS-47-09-00005-E Minimum Standards for the Form, Content and Sale of Medicare Supplement Insurance

11/25/09 N.Y. St. Reg. INS-47-09-00005-E

NEW YORK STATE REGISTER

VOLUME XXXI, ISSUE 47

November 25, 2009

RULE MAKING ACTIVITIES

INSURANCE DEPARTMENT

EMERGENCY RULE MAKING

 

I.D No. INS-47-09-00005-E

Filing No. 1246

Filing Date. Nov. 09, 2009

Effective Date. Nov. 09, 2009

Minimum Standards for the Form, Content and Sale of Medicare Supplement Insurance

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:

Action taken:

Amendment of Parts 215 (Regulation 34), 52 (Regulation 62), 360 (Regulation 145) and 361 (Regulation 146); and addition of Part 58 (Regulation 193) to Title 11 NYCRR.

Statutory authority:

Federal Social Security Act (42 U.S.C., section 1395ss), Insurance Law, sections 201, 301, 3201, 3216, 3217, 3218, 3221, 3231, 3232 and 4235 and art. 43

Finding of necessity for emergency rule:

Preservation of general welfare.

Specific reasons:

The federal Social Security Act (42 U.S.C. § 1395ss) provides for the certification of Medicare supplement health insurance regulatory programs by the U.S. Secretary of Health and Human Services to ensure that state regulatory programs provide for the application and enforcement of standards with respect to Medicare supplement insurance equal to or more stringent than the standards set forth in the National Association of Insurance Commissioners (NAIC) Model Regulation. If the Secretary of Health and Human Services determines that a state's program regulating Medicare supplement insurance policies does not provide for the application of standards at least as stringent as those contained in the NAIC Model Regulation, the regulation of Medicare supplement insurance reverts to the federal Secretary of Health and Human Services.

New York's standards for Medicare supplement insurance are more stringent than the minimums set forth in the NAIC Model Regulation. Since 1993, New York has offered additional consumer protections including, for example, continuous open enrollment and community rating. New York also requires insurers to offer standardized Medicare supplement insurance Plan B in addition to Plan A, which is required by federal law.

The federal Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), however, included a number of changes to the standardized Medicare supplement insurance plans. The MIPPA charged the NAIC — specifically, the Senior Issues Task Force — with the task of updating the standards for Medicare supplement insurance. On September 24, 2008, the NAIC adopted a revised Model Regulation to implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act.

In addition, the federal Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits insurers from discriminating on the basis of genetic information with respect to the issuance, pricing or medical underwriting of medical policies or certificates. GINA prohibits insurers from requesting that an individual or a family member of an individual undergo a genetic test. For purposes of GINA, a "genetic test" is defined as an analysis of human DNA, RNA, chromosomes, proteins or metabolites that detect genotypes, mutations, or chromosomal changes. "Genetic information" is defined to mean, with respect to any individual, information about such individual's genetic tests, the genetic tests of family members of such individual, and the manifestation of a disease or disorder in family members of such individual. This rulemaking includes provisions to ensure that New York law complies with GINA. Pursuant to federal law, the prohibitions of GINA will be in effect for policies and certificates issued or renewed with an effective date for coverage on or after May 21, 2009.

The NAIC Model Regulation, revised to include the requirements of MIPPA and GINA, was adopted on September 24, 2008. MIPAA requires that each State shall have one year from the date the NAIC adopts the revised Model Regulation to adopt the provisions of GINA and MIPPA. Consequently, New York must take action by September 24, 2009 to ensure that it can continue to regulate Medicare supplement insurance.

The normal regulatory approval process did not allow for final adoption of these regulations prior to September 24, 2009. For this reason, and for the reasons stated above, the immediate adoption of these regulations was necessary for the preservation of the general welfare. This regulation was previously promulgated on an emergency basis on August 10, 2009. The regulation must be kept in effect on an emergency basis until the regulation is formally adopted.

