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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

                             CHAPTER 17-H.F.No. 925 
                  An act relating to insurance; making federally 
                  conforming changes in Medicare-related coverage; 
                  providing financial solvency regulation for 
                  stand-alone Medicare Part D prescription drug plans; 
                  making related technical changes; amending Minnesota 
                  Statutes 2004, sections 62A.31, subdivisions 1f, 1k, 
                  1n, 1s, 1t, 1u, 3, 4, 7; 62A.315; 62A.316; 62A.318; 
                  62A.36, subdivision 1; 62L.12, subdivision 2; 62Q.01, 
                  subdivision 6; 256.9657, subdivision 3; proposing 
                  coding for new law in Minnesota Statutes, chapter 62A. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1 
           FEDERALLY CONFORMING CHANGES IN MEDICARE-RELATED COVERAGES 
           Section 1.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 1f, is amended to read: 
           Subd. 1f.  [SUSPENSION BASED ON ENTITLEMENT TO MEDICAL 
        ASSISTANCE.] (a) The policy or certificate must provide that 
        benefits and premiums under the policy or certificate shall be 
        suspended for any period that may be provided by federal 
        regulation at the request of the policyholder or certificate 
        holder for the period, not to exceed 24 months, in which the 
        policyholder or certificate holder 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 or 
        certificate holder notifies the issuer of the policy or 
        certificate within 90 days after the date the individual becomes 
        entitled to this assistance. 
           (b) If suspension occurs and if the policyholder or 
        certificate holder loses entitlement to this medical assistance, 
        the policy or certificate shall be automatically reinstated, 
        effective as of the date of termination of this entitlement, if 
        the policyholder or certificate holder provides notice of loss 
        of the entitlement within 90 days after the date of the loss and 
        pays the premium attributable to the period, effective as of the 
        date of termination of entitlement. 
           (c) The policy must provide that upon reinstatement (1) 
        there is no additional waiting period with respect to treatment 
        of preexisting conditions, (2) coverage is provided which is 
        substantially equivalent to coverage in effect before the date 
        of the suspension.  If the suspended policy provided coverage 
        for outpatient prescription drugs, reinstitution of the policy 
        for Medicare Part D enrollees must be without coverage for 
        outpatient prescription drugs and must otherwise provide 
        coverage substantially equivalent to the coverage in effect 
        before the date of suspension, and (3) 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. 
           Sec. 2.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 1k, is amended to read: 
           Subd. 1k.  [GUARANTEED RENEWABILITY.] The policy must 
        guarantee renewability.  
           (a) Only the following standards for renewability provided 
        in this subdivision may be used in Medicare supplement insurance 
        policy forms. 
           (b) 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.  
           (c) 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.  
           (d) 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. 
           (e) If a Medicare supplement policy eliminates an 
        outpatient prescription drug benefit as a result of requirements 
        imposed by the Medicare Prescription Drug, Improvement, and 
        Modernization Act of 2003, the policy as modified for that 
        purpose is deemed to satisfy the guaranteed renewal requirements 
        of this subdivision. 
           Sec. 3.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 1n, is amended to read: 
           Subd. 1n.  [TERMINATION OF COVERAGE.] (a) 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.  Receipt of Medicare Part D benefits is 
        not considered in determining a continuous loss.  
           (b) 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 form 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 This period of 
        discontinuance ineligibility to file a form for approval 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. 
           Sec. 4.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 1s, is amended to read: 
           Subd. 1s.  [PRESCRIPTION DRUG COVERAGE.] Beginning January 
        1, 1993, a health maintenance organization that issues 
        Medicare-related coverage must offer, to each person to whom it 
        offers any contract described in this subdivision, at least one 
        contract that either: 
           (1) covers 80 percent of the reasonable and customary 
        charge for prescription drugs or the co-payment equivalency; or 
           (2) offers the coverage described in clause (1) as an 
        optional rider that may be purchased separately from other 
        optional coverages (a) Subject to subdivisions 1k, 1m, 1n, and 
        1p, a Medicare supplement policy with benefits for outpatient 
        prescription drugs, in existence prior to January 1, 2006, must 
        be renewed, at the option of the policyholder, for current 
        policyholders who do not enroll in Medicare Part D.  
           (b) A Medicare supplement policy with benefits for 
        outpatient prescription drugs must not be issued after December 
        31, 2005. 
           (c) After December 31, 2005, a Medicare supplement policy 
        with benefits for outpatient prescription drugs must not be 
        renewed after the policyholder enrolls in Medicare Part D unless:
           (1) the policy is modified to eliminate outpatient 
        prescription drug coverage for expenses of outpatient 
        prescription drugs incurred on or after the effective date of 
        the individual's coverage under Medicare Part D; and 
           (2) premiums are adjusted to reflect the elimination of 
        outpatient prescription drug coverage at the time of Medicare 
        Part D enrollment, accounting for any claims paid, if applicable.
           (d) An issuer of a Medicare supplement policy or 
        certificate must comply with the federal Medicare Prescription 
        Drug, Improvement, and Modernization Act of 2003, as amended, 
        including any federal regulations, as amended, adopted under 
        that act.  This paragraph does not require compliance with any 
        provision of that act until the date upon which that act 
        requires compliance with that provision.  The commissioner has 
        authority to enforce this paragraph. 
