Minnesota Session Laws - 1989, Regular Session

  

                         Laws of Minnesota 1989 

                        CHAPTER 258-H.F.No. 611 
           An act relating to insurance; regulating agent 
          licensing; regulating Medicare supplement plans; 
          modifying required levels of coverages; amending 
          Minnesota Statutes 1988, sections 60A.17, subdivision 
          6c, and by adding a subdivision; 62A.31, subdivisions 
          1 and 2; 62A.41; 62D.104; 62D.121, subdivision 3; 
          62D.181, subdivision 4; 62E.07; and 62E.14, 
          subdivision 4; proposing coding for new law in 
          Minnesota Statutes, chapter 62A; repealing Minnesota 
          Statutes 1988, sections 62A.32; 62A.33; 62A.34; and 
          62A.35.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1988, section 60A.17, 
subdivision 6c, is amended to read: 
    Subd. 6c.  [REVOCATION OR SUSPENSION OF LICENSE.] (a) The 
commissioner may by order suspend or revoke an insurance agent's 
or agency's license issued to a natural person or impose a civil 
penalty appropriate to the offense, not to exceed $5,000 upon 
that licensee, or both, if, after notice and hearing, the 
commissioner finds as to that licensee any one or more of the 
following conditions: 
    (1) any materially untrue statement in the license 
application; 
    (2) any cause for which issuance of the license could have 
been refused had it then existed and been known to the 
commissioner at the time of issuance; 
    (3) violation of, or noncompliance with, any insurance law 
or violation of any rule or order of the commissioner or of a 
commissioner of insurance of another state or jurisdiction; 
    (4) obtaining or attempting to obtain any license through 
misrepresentation or fraud; 
    (5) improperly withholding, misappropriating, or converting 
to the licensee's own use any money belonging to a policyholder, 
insurer, beneficiary, or other person, received by the licensee 
in the course of the licensee's insurance business; 
      (6) misrepresentation of the terms of any actual or 
proposed insurance contract; 
      (7) conviction of a felony or of a gross misdemeanor or 
misdemeanor involving moral turpitude; 
    (8) that the licensee has been found guilty of any unfair 
trade practice, as defined in chapters 60A to 72A, or of fraud; 
    (9) that in the conduct of the agent's affairs under the 
license, the licensee has used fraudulent, coercive, or 
dishonest practices, or the licensee has been shown to be 
incompetent, untrustworthy, or financially irresponsible; 
    (10) that the agent's license has been suspended or revoked 
in any other state, province, district, territory, or foreign 
country; 
    (11) that the licensee has forged another's name to an 
application for insurance; or 
    (12) that the licensee has violated subdivision 6b. 
    (b) The commissioner may by order suspend or revoke an 
insurance agent's or insurance agency's license issued to a 
partnership or corporation or impose a civil penalty not to 
exceed $5,000 upon that licensee, or both, if, after notice and 
hearing, the commissioner finds as to that licensee, or as to 
any partner, director, shareholder, officer, or employee of that 
licensee, any one or more of the conditions set forth in 
paragraph (a). 
    (c) A revocation of a license shall prohibit the licensee 
from making a new application for a license for at least one 
year two years from the effective date of the revocation.  
Further, the commissioner may shall, as a condition of 
relicensure, require the applicant to file a reasonable bond for 
the protection of the citizens of this state, which bond shall 
be maintained by the licensee in full force for a period of five 
years immediately following issuance of the license, unless the 
commissioner at the commissioner's discretion shall after two 
years permit the licensee to sooner terminate the maintenance 
filing of the bond obtain a performance bond issued by an 
insurer authorized to transact business in this state in the 
amount of $20,000 or a greater amount the commissioner considers 
appropriate for the protection of citizens of this state.  The 
bond shall be filed with the commissioner, with the state of 
Minnesota as obligee, conditioned for the prompt payment to any 
aggrieved person entitled to payment of any amounts received by 
the licensee or to protect any aggrieved person from loss 
resulting from fraudulent, deceptive, dishonest, or other 
prohibited practices arising out of any transaction when the 
licensee was licensed or performed acts for which a license is 
required under this chapter.  The bond shall remain operative 
for as long as that licensee is licensed.  A discharge in 
bankruptcy shall not relieve a person from the penalties and 
disabilities provided in this section.  The bond required by 
this subdivision must provide coverage for all matters arising 
during the period of licensure.  