Subject:

Minimum standards for the form, content and sale of Medicare supplement insurance.

Purpose:

To conform the regulations with the requirements of federal law.

Substance of emergency rule:

The federal Social Security Act (42 U.S.C. § 1395ss) provides for the certification of Medicare supplement health insurance regulatory programs by the U.S. Secretary of Health and Human Services to ensure that a state's regulatory program provides for the application and enforcement of standards with respect to Medicare supplement insurance equal to or more stringent than the standards set forth in the National Association of Insurance Commissioners (NAIC) Model Standards. If the Secretary of Health and Human Services determines that a state's program regulating Medicare supplement insurance policies does not provide for the application of standards at least as stringent as those contained in the NAIC Model Regulation, the regulation of Medicare supplement insurance reverts to the federal Secretary of Health and Human Services.

In 1990, the federal Omnibus Budget Reconciliation Act of 1990 (OBRA) (P.L. 101-508) was enacted; establishing uniform requirements to govern Medicare supplement insurance. That federal law charged the NAIC with developing a model for the regulation and standardization of Medicare supplement insurance. The NAIC model (the "Model Regulation") was incorporated by reference into the federal statutory requirements. In 1992, New York amended provisions pertaining to the rules for the regulation of Medicare supplement insurance in 11 NYCRR 52 (Reg. 62) to ensure compliance with federal standards.

The federal Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (P.L. 110-275), however, included a number of changes to the standardized Medicare supplement insurance plans. The MIPPA charged the NAIC — specifically, the Senior Issues Task Force — with the task of updating the standards for Medicare supplement insurance. On September 24, 2008, the NAIC adopted a revised Model Regulation to implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act.

In addition, the federal Genetic Information Nondiscrimination Act of 2008 (GINA) (P.L. 110-233) prohibits insurers from discriminating on the basis of genetic information with respect to the issuance, pricing or medical underwriting of medical policies or certificates. GINA prohibits insurers from requesting that an individual or a family member of an individual undergo a genetic test. For purposes of GINA, a "genetic test" is defined as an analysis of human DNA, RNA, chromosomes, proteins or metabolites that detect genotypes, mutations, or chromosomal changes. "Genetic information" is defined to mean, with respect to any individual, information about such individual's genetic tests, the genetic tests of family members of such individual, and the manifestation of a disease or disorder in family members of such individual.

The Superintendent of Insurance is empowered by the New York Insurance Law to promulgate regulations implementing the standards required by federal law, as well as additional protections and benefits as deemed appropriate.

In addition to requirements established by MIPPA and GINA, for purposes of conciseness and clarity, this rulemaking relocates, without substantive change, existing provisions in New York regulations pertaining to the rules for the regulation of Medicare supplement insurance from 11 NYCRR 52 (Reg. 62), which is a broad regulation addressing all types of accident and health insurance, to new Regulation 193 (11 NYCRR Part 58) addressing only Medicare supplement insurance.

Regulation 193 (11 NYCRR Part 58) consists of six sections addressing the regulation of Medicare supplement insurance.

Section 58.1 is relocated from subdivisions (a)-(c) and (f)-(o) of 11 NYCRR 52.22 (Reg. 62) with the addition of new subdivision (j) included to add the specific protections required by GINA, as specified in the revised NAIC Model Regulation.

Section 58.2 is relocated from subdivisions (d) and (e) of 11 NYCRR 52.22 (Reg. 62) and contains the standards for Medicare supplement insurance and the make-up of benefit plans issued with an effective date for coverage prior to June 1, 2010, which is the date applicable for changes made pursuant to MIPPA.

Section 58.3 is disclosure language relocated from 11 NYCRR 52.54 and 52.63 (Reg. 62) for Medicare supplement insurance plans issued with an effective date for coverage prior to June 1, 2010.