           Sec. 5.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 1t, is amended to read: 
           Subd. 1t.  [NOTICE OF LACK OF DRUG COVERAGE.] Each policy 
        or 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 by retaining existing coverage you 
        may have or by enrolling in Medicare Part D.  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 subdivision 
        1h 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. 6.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 1u, is amended to read: 
           Subd. 1u.  [GUARANTEED ISSUE FOR ELIGIBLE PERSONS.] (a)(1) 
        Eligible persons are those individuals described in paragraph 
        (b) who seek to enroll under the policy during the period 
        specified in paragraph (c) and who submit evidence of the date 
        of termination or disenrollment described in paragraph (b), or 
        of the date of Medicare Part D enrollment, 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 paragraph (c) that is offered and 
        is available for issuance to new enrollees by the issuer; 
        discriminate in the pricing of such a Medicare supplement policy 
        because of health status, claims experience, receipt of health 
        care, medical condition, or age; or impose an exclusion of 
        benefits based upon a preexisting condition under such a 
        Medicare supplement policy. 
           (b) An eligible person is an individual described in any of 
        the following: 
           (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; 
           (2) the individual is enrolled with a Medicare+Choice 
        Medicare Advantage organization under a Medicare+Choice Medicare 
        Advantage plan under Medicare Part C, and any of the following 
        circumstances apply, or the individual is 65 years of age or 
        older and is enrolled with a Program of All-Inclusive Care for 
        the Elderly (PACE) provider under section 1894 of the federal 
        Social Security Act, and there are circumstances similar to 
        those described in this clause that would permit discontinuance 
        of the individual's enrollment with the provider if the 
        individual were enrolled in a Medicare+Choice Medicare Advantage 
        plan: 
           (i) the organization's or plan's certification under 
        Medicare Part C has been terminated or the organization has 
        terminated or otherwise discontinued providing the plan in the 
        area in which the individual resides; 
           (ii) 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, United States Code, title 42, section 
        1395w-21(g)(3)(b) (where the individual has not paid premiums on 
        a timely basis or has engaged in disruptive behavior as 
        specified in standards under section 1856 of the federal Social 
        Security Act, United States Code, title 42, section 1395w-26), 
        or the plan is terminated for all individuals within a residence 
        area; 
           (iii) the individual demonstrates, in accordance with 
        guidelines established by the Secretary, that: 
           (A) the organization offering the plan substantially 
        violated a material provision of the organization's contract in 
        relation to the individual, including the failure to provide an 
        enrollee 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 
           (B) 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 
           (iv) the individual meets such other exceptional conditions 
        as the secretary may provide; 
           (3)(i) the individual is enrolled with: 
           (A) an eligible organization under a contract under section 
        1876 of the federal Social Security Act, United States Code, 
        title 42, section 1395mm (Medicare 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) of the federal Social Security Act, United States 
        Code, title 42, section 1395l(a)(1)(A) (health care prepayment 
        plan); or 
           (D) an organization under a Medicare Select policy under 
        section 62A.318 or the similar law of another state; and 
           (ii) the enrollment ceases under the same circumstances 
        that would permit discontinuance of an individual's election of 
        coverage under clause (2); 
           (4) the individual is enrolled under a Medicare supplement 
        policy, and the enrollment ceases because: 
           (i)(A) of the insolvency of the issuer or bankruptcy of the 
        nonissuer organization; or 
           (B) of other involuntary termination of coverage or 
        enrollment under the policy; 
           (ii) the issuer of the policy substantially violated a 
        material provision of the policy; or 
           (iii) 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)(i) the individual was enrolled under a Medicare 
        supplement policy and terminates that enrollment and 
        subsequently enrolls, for the first time, with any 
        Medicare+Choice Medicare Advantage organization under a 
        Medicare+Choice Medicare Advantage plan under Medicare Part C; 
        any eligible organization under a contract under section 1876 of 
        the federal Social Security Act, United States Code, title 42, 
        section 1395mm (Medicare cost); any similar organization 
        operating under demonstration project authority; any PACE 
        provider under section 1894 of the federal Social Security Act, 
        or a Medicare Select policy under section 62A.318 or the similar 
        law of another state; and 
           (ii) the subsequent enrollment under item (i) is terminated 
        by the enrollee during any period within the first 12 months of 
        the subsequent enrollment during which the enrollee is permitted 
        to terminate the subsequent enrollment under section 1851(e) of 
        the federal Social Security Act; or 
           (6) the individual, upon first enrolling for benefits under 
        Medicare Part B, enrolls in a Medicare+Choice Medicare Advantage 
        plan under Medicare Part C, or with a PACE provider under 
        section 1894 of the federal Social Security Act, and disenrolls 
        from the plan by not later than 12 months after the effective 
        date of enrollment; or 
           (7) the individual enrolls in a Medicare Part D plan during 
        the initial Part D enrollment period, as defined under United 
        States Code, title 42, section 1395ss(v)(6)(D), and, at the time 
        of enrollment in Part D, was enrolled under a Medicare 
        supplement policy that covers outpatient prescription drugs and 
        the individual terminates enrollment in the Medicare supplement 
        policy and submits evidence of enrollment in Medicare Part D 
        along with the application for a policy described in paragraph 
        (e), clause (4). 
           (c)(1) In the case of an individual described in paragraph 
        (b), clause (1), the guaranteed issue period begins on the later 
        of:  (i) the date the individual receives a notice of 
        termination or cessation of all supplemental health benefits or, 
        if a notice is not received, notice that a claim has been denied 
        because of a termination or cessation,; or (ii) the date that 
        the applicable coverage terminates or ceases; and ends 63 days 
        after the date of the applicable notice later of those two dates.
           (2) In the case of an individual described in paragraph 
        (b), clause (2), (3), (5), or (6), whose enrollment is 
        terminated involuntarily, the guaranteed issue period begins on 
        the date that the individual receives a notice of termination 
        and ends 63 days after the date the applicable coverage is 
        terminated. 
           (3) In the case of an individual described in paragraph 
        (b), clause (4), item (i), the guaranteed issue period begins on 
        the earlier of:  (i) the date that the individual receives a 
        notice of termination, a notice of the issuer's bankruptcy or 
        insolvency, or other such similar notice if any; and (ii) the 
        date that the applicable coverage is terminated, and ends on the 
        date that is 63 days after the date the coverage is terminated. 