    (d) The commissioner may, in the manner prescribed by 
chapter 14, impose a civil penalty not to exceed $5,000 upon a 
person whose license has lapsed, or been suspended, revoked, or 
otherwise terminated, for engaging in conduct prohibited by 
paragraph (a) before, during, or after the period of licensure. 
    Sec. 2.  Minnesota Statutes 1988, section 60A.17, is 
amended by adding a subdivision to read:  
    Subd. 21.  [SUITABILITY OF INSURANCE.] In recommending the 
purchase of any life, endowment, long-term care, annuity, 
life-endowment, or Medicare supplement insurance to a customer, 
an agent must have reasonable grounds for believing that the 
recommendation is suitable for the customer, and must make 
reasonable inquiries to determine suitability.  The suitability 
of a recommended purchase of insurance will be determined by 
reference to the totality of the particular customer's 
circumstances, including, but not limited to, the customer's 
income, the customer's need for insurance, and the values, 
benefits, and costs of the customer's existing insurance 
program, if any, when compared to the values, benefits, and 
costs of the recommended policy or policies.  
    Sec. 3.  Minnesota Statutes 1988, section 62A.31, 
subdivision 1, is amended to read: 
    Subdivision 1.  [POLICY REQUIREMENTS.] No individual or 
group policy, certificate, subscriber contract or other evidence 
of accident and health insurance issued or delivered in this 
state shall be sold or issued to an individual age 65 or older 
covered by Medicare unless the following requirements are met:  
    (a) The policy must provide a minimum of the coverage set 
out in subdivision 2; 
    (b) The policy must cover preexisting conditions during the 
first six months of coverage if the insured was not diagnosed or 
treated for the particular condition during the 90 days 
immediately preceding the effective date of coverage; 
    (c) The policy must contain a provision that the plan will 
not be canceled or nonrenewed on the grounds of the 
deterioration of health of the insured; and 
    (d) Before the policy is sold or issued, an offer of both 
categories of Medicare supplement insurance has been made to the 
individual, together with an explanation of both coverages; and 
     (e) An outline of coverage as provided in section 62A.39 
must be delivered at the time of application and prior to 
payment of any premium.  
    Sec. 4.  Minnesota Statutes 1988, section 62A.31, 
subdivision 2, is amended to read: 
    Subd. 2.  [GENERAL COVERAGE.] For a policy to meet the 
requirements of this section it must contain (1) a designation 
specifying whether the policy is a an extended basic Medicare 
supplement 1+, 1, 2, or 3 plan or a basic Medicare supplement 
plan, (2) a caption stating that the commissioner has 
established four two categories of Medicare supplement insurance 
and minimum standards for each, with the extended basic Medicare 
supplement 1+ being the most comprehensive and the basic 
Medicare supplement 3 being the least comprehensive, and (3) the 
policy must provide the minimum coverage prescribed in 
sections 62A.32 to 62A.35 62A.315 and 62A.316 for the supplement 
specified, provided that an annual deductible of not more than 
$200 is permissible for those covered charges not paid by 
Medicare or otherwise included in paragraph (f) of sections 
62A.32 and 62A.33 section 62A.315 or 62A.316. 
    Sec. 5.  [62A.315] [EXTENDED BASIC MEDICARE SUPPLEMENT 
PLAN; COVERAGE.] 