Section 58.4 is a new section conforming with Sections 8.1 and 9.1 of the NAIC Model Regulation to comply with MIPPA. The section describes each benefit of Medicare supplement insurance, and the combinations of the different benefits that comprise each benefit plan (A-D, F, G, K-N) set forth in the NAIC Model Regulation, for benefit plans issued with an effective date for coverage on or after June 1, 2010. The revised Medicare supplement insurance standards, as implemented by the revised NAIC Model Regulation, add a hospice benefit to the core benefit package for all Medicare supplement insurance plans.

Section 58.5 is a new section conforming to Section 17 of the NAIC Model Regulation, and sets forth new disclosure language for the plans issued with an effective date for coverage on or after June 1, 2010.

Section 58.6 is relocated from 11 NYCRR 52.14 (Reg. 62) and contains the standards for Medicare select insurance.

Part 215 (Regulation 34), Part 52 (Regulation 62), Part 360 (Regulation 145), and Part 361 (Regulation 146) of Title 11 NYCRR are amended to conform references to material that was relocated from Part 52 to the new Part 58.

The full text of the regulations may be found at the Department's website (http://www.ins.state.ny.us/).

This notice is intended

to serve only as a notice of emergency adoption. This agency intends to adopt this emergency rule as a permanent rule and will publish a notice of proposed rule making in the State Register at some future date. The emergency rule will expire February 6, 2010.

Text of rule and any required statements and analyses may be obtained from:

Andrew Mais, NYS Insurance Department, 25 Beaver Street, New York, NY 10004, [phone], email: [e-mail]

Regulatory Impact Statement

1. Statutory authority: The Superintendent's authority for the promulgation of 11 NYCRR 58 (Regulation No. 193), the Forty-second Amendment to Part 52 of Title 11 NYCRR (Regulation No. 62), the Third Amendment to Part 215 of Title 11 (Regulation No. 34), the Sixth Amendment to Part 361 of Title 11 (Regulation No. 146), and for the Seventh Amendment to Part 360 of Title 11 (Regulation No. 145) derives from the federal Social Security Act (42 U.S.C. section 1395ss) and Insurance Law Sections 201, 301, 3201, 3216, 3217, 3218, 3221, 3231, 3232, and 4235, and Article 43.

The federal Social Security Act (42 U.S.C. § 1395ss) provides for the certification of Medicare supplement health insurance regulatory programs by the U.S. Secretary of Health and Human Services to ensure that a state's regulatory program provides for the application and enforcement of standards with respect to Medicare supplement insurance equal to or more stringent than the standards set forth in the National Association of Insurance Commissioners (NAIC) Model Regulation. If the Secretary of Health and Human Services determines that a state's program regulating Medicare supplement insurance policies does not provide for the application of standards at least as stringent as those contained in the NAIC Model Regulation, then the regulation of Medicare supplement insurance reverts to the federal Secretary of Health and Human Services.

Sections 201 and 301 of the Insurance Law authorize the Superintendent to prescribe regulations interpreting the provisions of the Insurance Law, and effectuate any power granted to the Superintendent under the Insurance Law.

Section 3201 authorizes the Superintendent to approve accident and health insurance policies for delivery or issuance for delivery in this state.

Section 3216 sets forth the standard provisions in individual accident and health insurance policies.

Section 3217 authorizes the Superintendent to issue regulations to establish minimum standards for the form, content and sale of health insurance.

Section 3218 authorizes the Superintendent to promulgate rules and regulations to establish minimum standards for the form, content and sale of Medicare supplement insurance.

Section 3221 sets forth the standard provisions in group and blanket accident and health insurance policies.

Section 3231 sets forth the requirement that individual and small group health insurance policies and Medicare supplement insurance policies be issued on a community rated and open enrollment basis.

Section 3232 establishes requirements for pre-existing condition provisions in certain health insurance policies.

Section 4235 establishes the types of permissible groups to which a group accident and health policy may be issued.

Article 43 of the Insurance Law sets forth requirements for non-profit medical and dental indemnity corporations and non-profit health or hospital corporations.