           (4) In the case of an individual described in paragraph 
        (b), clause (2), (4), (5), or (6), who disenrolls voluntarily, 
        the guaranteed issue period begins on the date that is 60 days 
        before the effective date of the disenrollment and ends on the 
        date that is 63 days after the effective date. 
           (5) In the case of an individual described in paragraph 
        (b), clause (7), the guaranteed issue period begins on the date 
        the individual receives notice pursuant to section 1882(v)(2)(B) 
        of the Social Security Act from the Medicare supplement issuer 
        during the 60-day period immediately preceding the initial Part 
        D enrollment period and ends on the date that is 63 days after 
        the effective date of the individual's coverage under Medicare 
        Part D. 
           (6) In the case of an individual described in paragraph (b) 
        but not described in this paragraph, the guaranteed issue period 
        begins on the effective date of disenrollment and ends on the 
        date that is 63 days after the effective date. 
           (d)(1) In the case of an individual described in paragraph 
        (b), clause (5), or deemed to be so described, pursuant to this 
        paragraph, whose enrollment with an organization or provider 
        described in paragraph (b), clause (5), item (i), is 
        involuntarily terminated within the first 12 months of 
        enrollment, and who, without an intervening enrollment, enrolls 
        with another such organization or provider, the subsequent 
        enrollment is deemed to be an initial enrollment described in 
        paragraph (b), clause (5). 
           (2) In the case of an individual described in paragraph 
        (b), clause (6), or deemed to be so described, pursuant to this 
        paragraph, whose enrollment with a plan or in a program 
        described in paragraph (b), clause (6), is involuntarily 
        terminated within the first 12 months of enrollment, and who, 
        without an intervening enrollment, enrolls in another such plan 
        or program, the subsequent enrollment is deemed to be an initial 
        enrollment described in paragraph (b), clause (6). 
           (3) For purposes of paragraph (b), clauses (5) and (6), no 
        enrollment of an individual with an organization or provider 
        described in paragraph (b), clause (5), item (i), or with a plan 
        or in a program described in paragraph (b), clause (6), may be 
        deemed to be an initial enrollment under this paragraph after 
        the two-year period beginning on the date on which the 
        individual first enrolled with the organization, provider, plan, 
        or program. 
           (e) The Medicare supplement policy to which eligible 
        persons are entitled under: 
           (1) paragraph (b), clauses (1) to (4), is any Medicare 
        supplement policy that has a benefit package consisting of the 
        basic Medicare supplement plan described in section 62A.316, 
        paragraph (a), plus any combination of the three optional riders 
        described in section 62A.316, paragraph (b), clauses (1) to (3), 
        offered by any issuer; 
           (2) paragraph (b), clause (5), 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, any policy described in clause (1) offered by 
        any issuer;, except that after December 31, 2005, if the 
        individual was most recently enrolled in a Medicare supplement 
        policy with an outpatient prescription drug benefit, a Medicare 
        supplement policy to which the individual is entitled under 
        paragraph (b), clause (5), is: 
           (i) the policy available from the same issuer but modified 
        to remove outpatient prescription drug coverage; or 
           (ii) at the election of the policyholder, a policy 
        described in clause (4), except that the policy may be one that 
        is offered and available for issuance to new enrollees that is 
        offered by any issuer; 
           (3) paragraph (b), clause (6), shall include is any 
        Medicare supplement policy offered by any issuer; 
           (4) paragraph (b), clause (7), is a Medicare supplement 
        policy that has a benefit package classified as a basic plan 
        under section 62A.316 if the enrollee's existing Medicare 
        supplement policy is a basic plan or, if the enrollee's existing 
        Medicare supplement policy is an extended basic plan under 
        section 62A.315, a basic or extended basic plan at the option of 
        the enrollee, provided that the policy is offered and is 
        available for issuance to new enrollees by the same issuer that 
        issued the individual's Medicare supplement policy with 
        outpatient prescription drug coverage.  The issuer must permit 
        the enrollee to retain all optional benefits contained in the 
        enrollee's existing coverage, other than outpatient prescription 
        drugs, subject to the provision that the coverage be offered and 
        available for issuance to new enrollees by the same issuer. 
           (f)(1) At the time of an event described in paragraph (b), 
        because of which an individual loses coverage or benefits due to 
        the termination of a contract or agreement, policy, or plan, the 
        organization that terminates the contract or agreement, the 
        issuer terminating the policy, or the administrator of the plan 
        being terminated, respectively, shall notify the individual of 
        the individual's rights under this subdivision, and of the 
        obligations of issuers of Medicare supplement policies under 
        paragraph (a).  The notice must be communicated 
        contemporaneously with the notification of termination. 
           (2) At the time of an event described in paragraph (b), 
        because of which an individual ceases enrollment under a 
        contract or agreement, policy, or plan, the organization that 
        offers the contract or agreement, regardless of the basis for 
        the cessation of enrollment, the issuer offering the policy, or 
        the administrator of the plan, respectively, shall notify the 
        individual of the individual's rights under this subdivision, 
        and of the obligations of issuers of Medicare supplement 
        policies under paragraph (a).  The notice must be communicated 
        within ten working days of the issuer receiving notification of 
        disenrollment.  
           (g) Reference in this subdivision to a situation in which, 
        or to a basis upon which, an individual's coverage has been 
        terminated does not provide authority under the laws of this 
        state for the termination in that situation or upon that basis. 
           (h) An individual's rights under this subdivision are in 
        addition to, and do not modify or limit, the individual's rights 
        under subdivision 1h. 