    The extended basic Medicare supplement plan must have a 
level of coverage so that it will be certified as a qualified 
plan pursuant to chapter 62E, and will provide: 
    (1) coverage for all of the Medicare part A inpatient 
hospital deductible amount; 
    (2) coverage for the daily copayment amount of Medicare 
part A eligible expenses for the first eight days per calendar 
year incurred for skilled nursing facility care; 
    (3) coverage for the 20 percent copayment amount of 
Medicare eligible expenses excluding outpatient prescription 
drugs under Medicare part B regardless of hospital confinement 
up to the maximum out-of-pocket amount for Medicare part B and 
coverage of the Medicare deductible amount; 
    (4) 80 percent of usual and customary hospital and medical 
expenses, supplies, and prescription drug expenses, including 
home intravenous (IV) therapy drugs and immunosuppressive 
therapy drugs, not covered by Medicare's eligible expenses; and 
    (5) coverage for the reasonable cost of the first three 
pints of blood, or equivalent quantities of packed red blood 
cells as defined under federal regulations under Medicare parts 
A and B, unless replaced in accordance with federal regulations. 
    Sec. 6.  [62A.316] [BASIC MEDICARE SUPPLEMENT PLAN; 
COVERAGE.] 
    (a) The basic Medicare supplement plan must have a level of 
coverage that, at a minimum, will provide: 
    (1) coverage for the daily copayment amount of Medicare 
part A eligible expenses for the first eight days per calendar 
year incurred for skilled nursing facility care; 
    (2) coverage for the 20 percent copayment amount of 
Medicare eligible expenses excluding outpatient prescription 
drugs under Medicare part B regardless of hospital confinement 
up to the maximum out-of-pocket amount for Medicare part B after 
the Medicare deductible amount; 
    (3) coverage for the reasonable cost of the first three 
pints of blood, or equivalent quantities of packed red blood 
cells as defined under federal regulations under Medicare parts 
A and B, unless replaced in accordance with federal regulations; 
    (4) coverage for the copayment amount of Medicare eligible 
expenses for covered home intravenous (IV) therapy drugs, as 
determined by the Secretary of Health and Human Services, 
subject to the Medicare outpatient prescription drug deductible 
amount, if applicable; and 
    (5) coverage for the copayment amount of Medicare eligible 
expenses for outpatient drugs used in immunosuppressive therapy 
subject to the Medicare outpatient prescription drug deductible, 
if applicable. 
    (b) Only the following optional benefit riders may be added 
to this plan: 
    (1) coverage for all of the Medicare part A inpatient 
hospital deductible amount; and 
    (2) a minimum of 80 percent of usual and customary medical 
expenses and supplies not covered by Medicare part B eligible 
expenses.  This does not include outpatient prescription drugs. 
    Sec. 7.  Minnesota Statutes 1988, section 62A.41, is 
amended to read: 
    62A.41 [PENALTIES.] 
    Subdivision 1.  [GENERALLY.] Any insurer, general agent, 
agent, or other person who knowingly or willfully, either 
directly or indirectly, makes or causes to be made or induces or 
seeks to induce the making of any false statement or 
representation of a material fact with respect to compliance of 
any policy with the standards and requirements set forth in this 
section; falsely assumes or pretends to be acting, or 
misrepresents in any way, including a violation of section 
62A.37, that the person is acting, under the authority or in 
association with Medicare, or any federal agency, for the 
purpose of selling or attempting to sell insurance, or in such 
pretended character demands, or obtains money, paper, documents, 
or anything of value; or knowingly sells a health insurance 
policy to an individual entitled to benefits under part A or 
part B of Medicare with the knowledge that such policy 
substantially duplicates health benefits to which such 
individual is otherwise entitled under a requirement of state or 
federal law other than under medicare shall be guilty of a 
felony and subject to a civil penalty of not more than $5,000 
per violation, and the commissioner may revoke or suspend the 
license of any company, association, society, other insurer, or 
agent thereof.  