2. Legislative objectives: The statutory sections cited above establish a framework for the form, content and sale of Medicare supplement insurance. States must have a regulatory program that provides a minimum level of coverage as established by 42 U.S.C. § 1395ss. If the U.S. Secretary of Health and Human Services determines that a state's program regulating Medicare supplement insurance policies does not provide for the application of standards at least as stringent as those contained in the NAIC Model Regulation, then the regulation of Medicare supplement insurance reverts to the federal Secretary of Health and Human Services. The Superintendent is empowered by state law to promulgate regulations implementing the standards required by federal law, and to provide additional protections and benefits as appropriate.

3. Needs and benefits: In 1990, the federal Omnibus Budget Reconciliation Act of 1990 (OBRA) was enacted establishing uniform requirements to govern Medicare supplement insurance. That federal law charged the NAIC with developing a model for the regulation and standardization of Medicare supplement insurance. The NAIC model (the "Model Regulation") was incorporated by reference into the federal statutory requirements. In 1992, New York amended the provisions regulating Medicare supplement insurance in 11 NYCRR 52 (Reg. 62) to ensure compliance with the federal standards.

The federal Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required a number of changes to the standardized Medicare supplement insurance plans. The MIPPA charged the NAIC — specifically, the Senior Issues Task Force — with the task of updating the standards for Medicare supplement insurance. On September 24, 2008, the NAIC adopted a revised Model Regulation to implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act.

In addition, the federal Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits insurers from discriminating on the basis of genetic information with respect to the issuance, pricing or medical underwriting of medical policies or certificates. Insurers are also prohibited from requesting that an individual or a family member of an individual undergo a genetic test. For purposes of GINA, a genetic test is defined as an analysis of human DNA, RNA, chromosomes, proteins or metabolites that detect genotypes, mutations, or chromosomal changes. Genetic information is defined to mean, with respect to any individual, information about such individual's genetic tests, the genetic tests of family members of such individual, and the manifestation of a disease or disorder in family members of such individual. This rulemaking includes provisions to ensure that New York Law complies with GINA. Pursuant to federal law, the prohibitions of GINA are already in effect for policies and certificates that were issued or renewed with an effective date for coverage on or after May 21, 2009.

Federal law requires that states amend their regulatory programs to implement all new federal statutory requirements and applicable changes to the NAIC Model standards or lose their ability to regulate Medicare supplement insurance. The changes required by GINA and MIPPA, as set forth in the NAIC Model Regulation, are the only substantive changes being made to New York's Medicare supplement insurance regulatory program. The regulated parties are the insurers participating in the Medicare supplement insurance market and the parties affected are Medicare eligible consumers in New York. If New York fails to adopt the changes required by federal law, New York will be out of compliance and regulation of Medicare supplement insurance will revert to the federal U.S. Secretary of Health and Human Services. The Secretary will apply the standards of the NAIC Model Regulation, which do not include the additional consumer protections of community rating, continuous open enrollment, and mandated additional plan offerings, as are currently required by New York's existing regulatory program.

In addition to effectuating requirements established by MIPPA and GINA, for purposes of conciseness and clarity, this rulemaking relocates, without substantive change, existing provisions in New York regulations pertaining to the rules for the regulation of Medicare supplement insurance from 11 NYCRR 52 (Reg. 62) to new 11 NYCRR Part 58 (Reg. 193). Regulation 62 is a broad regulation addressing all types of accident and health insurance whereas new Regulation 193 addresses only Medicare supplement insurance.. The rulemaking also makes conforming amendments to 11 NYCRR 52 (Regulation No. 62), 11 NYCRR 215 (Regulation No. 34), 11 NYCRR 361 (Regulation No. 146), and 11 NYCRR 360 (Regulation No. 145).

4. Costs: Insurers issuing Medicare supplement insurance in New York have been aware of the new requirements since the 2008 federal incorporation of the revised NAIC Model Regulation. The changes required by GINA and MIPPA, as set forth in the NAIC Model Regulation, are the only substantive changes being made to New York's Medicare supplement insurance regulatory program.