           Sec. 7.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 3, is amended to read: 
           Subd. 3.  [DEFINITIONS.] (a) The definitions provided in 
        this subdivision apply to sections 62A.31 to 62A.44. 
           (b) "Accident," "accidental injury," or "accidental means" 
        means to employ "result" language and does not include words 
        that establish an accidental means test or use words such as 
        "external," "violent," "visible wounds," or similar words of 
        description or characterization. 
           (1) The definition shall not be more restrictive than the 
        following:  "Injury or injuries for which benefits are provided 
        means accidental bodily injury sustained by the insured person 
        which is the direct result of an accident, independent of 
        disease or bodily infirmity or any other cause, and occurs while 
        insurance coverage is in force." 
           (2) The definition may provide that injuries shall not 
        include injuries for which benefits are provided or available 
        under a workers' compensation, employer's liability or similar 
        law, or motor vehicle no-fault plan, unless prohibited by law. 
           (c) "Applicant" means: 
           (1) in the case of an individual Medicare supplement policy 
        or certificate, the person who seeks to contract for insurance 
        benefits; and 
           (2) in the case of a group Medicare supplement policy or 
        certificate, the proposed certificate holder. 
           (d) "Bankruptcy" means a situation in which a 
        Medicare+Choice Medicare Advantage 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 the 
        state. 
           (e) "Benefit period" or "Medicare benefit period" shall not 
        be defined more restrictively than as defined in the Medicare 
        program. 
           (f) "Certificate" means a certificate delivered or issued 
        for delivery in this state or offered to a resident of this 
        state under a group Medicare supplement policy or certificate. 
           (g) "Certificate form" means the form on which the 
        certificate is delivered or issued for delivery by the issuer. 
           (h) "Convalescent nursing home," "extended care facility," 
        or "skilled nursing facility" shall not be defined more 
        restrictively than as defined in the Medicare program. 
           (i) "Employee welfare benefit plan" means a plan, fund, or 
        program of employee benefits as defined in United States Code, 
        title 29, section 1002 (Employee Retirement Income Security Act).
           (j) "Health care expenses" means, for purposes of section 
        62A.36, expenses of health maintenance organizations associated 
        with the delivery of health care services which are analogous to 
        incurred losses of insurers.  The expenses shall not include: 
           (1) home office and overhead costs; 
           (2) advertising costs; 
           (3) commissions and other acquisition costs; 
           (4) taxes; 
           (5) capital costs; 
           (6) administrative costs; and 
           (7) claims processing costs. 
           (k) "Hospital" may be defined in relation to its status, 
        facilities, and available services or to reflect its 
        accreditation by the Joint Commission on Accreditation of 
        Hospitals, but not more restrictively than as defined in the 
        Medicare program. 
           (l) "Insolvency" means a situation in which an issuer, 
        licensed to transact the business of insurance in this state, 
        including the right to transact business as any type of issuer, 
        has had a final order of liquidation entered against it with a 
        finding of insolvency by a court of competent jurisdiction in 
        the issuer's state of domicile. 
           (m) "Issuer" includes insurance companies, fraternal 
        benefit societies, health service plan corporations, health 
        maintenance organizations, and any other entity delivering or 
        issuing for delivery Medicare supplement policies or 
        certificates in this state or offering these policies or 
        certificates to residents of this state. 
           (n) "Medicare" shall be defined in the policy and 
        certificate.  Medicare may be defined as the Health Insurance 
        for the Aged Act, title XVIII of the Social Security Amendments 
        of 1965, as amended, or title I, part I, of Public Law 89-97, as 
        enacted by the 89th Congress of the United States of America and 
        popularly known as the Health Insurance for the Aged Act, as 
        amended. 
           (o) "Medicare eligible expenses" means health care expenses 
        covered by Medicare Part A or B, to the extent recognized as 
        reasonable and medically necessary by Medicare. 
           (p) "Medicare+Choice Medicare Advantage plan" means a plan 
        of coverage for health benefits under Medicare Part C as defined 
        in section 1859 of the federal Social Security Act, United 
        States Code, title 42, section 1395w-28, and includes: 
           (1) coordinated care plans which provide health care 
        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; 
           (2) medical savings account plans coupled with a 
        contribution into a Medicare+Choice Medicare Advantage medical 
        savings account; and 
           (3) Medicare+Choice Medicare Advantage private 
        fee-for-service plans. 
           (q) "Medicare-related coverage" means a policy, contract, 
        or certificate issued as a supplement to Medicare, regulated 
        under sections 62A.31 to 62A.44, including Medicare select 
        coverage; policies, contracts, or certificates that supplement 
        Medicare issued by health maintenance organizations; or 
        policies, contracts, or certificates governed by section 1833 
        (known as "cost" or "HCPP" contracts) or 1876 (known as "TEFRA" 
        or "risk" contracts) of the federal Social Security Act, United 
        States Code, title 42, section 1395, et seq., as amended; or 
        Section 4001 of the Balanced Budget Act of 1997 (BBA)(Public Law 
        105-33), Sections 1851 to 1859 of the Social Security Act 
        establishing part C of the Medicare program, known as the 
        "Medicare+Choice Medicare Advantage program." 
           (r) "Medicare supplement policy or certificate" means a 
        group or individual policy of accident and sickness insurance or 
        a subscriber contract of hospital and medical service 
        associations or health maintenance organizations, or other than 
        those policies or certificates covered by section 1833 of the 
        federal Social Security Act, United States Code, title 42, 
        section 1395, et seq., or an issued policy under a demonstration 
        project specified under amendments to the federal Social 
        Security Act, which is advertised, marketed, or designed 
        primarily as a supplement to reimbursements under Medicare for 
        the hospital, medical, or surgical expenses of persons eligible 
        for Medicare.  "Medicare supplement policy" does not include 
        Medicare Advantage plans established under Medicare Part C, 
        outpatient prescription drug plans established under Medicare 
        Part D, or any health care prepayment plan that provides 
        benefits under an agreement under section 1833(a)(1)(A) of the 
        Social Security Act. 
