Minnesota Session Laws - 1993, Regular Session

  
    Laws of Minnesota 1993 

                          CHAPTER 1-H.F.No. 22 
           An act relating to insurance; Medicare supplement; 
          permitting phased-in compliance with community rating; 
          amending Minnesota Statutes 1992, section 62A.31, 
          subdivision 1. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1992, section 62A.31, 
subdivision 1, is amended to read: 
    Subdivision 1.  [POLICY REQUIREMENTS.] No individual or 
group policy, certificate, subscriber contract issued by a 
health service plan corporation regulated under chapter 62C, or 
other evidence of accident and health insurance the effect or 
purpose of which is to supplement Medicare coverage issued or 
delivered in this state or offered to a resident of this state 
shall be sold or issued to an individual covered by Medicare 
unless the following requirements are met:  
     (a) The policy must provide a minimum of the coverage set 
out in subdivision 2 and section 62E.07. 
     (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. 
     (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. 
     (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. 
     (f)(1) The policy must provide that benefits and premiums 
under the policy shall be suspended at the request of the 
policyholder for the period, not to exceed 24 months, in which 
the policyholder has applied for and is determined to be 
entitled to medical assistance under title XIX of the Social 
Security Act, but only if the policyholder notifies the issuer 
of the policy within 90 days after the date the individual 
becomes entitled to this assistance; 
     (2) if suspension occurs and if the policyholder or 
certificate holder loses entitlement to this medical assistance, 
the policy shall be automatically reinstated, effective as of 
the date of termination of this entitlement, if the policyholder 
provides notice of loss of the entitlement within 90 days after 
the date of the loss; 
     (3) the policy must provide that upon reinstatement (i) 
there is no additional waiting period with respect to treatment 
of preexisting conditions, (ii) coverage is provided which is 
substantially equivalent to coverage in effect before the date 
of the suspension, and (iii) premiums are classified on terms 
that are at least as favorable to the policyholder or 
certificate holder as the premium classification terms that 
would have applied to the policyholder or certificate holder had 
coverage not been suspended. 
     (g) The written statement required by an application for 
Medicare supplement insurance pursuant to section 62A.43, 
subdivision 1, shall be made on a form, approved by the 
commissioner, that states that counseling services may be 
available in the state to provide advice concerning the purchase 
of Medicare supplement policies and enrollment under the 
Medicaid program. 
     (h) No issuer of Medicare supplement policies, including 
policies that supplement Medicare issued by health maintenance 
organizations or those policies governed by section 1833 or 1876 
of the federal Social Security Act, United States Code, title 
42, section 1395, et seq., in this state may impose preexisting 
condition limitations or otherwise deny or condition the 
issuance or effectiveness of any Medicare supplement insurance 
policy form available for sale in this state, nor may it 
discriminate in the pricing of such a policy, because of the 
health status, claims experience, receipt of health care, or 
medical condition of an applicant where an application for such 
insurance is submitted during the six-month period beginning 
with the first month in which an individual first enrolled for 
benefits under Medicare Part B.  This paragraph applies 
regardless of whether the individual has attained the age of 65 
years.  
    (i) If a Medicare supplement policy replaces another 
Medicare supplement policy, the issuer of the replacing policy 
shall waive any time periods applicable to preexisting 
conditions, waiting periods, elimination periods, and 
probationary periods in the new Medicare supplement policy for 
benefits to the extent the time was spent under the original 
policy. 
    (j) The policy has been filed with and approved by the 
department as meeting all the requirements of sections 62A.31 to 
62A.44. 
    (k) The policy guarantees renewability.  
    Only the following standards for renewability may be used 
in Medicare supplement insurance policy forms. 
     No issuer of Medicare supplement insurance policies may 
cancel or nonrenew a Medicare supplement policy or certificate 
for any reason other than nonpayment of premium or material 
misrepresentation.  
     If a group Medicare supplement insurance policy is 
terminated by the group policyholder and is not replaced as 
provided in this clause, the issuer shall offer certificate 
holders an individual Medicare supplement policy which, at the 
option of the certificate holder, provides for continuation of 
the benefits contained in the group policy; or provides for such 
benefits and benefit packages as otherwise meet the requirements 
of this clause.  