    Subd. 2.  [SALES OF REPLACEMENT POLICIES.] An insurer or 
general agent, agent, manager's general agent, or other 
representative, who knowingly or willfully violates section 
62A.40 is guilty of a felony and is subject to a civil penalty 
of not more than $5,000 per violation. 
    Subd. 3.  [SALES OF DUPLICATE POLICIES.] An agent who 
knowingly or willfully violates section 62A.43, subdivision 1, 
is guilty of a felony and is subject to a civil penalty of not 
more than $5,000 per violation. 
    Subd. 4.  [UNLICENSED SALES.] Notwithstanding section 
60A.17, subdivision 1, paragraph (d), a person who acts or 
assumes to act as an insurance agent without a valid license for 
the purpose of selling or attempting to sell Medicare supplement 
insurance, and the person who aids or abets the actor, is guilty 
of a felony and is subject to a civil penalty of not more than 
$5,000 per violation. 
    Sec. 8.  [62A.436] [COMMISSIONS.] 
    The commission, sales allowance, service fee, or 
compensation to an agent for the sale of a Medicare supplement 
plan must be the same for each of the first four years of the 
policy.  The commissioner may grant a waiver of this restriction 
on commissions when the commissioner believes that the insurer's 
fee structure does not encourage deceptive practices. 
    In no event may the rate of commission, sales allowance, 
service fee, or compensation for the sale of a basic Medicare 
supplement plan exceed that which applies to the sale of an 
extended basic Medicare supplement plan. 
    This section also applies to sales of replacement policies. 
    Sec. 9.  Minnesota Statutes 1988, section 62D.104, is 
amended to read: 
    62D.104 [REQUIRED OUT-OF-AREA CONVERSION.] 
    Enrollees who have individual health maintenance 
organization contracts and who have become nonresidents of the 
health maintenance organization's service area but remain 
residents of the state of Minnesota shall be given the option, 
to be arranged by the health maintenance organization if an 
agreement with an insurer can reasonably be made, of a number 
three qualified plan, a number two qualified plan, or a number 
one qualified plan as provided by section 62E.06, subdivisions 1 
to 3, or, if such enrollees are covered by title XVIII of the 
Social Security Act (Medicare), they shall be given the option 
of a Medicare supplement plan as provided by sections 62A.31 to 
62A.35 chapter 62A. 
    This option shall be made available at the enrollee's 
expense, without further evidence of insurability and without 
interruption of coverage. 
    If a health maintenance organization cannot make 
arrangements for conversion coverage, the health maintenance 
organization shall notify enrollees of health plans available in 
other service areas. 
    Sec. 10.  Minnesota Statutes 1988, section 62D.121, 
subdivision 3, is amended to read: 
    Subd. 3.  If replacement coverage is not provided by the 
health maintenance organization, as explained under subdivision 
2, the replacement coverage shall provide, for enrollees covered 
by title XVIII of the Social Security Act, coverage at least 
equivalent to a basic Medicare supplement two plan as defined in 
section 62A.34 62A.316, except that the replacement coverage 
shall also cover the liability for any Medicare part A and part 
B deductible as defined under title XVIII of the Social Security 
Act.  After satisfaction of the Medicare part B deductible, the 
replacement coverage shall be based on 120 percent of the 
Medicare part B eligible expenses less the Medicare part B 
payment amount.  The fee or premium of the replacement coverage 
shall not exceed the premium charged by the state comprehensive 
health plan as established under section 62E.08, for a qualified 
Medicare supplement plan.  All enrollees not covered by Medicare 
shall be given the option of a number three qualified plan or a 
number two qualified plan as defined in section 62E.06, 
subdivisions 1 and 2, for replacement coverage.  The fee or 
premium for a number three qualified plan shall not exceed 125 
percent of the average of rates charged by the five insurers 
with the largest number of individuals in a number three 
qualified plan of insurance in force in Minnesota.  The fee or 
premium for a number two qualified plan shall not exceed 125 
percent of the average of rates charged by the five insurers 
with the largest number of individuals in a number two qualified 
plan of insurance in force in Minnesota.  