           (s) "Physician" shall not be defined more restrictively 
        than as defined in the Medicare program or section 62A.04, 
        subdivision 1, or 62A.15, subdivision 3a. 
           (t) "Policy form" means the form on which the policy is 
        delivered or issued for delivery by the issuer. 
           (u) "Secretary" means the Secretary of the United States 
        Department of Health and Human Services. 
           (v) "Sickness" shall not be defined more restrictively than 
        the following: 
           "Sickness means illness or disease of an insured person 
           which first manifests itself after the effective date of 
           insurance and while the insurance is in force." 
           The definition may be further modified to exclude 
        sicknesses or diseases for which benefits are provided under a 
        workers' compensation, occupational disease, employer's 
        liability, or similar law. 
           (w) "Outpatient prescription drug" means a prescription 
        drug prescribed or administered under circumstances that qualify 
        for coverage under Medicare Part D and not under Medicare Part A 
        or Part B.  
           Sec. 8.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 4, is amended to read: 
           Subd. 4.  [PROHIBITED POLICY PROVISIONS.] (a) A Medicare 
        supplement policy or certificate in force in the state shall not 
        contain benefits that duplicate benefits provided by Medicare or 
        contain exclusions on coverage that are more restrictive than 
        those of Medicare.  Duplication of benefits is permitted to the 
        extent permitted under subdivision 1s, paragraph (a), for 
        benefits provided by Medicare Part D. 
           (b) No Medicare supplement policy or certificate may use 
        waivers to exclude, limit, or reduce coverage or benefits for 
        specifically named or described preexisting diseases or physical 
        conditions, except as permitted under subdivision 1b. 
           Sec. 9.  Minnesota Statutes 2004, section 62A.31, 
        subdivision 7, is amended to read: 
           Subd. 7.  [MEDICARE PRESCRIPTION DRUG BENEFIT.] If Congress 
        enacts legislation creating a prescription drug benefit in the 
        Medicare program, nothing in this section or any other section 
        shall prohibit an issuer of a Medicare supplement policy from 
        offering this prescription drug benefit consistent with the 
        applicable federal law or regulations.  If an issuer offers the 
        federal benefit, such an offer shall be deemed to meet the 
        issuer's mandatory offer obligations under this section and may, 
        at the discretion of the issuer, constitute replacement coverage 
        as defined in subdivision 1i for any existing policy containing 
        a prescription drug benefit. 
           Sec. 10.  Minnesota Statutes 2004, section 62A.315, is 
        amended to read: 
           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 section 62E.07, and will provide: 
           (1) coverage for all of the Medicare Part A inpatient 
        hospital deductible and coinsurance amounts, and 100 percent of 
        all Medicare Part A eligible expenses for hospitalization not 
        covered by Medicare; 
           (2) coverage for the daily co-payment amount of Medicare 
        Part A eligible expenses for the calendar year incurred for 
        skilled nursing facility care; 
           (3) coverage for the coinsurance amount or in the case of 
        hospital outpatient department services paid under a prospective 
        payment system, the co-payment amount, of Medicare eligible 
        expenses under Medicare Part B regardless of hospital 
        confinement, and the Medicare Part B deductible amount; 
           (4) 80 percent of the usual and customary hospital and 
        medical expenses and supplies described in section 62E.06, 
        subdivision 1, not to exceed any charge limitation established 
        by the Medicare program or state law,; the usual and customary 
        hospital and medical expenses and supplies, described in section 
        62E.06, subdivision 1, while in a foreign country,; and 
        prescription drug expenses, not covered by Medicare.  An 
        outpatient prescription drug benefit must not be included for 
        sale or issuance in a Medicare supplement policy or certificate 
        issued on or after January 1, 2006; 
           (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; 
           (6) 100 percent of the cost of immunizations and routine 
        screening procedures for cancer, including mammograms and pap 
        smears; 
           (7) preventive medical care benefit:  coverage for the 
        following preventive health services: 
           (i) an annual clinical preventive medical history and 
        physical examination that may include tests and services from 
        clause (ii) and patient education to address preventive health 
        care measures; 
           (ii) any one or a combination of the following preventive 
        screening tests or preventive services, the frequency of which 
        is considered medically appropriate: 
           (A) fecal occult blood test and/or digital rectal 
        examination; 
           (B) dipstick urinalysis for hematuria, bacteriuria, and 
        proteinuria; 
           (C) pure tone (air only) hearing screening test 
        administered or ordered by a physician; 
           (D) serum cholesterol screening every five years; 
           (E) thyroid function test; 
           (F) diabetes screening; 
           (iii) any other tests or preventive measures determined 
        appropriate by the attending physician.  