     If an individual is a certificate holder in a group 
Medicare supplement insurance policy and the individual 
terminates membership in the group, the issuer of the policy 
shall offer the certificate holder the conversion opportunities 
described in this clause; or offer the certificate holder 
continuation of coverage under the group policy. 
      (l) A Medicare supplement policy or certificate shall not 
indemnify against losses resulting from sickness on a different 
basis than losses resulting from accidents. 
     (m) A Medicare supplement policy or certificate shall 
provide that benefits designed to cover cost sharing amounts 
under Medicare will be changed automatically to coincide with 
any changes in the applicable Medicare deductible amount and 
copayment percentage factors.  Premiums may be modified to 
correspond with the changes. 
     As soon as practicable, but no later than 30 days prior to 
the annual effective date of any Medicare benefit changes, an 
issuer shall notify its policyholders and certificate holders of 
modifications it has made to Medicare supplement insurance 
policies or certificates in a format acceptable to the 
commissioner.  Such notice shall: 
     (1) include a description of revisions to the Medicare 
program and a description of each modification made to the 
coverage provided under the Medicare supplement policy or 
certificate; and 
     (2) inform each policyholder or certificate holder as to 
when any premium adjustment is to be made, due to changes in 
Medicare. 
     The notice of benefit modifications and any premium 
adjustments must be in outline form and in clear and simple 
terms so as to facilitate comprehension. 
     The notices must not contain or be accompanied by any 
solicitation. 
     (n) Termination by an issuer of a Medicare supplement 
policy or certificate shall be without prejudice to any 
continuous loss that began while the policy or certificate was 
in force, but the extension of benefits beyond the period during 
which the policy or certificate was in force may be conditioned 
on the continuous total disability of the insured, limited to 
the duration of the policy or certificate benefit period, if 
any, or payment of the maximum benefits.  The extension of 
benefits does not apply when the termination is based on fraud, 
misrepresentation, or nonpayment of premium.  An issuer may 
discontinue the availability of a policy form or certificate 
form if the issuer provides to the commissioner in writing its 
decision at least 30 days before discontinuing the availability 
of the form of the policy or certificate.  An issuer that 
discontinues the availability of a policy form or certificate 
shall not file for approval a new policy form or certificate 
form of the same type for the same Medicare supplement benefit 
plan as the discontinued form for five years after the issuer 
provides notice to the commissioner of the discontinuance.  The 
period of discontinuance may be reduced if the commissioner 
determines that a shorter period is appropriate.  The sale or 
other transfer of Medicare supplement business to another issuer 
shall be considered a discontinuance for the purposes of this 
section.  A change in the rating structure or methodology shall 
be considered a discontinuance under this section unless the 
issuer complies with the following requirements: 
     (1) the issuer provides an actuarial memorandum, in a form 
and manner prescribed by the commissioner, describing the manner 
in which the revised rating methodology and resulting rates 
differ from the existing rating methodology and resulting rates; 
and 
     (2) the issuer does not subsequently put into effect a 
change of rates or rating factors that would cause the 
percentage differential between the discontinued and subsequent 
rates as described in the actuarial memorandum to change.  The 
commissioner may approve a change to the differential that is in 
the public interest. 
     (o)(1) Except as provided in clause (2), the Minnesota 
experience of all policy forms or certificate forms of the same 
type in a standard Medicare supplement benefit plan shall be 
combined for purposes of the refund or credit calculation 
prescribed in section 62A.36; 
     (2) forms assumed under an assumption reinsurance agreement 
shall not be combined with the Minnesota experience of other 
forms for purposes of the refund or credit calculation. 
     (p) Medicare supplement policies and certificates shall 
include a renewal or continuation provision.  The language or 
specifications of the provision shall be consistent with the 
type of contract issued.  The provision shall be appropriately 
captioned and shall appear on the first page of the policy or 
certificate, and shall include any reservation by the issuer of 
the right to change premiums and any automatic renewal premium 
increases based on the policyholder's age.  Except for riders or 
endorsements by which the issuer effectuates a request made in 
writing by the insured, exercises a specifically reserved right 
under a Medicare supplement policy or certificate, or is 
required to reduce or eliminate benefits to avoid duplication of 
Medicare benefits, all riders or endorsements added to a 
Medicare supplement policy or certificate after the date of 
issue or at reinstatement or renewal that reduce or eliminate 
benefits or coverage in the policy or certificate shall require 
a signed acceptance by the insured.  After the date of policy or 
certificate issue, a rider or endorsement that increases 
benefits or coverage with a concomitant increase in premium 
during the policy or certificate term shall be agreed to in 
writing and signed by the insured, unless the benefits are 
required by the minimum standards for Medicare supplement 
policies or if the increased benefits or coverage is required by 
law.  Where a separate additional premium is charged for 
benefits provided in connection with riders or endorsements, the 
premium charge shall be set forth in the policy, declaration 
page, or certificate.  If a Medicare supplement policy or 
certificate contains limitations with respect to preexisting 
conditions, the limitations shall appear as a separate paragraph 
of the policy or certificate and be labeled as "preexisting 
condition limitations." 