The changes to the benefit structure and the addition and elimination of plans will necessitate changes to Medicare supplement insurance policy and certificate forms and disclosure notices issued by insurers to insureds. Such forms will require updating to comply with the regulatory changes. Insurers will be making these same changes in all states in which they write Medicare supplement insurance. The insurers in the Medicare supplement insurance market are staffed with existing salaried personnel tasked with compliance. Based upon insurer information, we estimate that each insurer will expend approximately 20 - 25 work hours updating forms at an estimated cost of approximately $25 - 50 per hour. Using such estimates, the cost to insurers associated with updating forms will be minimal, ranging from $500 - 1,250 per insurer. There are currently sixteen Medicare supplement insurance insurers in New York. Therefore, the estimated cost statewide to all insurers will be approximately $8,000 - 20,000.

GINA prohibits an issuer of a Medicare supplement insurance policy from using genetic information to deny, condition the effectiveness of, or discriminate in the pricing of a Medicare supplement insurance policy. New York already requires continuous open enrollment and community rating for all Medicare supplement insurance. Insurers are currently prohibited from using genetic information to deny, condition the effectiveness of, or discriminate in the pricing of a Medicare supplement insurance policy. Thus, there are no costs associated with compliance with the GINA provisions for Medicare supplement insurers.

Costs to the Insurance Department also should be minimal, as existing personnel are available to review any modified filings necessitated by the regulations. These rules impose no compliance costs on state or local governments or health care providers.

5. Local government mandates: These rules do not impose any program, service, duty or responsibility upon a city, town, village, school district or fire district.

6. Paperwork: The regulations impose no new reporting requirements. Other than the provisions included to comply with the federal requirements under MIPPA and GINA, the new Regulation 193 merely carries over existing regulatory provisions, located in various sections of Regulation 62, to provide a consolidated regulation containing the applicable provisions regulating Medicare supplement insurance. Insurers will need to revise policy form filings to comply with the regulation.

7. Duplication: The regulations will not duplicate any existing state or federal rule for insurers that write accident and health insurance, but rather implement and conform to the federal requirements.

8. Alternatives: In order for the State to regulate Medicare supplement insurance, federal law requires that it adopt, at a minimum, the standards set forth in the NAIC Model Regulation. The NAIC Model Regulation was revised in 2008 to include the requirements of two additional federal Acts, MIPPA and GINA. Failure to adopt the revised NAIC Model Regulation standards would result in the regulation of Medicare supplement insurance in New York State reverting to the federal U.S. Secretary of Health and Human Services. The federal minimum standards would then be applicable. Such federal standards do not include the additional consumer protections that New York currently has in place. This result is undesirable for consumers and therefore, is not a viable alternative.

The changes required by GINA and MIPPA, as set forth in the NAIC Model Regulation, are the only substantive changes being made to New York's Medicare supplement insurance regulatory program. However, these changes made numerous revisions to the benefit plan offerings and the benefit structure for policies that become effective on or after June 1, 2010. As such, New York's regulation needs to set forth the separate standards that are applicable to policies that are effective both pre- and post- June 1, 2010. Adding sections to Regulation 62 would have created an unwieldy and confusing set of standards for the regulation of Medicare supplement insurance. For ease of reference for insurers and any interested parties who may refer to the Medicare supplement insurance regulation, various applicable sections of current regulation were pulled out and inserted into the new Regulation 193 rather than adding additional sections to an already voluminous regulation. Regulation 62 is relevant to all types of accident and health insurance, not just Medicare supplement insurance. Therefore, drafting a new regulation was considered to be the best alternative for insurers.