           Reimbursement shall be for the actual charges up to 100 
        percent 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; 
           (8) at-home recovery benefit:  coverage for services to 
        provide short-term at-home assistance with activities of daily 
        living for those recovering from an illness, injury, or surgery: 
           (i) for purposes of this benefit, the following definitions 
        shall apply: 
           (A) "activities of daily living" include, but are not 
        limited to, bathing, dressing, personal hygiene, transferring, 
        eating, ambulating, assistance with drugs that are normally 
        self-administered, and changing bandages or other dressings; 
           (B) "care provider" means a duly qualified or licensed home 
        health aide/homemaker, personal care aide, or nurse provided 
        through a licensed home health care agency or referred by a 
        licensed referral agency or licensed nurses registry; 
           (C) "home" means a place used by the insured as a place of 
        residence, provided that the place would qualify as a residence 
        for home health care services covered by Medicare.  A hospital 
        or skilled nursing facility shall not be considered the 
        insured's place of residence; 
           (D) "at-home recovery visit" means the period of a visit 
        required to provide at-home recovery care, without limit on the 
        duration of the visit, except each consecutive four hours in a 
        24-hour period of services provided by a care provider is one 
        visit; 
           (ii) coverage requirements and limitations: 
           (A) at-home recovery services provided must be primarily 
        services that assist in activities of daily living; 
           (B) the insured's attending physician must certify that the 
        specific type and frequency of at-home recovery services are 
        necessary because of a condition for which a home care plan of 
        treatment was approved by Medicare; 
           (C) coverage is limited to: 
           (I) no more than the number and type of at-home recovery 
        visits certified as medically necessary by the insured's 
        attending physician.  The total number of at-home recovery 
        visits shall not exceed the number of Medicare-approved home 
        health care visits under a Medicare-approved home care plan of 
        treatment; 
           (II) the actual charges for each visit up to a maximum 
        reimbursement of $100 per visit; 
           (III) $4,000 per calendar year; 
           (IV) seven visits in any one week; 
           (V) care furnished on a visiting basis in the insured's 
        home; 
           (VI) services provided by a care provider as defined in 
        this section; 
           (VII) at-home recovery visits while the insured is covered 
        under the policy or certificate and not otherwise excluded; 
           (VIII) at-home recovery visits received during the period 
        the insured is receiving Medicare-approved home care services or 
        no more than eight weeks after the service date of the last 
        Medicare-approved home health care visit; 
           (iii) coverage is excluded for: 
           (A) home care visits paid for by Medicare or other 
        government programs; and 
           (B) care provided by unpaid volunteers or providers who are 
        not care providers. 
           Sec. 11.  Minnesota Statutes 2004, section 62A.316, is 
        amended to read: 
           62A.316 [BASIC MEDICARE SUPPLEMENT PLAN; COVERAGE.] 
           (a) The basic Medicare supplement plan must have a level of 
        coverage that will provide: 
           (1) coverage for all of the Medicare part A inpatient 
        hospital coinsurance amounts, and 100 percent of all Medicare 
        part A eligible expenses for hospitalization not covered by 
        Medicare, after satisfying the Medicare part A deductible; 
           (2) coverage for the daily co-payment amount of Medicare 
        part A eligible expenses for the calendar year incurred for 
        skilled nursing facility care; 
           (3) coverage for the coinsurance amount, or in the case of 
        outpatient department services paid under a prospective payment 
        system, the co-payment amount, of Medicare eligible expenses 
        under Medicare part B regardless of hospital confinement, 
        subject to the Medicare part B deductible amount; 
           (4) 80 percent of the hospital and medical expenses and 
        supplies incurred during travel outside the United States as a 
        result of a medical emergency; 
           (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; 
           (6) 100 percent of the cost of immunizations and routine 
        screening procedures for cancer screening including mammograms 
        and pap smears; and 
           (7) 80 percent of coverage for all physician prescribed 
        medically appropriate and necessary equipment and supplies used 
        in the management and treatment of diabetes.  Coverage must 
        include persons with gestational, type I, or type II diabetes. 
           (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; 
           (2) a minimum of 80 percent of eligible medical expenses 
        and supplies not covered by Medicare part B, not to exceed any 
        charge limitation established by the Medicare program or state 
        law; 
           (3) coverage for all of the Medicare part B annual 
        deductible; 
           (4) coverage for at least 50 percent, or the equivalent of 
        50 percent, of usual and customary prescription drug expenses.  
        An outpatient prescription drug benefit must not be included for 
        sale or issuance in a Medicare policy or certificate issued on 
        or after January 1, 2006; 
           (5) coverage for the following preventive health services: 
           (i) an annual clinical preventive medical history and 
        physical examination that may include tests and services from 
        clause (ii) and patient education to address preventive health 
        care measures; 
           (ii) any one or a combination of the following preventive 
        screening tests or preventive services, the frequency of which 
        is considered medically appropriate: 
           (A) fecal occult blood test and/or digital rectal 
        examination; 
           (B) dipstick urinalysis for hematuria, bacteriuria, and 
        proteinuria; 
           (C) pure tone (air only) hearing screening test, 
        administered or ordered by a physician; 
           (D) serum cholesterol screening every five years; 
           (E) thyroid function test; 
           (F) diabetes screening; 
           (iii) any other tests or preventive measures determined 
        appropriate by the attending physician. 