    If the replacement coverage is health maintenance 
organization coverage, the fee shall not exceed 125 percent of 
the cost of the average fee charged by health maintenance 
organizations for a similar health plan.  The commissioner of 
health will determine the average cost of the plan on the basis 
of information provided annually by the health maintenance 
organizations concerning the rates charged by the health 
maintenance organizations for the plans offered.  Fees or 
premiums charged under this section must be actuarially 
justified. 
    Sec. 11.  Minnesota Statutes 1988, section 62D.181, 
subdivision 4, is amended to read: 
    Subd. 4.  [COVERAGE.] Alternative coverage issued under 
this section must be at least a number two qualified plan, as 
described in section 62E.06, subdivision 2, or for individuals 
over age 65, a basic Medicare supplement 2 plan, as described in 
section 62A.34 62A.316. 
    Sec. 12.  Minnesota Statutes 1988, section 62E.07, is 
amended to read: 
    62E.07 [QUALIFIED MEDICARE SUPPLEMENT PLAN.] 
    Any plan which provides benefits to persons over the age of 
65 years may be certified as a qualified Medicare supplement 
plan if the plan is designed to supplement Medicare and provides 
coverage of 50 100 percent of the deductible and 
copayment deductibles required under Medicare and 80 percent of 
the charges for covered services described in section 62E.06, 
subdivision 1, which charges are not paid by Medicare.  The 
coverage shall include a limitation of $1,000 per person on 
total annual out-of-pocket expenses for the covered services.  
The coverage may be subject to a maximum lifetime benefit of not 
less than $100,000 $500,000. 
    Sec. 13.  Minnesota Statutes 1988, section 62E.14, 
subdivision 4, is amended to read: 
    Subd. 4.  Notwithstanding the above, any Minnesota resident 
holder of a policy or certificate of Medicare supplement 
coverages pursuant to sections 62A.32 to 62A.35 62A.315 and 
62A.316, or Medicare supplement plans previously approved by the 
commissioner, may enroll in the comprehensive health insurance 
plan as described in section 62E.07, with a waiver of the 
preexisting condition as described in subdivision 3, without 
interruption in coverage, provided, the policy or certificate 
has been terminated by the insurer for reasons other than 
nonpayment of premium and, provided further, that the option to 
enroll in the plan is exercised within 30 days of termination of 
the existing contract. 
    Coverage in the state plan for purposes of this section 
shall be effective on the date of termination upon completion of 
the proper application and payment of the required premium.  The 
application must include evidence of termination of the existing 
policy or certificate. 
    Sec. 14.  [REPEALER.] 
    (a) Minnesota Statutes 1988, sections 62A.32; 62A.33; 
62A.34; and 62A.35, are repealed. 
    (b) Minnesota Rules, part 2795.0900, is repealed.  
    Sec. 15.  [APPLICATION; EFFECTIVE DATE.] 
    Section 7 is effective the day following final enactment 
and applies to claims arising from incidents occurring on or 
after that date. 
    Sections 1, 2, and 14, paragraph (b), are effective June 1, 
1989.  Sections 3, 4 to 6, 8 to 13, and 14, paragraph (a), are 
effective January 1, 1990, for policies, plans, or contracts 
subject to Minnesota Statutes, section 62A.31, which are issued 
or delivered in this state on or after that date.  No policy of 
Medicare supplement 1+, 1, 2, or 3 may be sold or issued on or 
after that date.  Policies, plans, and contracts in effect on or 
after June 1, 1989, must conform with federal Medicare benefit 
modifications and must provide appropriate premium adjustments 
to policyholders by January 1, 1990. 
    Presented to the governor May 23, 1989 
    Signed by the governor May 25, 1989, 6:12 p.m.