     Issuers of accident and sickness policies or certificates 
that provide hospital or medical expense coverage on an expense 
incurred or indemnity basis, other than incidentally, to a 
person eligible for Medicare by reason of age shall provide to 
such applicants a Medicare Supplement Buyer's Guide in the form 
developed by the Health Care Financing Administration and in a 
type size no smaller than 12-point type.  Delivery of the 
Buyer's Guide must be made whether or not such policies or 
certificates are advertised, solicited, or issued as Medicare 
supplement policies or certificates as defined in this section.  
Except in the case of direct response issuers, delivery of the 
Buyer's Guide must be made to the applicant at the time of 
application, and acknowledgment of receipt of the Buyer's Guide 
must be obtained by the issuer.  Direct response issuers shall 
deliver the Buyer's Guide to the applicant upon request, but no 
later than the time at which the policy is delivered. 
     (q)(1) An issuer, directly or through its producers, shall: 
     (i) establish marketing procedures to assure that a 
comparison of policies by its agents or other producers will be 
fair and accurate; 
     (ii) establish marketing procedures to ensure that 
excessive insurance is not sold or issued; 
     (iii) establish marketing procedures that set forth a 
mechanism or formula for determining whether a replacement 
policy or certificate contains benefits clearly and 
substantially greater than the benefits under the replaced 
policy or certificate; 
     (iv) display prominently by type or other appropriate 
means, on the first page of the policy or certificate, the 
following: 
 "Notice to buyer:  This policy or certificate may not cover 
all of your medical expenses"; 
     (v) inquire and otherwise make every reasonable effort to 
identify whether a prospective applicant or enrollee for 
Medicare supplement insurance already has accident and sickness 
insurance and the types and amounts of the insurance; 
     (vi) establish auditable procedures for verifying 
compliance with this paragraph; 
     (2) in addition to the practices prohibited in chapter 72A, 
the following acts and practices are prohibited: 
     (i) knowingly making any misleading representation or 
incomplete or fraudulent comparison of any insurance policies or 
issuers for the purpose of inducing, or tending to induce, any 
person to lapse, forfeit, surrender, terminate, retain, pledge, 
assign, borrow on, or convert any insurance policy or to take 
out a policy of insurance with another insurer; 
     (ii) employing any method of marketing having the effect of 
or tending to induce the purchase of insurance through force, 
fright, threat, whether explicit or implied, or undue pressure 
to purchase or recommend the purchase of insurance; 
     (iii) making use directly or indirectly of any method of 
marketing which fails to disclose in a conspicuous manner that a 
purpose of the method of marketing is solicitation of insurance 
and that contact will be made by an insurance agent or insurance 
company; 
    (3) the terms "Medicare supplement," "medigap," and words 
of similar import shall not be used unless the policy or 
certificate is issued in compliance with this subdivision. 
    (r) Each health maintenance organization, health service 
plan corporation, insurer, or fraternal benefit society that 
sells coverage that supplements Medicare coverage shall 
establish a separate community rate for that coverage.  
Beginning January 1, 1993, no coverage that supplements Medicare 
or that is governed by section 1833 or 1876 of the federal 
Social Security Act, United States Code, title 42, section 1395, 
et seq., may be offered, issued, sold, or renewed to a Minnesota 
resident, except at the community rate required by this 
paragraph.  The same community rate must apply to newly-issued 
coverage and to renewal coverage. 