           Reimbursement shall be for the actual charges up to 100 
        percent 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 a procedure covered by 
        Medicare; 
           (6) coverage for services to provide short-term at-home 
        assistance with activities of daily living for those recovering 
        from an illness, injury, or surgery: 
           (i) For purposes of this benefit, the following definitions 
        apply: 
           (A) "activities of daily living" include, but are not 
        limited to, bathing, dressing, personal hygiene, transferring, 
        eating, ambulating, assistance with drugs that are normally 
        self-administered, and changing bandages or other dressings; 
           (B) "care provider" means a duly qualified or licensed home 
        health aide/homemaker, personal care aid, or nurse provided 
        through a licensed home health care agency or referred by a 
        licensed referral agency or licensed nurses registry; 
           (C) "home" means a place used by the insured as a place of 
        residence, provided that the place would qualify as a residence 
        for home health care services covered by Medicare.  A hospital 
        or skilled nursing facility shall not be considered the 
        insured's place of residence; 
           (D) "at-home recovery visit" means the period of a visit 
        required to provide at-home recovery care, without limit on the 
        duration of the visit, except each consecutive four hours in a 
        24-hour period of services provided by a care provider is one 
        visit; 
           (ii) Coverage requirements and limitations: 
           (A) at-home recovery services provided must be primarily 
        services that assist in activities of daily living; 
           (B) the insured's attending physician must certify that the 
        specific type and frequency of at-home recovery services are 
        necessary because of a condition for which a home care plan of 
        treatment was approved by Medicare; 
           (C) coverage is limited to: 
           (I) no more than the number and type of at-home recovery 
        visits certified as necessary by the insured's attending 
        physician.  The total number of at-home recovery visits shall 
        not exceed the number of Medicare-approved home care visits 
        under a Medicare-approved home care plan of treatment; 
           (II) the actual charges for each visit up to a maximum 
        reimbursement of $40 per visit; 
           (III) $1,600 per calendar year; 
           (IV) seven visits in any one week; 
           (V) care furnished on a visiting basis in the insured's 
        home; 
           (VI) services provided by a care provider as defined in 
        this section; 
           (VII) at-home recovery visits while the insured is covered 
        under the policy or certificate and not otherwise excluded; 
           (VIII) at-home recovery visits received during the period 
        the insured is receiving Medicare-approved home care services or 
        no more than eight weeks after the service date of the last 
        Medicare-approved home health care visit; 
           (iii) Coverage is excluded for: 
           (A) home care visits paid for by Medicare or other 
        government programs; and 
           (B) care provided by family members, unpaid volunteers, or 
        providers who are not care providers; 
           (7) coverage for at least 50 percent, or the equivalent of 
        50 percent, of usual and customary prescription drug expenses to 
        a maximum of $1,200 paid by the issuer annually under this 
        benefit.  An issuer of Medicare supplement insurance policies 
        that elects to offer this benefit rider shall also make 
        available coverage that contains the rider specified in clause 
        (4).  An outpatient prescription drug benefit must not be 
        included for sale or issuance in a Medicare policy or 
        certificate issued on or after January 1, 2006. 
           Sec. 12.  Minnesota Statutes 2004, section 62A.318, is 
        amended to read: 
           62A.318 [MEDICARE SELECT POLICIES AND CERTIFICATES.] 
           Subdivision 1.  [APPLICABILITY AND ADVERTISING LIMITATION.] 
        (a) This section applies to Medicare select policies and 
        certificates, as defined in this section, including those issued 
        by health maintenance organizations.  
           (b) No policy or certificate may be advertised as a 
        Medicare select policy or certificate unless it meets the 
        requirements of this section. 
           (b) Subd. 2.  [DEFINITIONS.] For the purposes of this 
        section: 
           (1) "complaint" means any dissatisfaction expressed by an 
        individual concerning a Medicare select issuer or its network 
        providers; 
           (2) "grievance" means dissatisfaction expressed in writing 
        by an individual insured under a Medicare select policy or 
        certificate with the administration, claims practices, or 
        provision of services concerning a Medicare select issuer or its 
        network providers; 
           (3) "Medicare select issuer" means an issuer offering, or 
        seeking to offer, a Medicare select policy or certificate; 
           (4) "Medicare select policy" or "Medicare select 
        certificate" means a Medicare supplement policy or certificate 
        that contains restricted network provisions; 
           (5) "network provider" means a provider of health care, or 
        a group of providers of health care, that has entered into a 
        written agreement with the issuer to provide benefits insured 
        under a Medicare select policy or certificate; 
           (6) "restricted network provision" means a provision that 
        conditions the payment of benefits, in whole or in part, on the 
        use of network providers; and 
           (7) "service area" means the geographic area approved by 
        the commissioner within which an issuer is authorized to offer a 
        Medicare select policy or certificate. 
           (c) Subd. 3.  [REVIEW BY COMMISSIONER.] The commissioner 
        may authorize an issuer to offer a Medicare select policy or 
        certificate pursuant to this section and section 4358 of the 
        Omnibus Budget Reconciliation Act (OBRA) of 1990, Public Law 
        101-508, if the commissioner finds that the issuer has satisfied 
        all of the requirements of Minnesota Statutes. 
           (d) Subd. 4.  [APPROVAL; PLAN OF OPERATION.] A Medicare 
        select issuer shall not issue a Medicare select policy or 
        certificate in this state until its plan of operation has been 
        approved by the commissioner. 
           (e) Subd. 5.  [CONTENTS OF PLAN OF OPERATION.] A Medicare 
        select issuer shall file a proposed plan of operation with the 
        commissioner, in a format prescribed by the commissioner.  The 
        plan of operation shall contain at least the following 
        information: 
           (1) evidence that all covered services that are subject to 
        restricted network provisions are available and accessible 
        through network providers, including a demonstration that: 
           (i) the services can be provided by network providers with 
        reasonable promptness with respect to geographic location, hours 
        of operation, and after-hour care.  The hours of operation and 
        availability of after-hour care shall reflect usual practice in 
        the local area.  Geographic availability shall reflect the usual 
        travel times within the community; 
           (ii) the number of network providers in the service area is 
        sufficient, with respect to current and expected policyholders, 
        either: 
           (A) to deliver adequately all services that are subject to 
        a restricted network provision; or 
           (B) to make appropriate referrals; 
           (iii) there are written agreements with network providers 
        describing specific responsibilities; 
           (iv) emergency care is available 24 hours per day and seven 
        days per week; and 
           (v) in the case of covered services that are subject to a 
        restricted network provision and are provided on a prepaid 
        basis, there are written agreements with network providers 
        prohibiting the providers from billing or otherwise seeking 
        reimbursement from or recourse against an individual insured 
        under a Medicare select policy or certificate.  This section 
        does not apply to supplemental charges or coinsurance amounts as 
        stated in the Medicare select policy or certificate; 
           (2) a statement or map providing a clear description of the 
        service area; 
           (3) a description of the grievance procedure to be used; 
           (4) a description of the quality assurance program, 
        including: 
           (i) the formal organizational structure; 
           (ii) the written criteria for selection, retention, and 
        removal of network providers; and 
           (iii) the procedures for evaluating quality of care 
        provided by network providers, and the process to initiate 
        corrective action when warranted; 
           (5) a list and description, by specialty, of the network 
        providers; 
           (6) copies of the written information proposed to be used 
        by the issuer to comply with paragraph (i); and 
           (7) any other information requested by the commissioner. 