9. Federal standards: The existing New York standards exceed the federal minimum standards set forth in the NAIC Model Regulation, in order to offer longstanding additional protections, not imposed by federal law, for residents of the State. The existing provisions of Regulation 62 (11 NYCRR 52) require insurers (1) to utilize community rating, (2) to offer continuous open enrollment to individuals enrolled in Medicare by reason of age or disability, and (3) mandates that insurers selling Medicare supplement insurance must offer benefit plan B. Federal law specifically permits the state to establish more stringent standards for insurers offering Medicare supplement insurance, and since 1993, New York residents have benefited from the security of these extra protections. With this rulemaking, New York is substantially adopting the federal changes required by MIPPA and GINA while maintaining all of the existing protections currently afforded New York residents.

10. Compliance schedule: The provisions of the regulations took effect upon filing with the Department of State on August 10, 2009 and some insurers have already submitted filings to comply with the regulatory changes. Pursuant to federal law, the prohibitions of GINA are already in effect for policies and certificates that were issued or renewed with an effective date for coverage on or after May 21, 2009. MIPPA applies to policies and certificates issued with an effective date of coverage on or after June 1, 2010.

Regulatory Flexibility Analysis

1. Small Businesses:

The Insurance Department believes that these rules will not impose any adverse economic impact on small businesses and will not impose any reporting, recordkeeping or other compliance requirements on small businesses. The basis for this belief is that these rules are directed at all insurers that write accident and health insurance and Article 43 corporations, none of which falls within the definition of "small business" set forth in section 102(8) of the State Administrative Procedure Act. Indeed, the Insurance Department has reviewed filed Reports on Examination and Annual Statements of these entities, and believes that there are none that are both independently owned and that employ fewer than 100 persons. Accordingly, there is no need to prepare any special guidance materials for small businesses with regard to this rule.

2. Local Governments:

The regulations do not impose any impact, including any adverse impact, or reporting, recordkeeping, or other compliance requirements on any local governments. The basis for this finding is that this rule is directed at insurers that write accident and health insurance and Article 43 corporations, none of which are local governments.

Rural Area Flexibility Analysis

The Insurance Department finds that these rules do not impose any significant burden on persons located in rural areas, and the Insurance Department finds that it will not have an adverse impact on rural areas.

The entities covered by these regulations — all insurers that write accident and health insurance and Article 43 corporations — do business in every county in this state, including rural areas as defined under SAPA § 102(10). Insurers issuing Medicare supplement insurance in New York have been aware of the new requirements since the 2008 federal incorporation of the revised NAIC Model Regulation. The changes required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) and the Genetic Information Nondiscrimination Act of 2008 (GINA), as set forth in the NAIC Model Regulation, are the only substantive changes being made to New York's Medicare supplement insurance regulatory program.

The changes to the benefit structure, and the addition and elimination of plans, will necessitate changes to the requirements for Medicare supplement insurance applications and disclosure notices. Any additional cost of compliance with MIPPA for insurers and Article 43 corporations should be minimal. The insurers and Article 43 corporations in the Medicare supplement insurance market are staffed with existing salaried personnel tasked with compliance.

GINA prohibits an issuer of a Medicare supplement insurance policy from using genetic information to deny, condition the effectiveness of, or discriminate in the pricing of a Medicare supplement insurance policy. New York already requires continuous open enrollment and community rating for all Medicare supplement insurance. Insurers are currently prohibited from using genetic information to deny, condition the effectiveness of, or discriminate in the pricing of a Medicare supplement insurance policy. Thus, there should be no cost associated with compliance with the GINA provisions.

Job Impact Statement

Adoption of the five consolidated regulations should not adversely impact job or employment opportunities in New York.. The consolidated regulations will involve revision of some mandatory practices that insurers must follow in issuing Medicare supplement insurance policies to bring company practices into conformance with the revised NAIC Model Regulation for Medicare supplement insurance, as required by 42 U.S.C. § 1395ss. Such revisions to company practices will not have any negative affect on jobs or employment opportunities.

There is no evidence that these rules would have any adverse impact on self-employment opportunities.

The Insurance Department has no reason to believe that the rules will result in any adverse impacts.