    For coverage that supplements Medicare and for the Part A 
rate calculation for plans governed by section 1833 of the 
federal Social Security Act, United States Code, title 42, 
section 1395, et seq., the community rate may take into account 
only the following factors: 
    (1) actuarially valid differences in benefit designs or 
provider networks; 
    (2) geographic variations in rates if preapproved by the 
commissioner of commerce; and 
    (3) premium reductions in recognition of healthy lifestyle 
behaviors, including but not limited to, refraining from the use 
of tobacco.  Premium reductions must be actuarially valid and 
must relate only to those healthy lifestyle behaviors that have 
a proven positive impact on health.  Factors used by the health 
carrier making this premium reduction must be filed with and 
approved by the commissioner of commerce. 
    For insureds not residing in Anoka, Carver, Chisago, 
Dakota, Hennepin, Ramsey, Scott, or Washington county, a health 
plan may, at the option of the health carrier, phase in 
compliance under the following timetable: 
    (i) a premium adjustment as of March 1, 1993, that consists 
of one-half of the difference between the community rate that 
would be applicable to the person as of March 1, 1993, and the 
premium rate that would be applicable to the person as of March 
1, 1993, under the rate schedule permitted on December 31, 1992. 
A health plan may, at the option of the health carrier, 
implement the entire premium difference described in this clause 
for any person as of March 1, 1993, if the premium difference 
would be 15 percent or less of the premium rate that would be 
applicable to the person as of March 1, 1993, under the rate 
schedule permitted on December 31, 1992, if the health plan does 
so uniformly regardless of whether the premium difference causes 
premiums to rise or to fall.  The premium difference described 
in this clause is in addition to any premium adjustment 
attributable to medical cost inflation or any other lawful 
factor and is intended to describe only the premium difference 
attributable to the transition to the community rate; and 
    (ii) with respect to any person whose premium adjustment 
was constrained under clause (i), a premium adjustment as of 
January 1, 1994, that consists of the remaining one-half of the 
premium difference attributable to the transition to the 
community rate, as described in clause (i). 
    A health plan that initially follows the phase-in timetable 
may at any subsequent time comply on a more rapid timetable.  A 
health plan that is in full compliance as of January 1, 1993, 
may not use the phase-in timetable and must remain in full 
compliance.  Health plans that follow the phase-in timetable 
must charge the same premium rate for newly-issued coverage that 
they charge for renewal coverage.  A health plan whose premiums 
are constrained by clause (i) may take the constraint into 
account in establishing its community rate. 
    From January 1, 1993 to February 28, 1993, a health plan 
may, at the health carrier's option, charge the community rate 
under this paragraph or may instead charge premiums permitted as 
of December 31, 1992. 
      (s) Beginning January 1, 1993, a health maintenance 
organization that issues coverage that supplements Medicare or 
that issues coverage governed by section 1833 or 1876 of the 
federal Social Security Act, United States Code, title 42, 
section 1395 et seq., must offer, to each person to whom it 
offers any contract described in this paragraph, at least one 
contract that either: 
     (1) covers 80 percent of the reasonable and customary 
charge for prescription drugs or the copayment equivalency; or 
     (2) offers the coverage described in clause (1) as an 
optional rider that may be purchased separately from other 
optional coverages.  Each contract issued without prescription 
drug coverage by any insurer, health service plan corporation, 
health maintenance organization, or fraternal benefit society 
must contain, displayed prominently by type or other appropriate 
means, on the first page of the contract, the following: 
    "Notice to buyer:  This contract does not cover 
prescription drugs.  Prescription drugs can be a very high 
percentage of your medical expenses.  Coverage for prescription 
drugs may be available to you.  Please ask for further details." 
    From January 1, 1993 to February 28, 1993, compliance with 
this paragraph is optional.  If a health maintenance 
organization does not comply with this paragraph during that 
period, the health maintenance organization must extend any 
person's six-month eligibility period provided under paragraph 
(h) that began prior to or during that period and ends during or 
after that period.  The length of the extension must be no less 
than that portion of the person's six-month eligibility period 
during which the health carrier did not comply with this 
paragraph.  The extended eligibility period applies only to 
contracts that provide the prescription drug coverage required 
by this paragraph. 
    Sec. 2.  [EFFECTIVE DATE.] 
    Section 1 is effective July 30, 1992. 
    Presented to the governor January 19, 1993 
    Signed by the governor January 21, 1993, 2:47 p.m.