           (f) Subd. 6.  [FILING OF PROPOSED CHANGES; DEEMED 
        APPROVAL.] A Medicare select issuer shall file proposed changes 
        to the plan of operation, except for changes to the list of 
        network providers, with the commissioner before implementing the 
        changes.  The changes shall be considered approved by the 
        commissioner after 30 days unless specifically disapproved. 
           An updated list of network providers shall be filed with 
        the commissioner at least quarterly. 
           (g) Subd. 7.  [NONNETWORK PROVIDERS; LIMITS ON COVERAGE 
        RESTRICTIONS.] A Medicare select policy or certificate shall not 
        restrict payment for covered services provided by nonnetwork 
        providers if: 
           (1) the services are for symptoms requiring emergency care 
        or are immediately required for an unforeseen illness, injury, 
        or condition; and 
           (2) it is not reasonable to obtain the services through a 
        network provider. 
           (h) Subd. 8.  [FULL PAYMENT; SERVICES NOT AVAILABLE IN 
        NETWORK.] A Medicare select policy or certificate shall provide 
        payment for full coverage under the policy or certificate for 
        covered services that are not available through network 
        providers. 
           (i) Subd. 9.  [REQUIRED DISCLOSURES.] A Medicare select 
        issuer shall make full and fair disclosure in writing of the 
        provisions, restrictions, and limitations of the Medicare select 
        policy or certificate to each applicant.  This disclosure must 
        include at least the following: 
           (1) an outline of coverage sufficient to permit the 
        applicant to compare the coverage and premiums of the Medicare 
        select policy or certificate with: 
           (i) other Medicare supplement policies or certificates 
        offered by the issuer; and 
           (ii) other Medicare select policies or certificates; 
           (2) a description, including address, phone number, and 
        hours of operation, of the network providers, including primary 
        care physicians, specialty physicians, hospitals, and other 
        providers; 
           (3) a description of the restricted network provisions, 
        including payments for coinsurance and deductibles when 
        providers other than network providers are used; 
           (4) a description of coverage for emergency and urgently 
        needed care and other out-of-service area coverage; 
           (5) a description of limitations on referrals to restricted 
        network providers and to other providers; 
           (6) a description of the policyholder's rights to purchase 
        any other Medicare supplement policy or certificate otherwise 
        offered by the issuer; and 
           (7) a description of the Medicare select issuer's quality 
        assurance program and grievance procedure. 
           (j) Subd. 10.  [PROOF OF DISCLOSURE.] Before the sale of a 
        Medicare select policy or certificate, a Medicare select issuer 
        shall obtain from the applicant a signed and dated form stating 
        that the applicant has received the information provided 
        pursuant to paragraph (i) and that the applicant understands the 
        restrictions of the Medicare select policy or certificate. 
           (k) Subd. 11.  [GRIEVANCE PROCEDURES.] A Medicare select 
        issuer shall have and use procedures for hearing complaints and 
        resolving written grievances from the subscribers.  The 
        procedures shall be aimed at mutual agreement for settlement and 
        may include arbitration procedures.  
           (1) The grievance procedure must be described in the policy 
        and certificates and in the outline of coverage. 
           (2) At the time the policy or certificate is issued, the 
        issuer shall provide detailed information to the policyholder 
        describing how a grievance may be registered with the issuer. 
           (3) Grievances must be considered in a timely manner and 
        must be transmitted to appropriate decision makers who have 
        authority to fully investigate the issue and take corrective 
        action. 
           (4) If a grievance is found to be valid, corrective action 
        must be taken promptly. 
           (5) All concerned parties must be notified about the 
        results of a grievance. 
           (6) The issuer shall report no later than March 31 of each 
        year to the commissioner regarding the grievance procedure.  The 
        report shall be in a format prescribed by the commissioner and 
        shall contain the number of grievances filed in the past year 
        and a summary of the subject, nature, and resolution of the 
        grievances. 
           (l) Subd. 12.  [OFFER OF ALTERNATIVE PRODUCT REQUIRED.] At 
        the time of initial purchase, a Medicare select issuer shall 
        make available to each applicant for a Medicare select policy or 
        certificate the opportunity to purchase a Medicare supplement 
        policy or certificate otherwise offered by the issuer. 
           (m)(1) Subd. 13.  [RIGHT TO REPLACE WITH NONNETWORK 
        COVERAGE.] (a) At the request of an individual insured under a 
        Medicare select policy or certificate, a Medicare select issuer 
        shall make available to the individual insured the opportunity 
        to purchase a Medicare supplement policy or certificate offered 
        by the issuer that has comparable or lesser benefits and that 
        does not contain a restricted network provision.  The issuer 
        shall make the policies or certificates available without 
        requiring evidence of insurability after the Medicare supplement 
        select policy or certificate has been in force for six months.  
        If the issuer does not have available for sale a policy or 
        certificate without restrictive network provisions, the issuer 
        shall provide enrollment information for the Minnesota 
        comprehensive health association Medicare supplement plans. 
           (2) (b) For the purposes of this paragraph subdivision, a 
        Medicare supplement policy or certificate will be considered to 
        have comparable or lesser benefits unless it contains one or 
        more significant benefits not included in the Medicare select 
        policy or certificate being replaced.  For the purposes of this 
        paragraph, a significant benefit means coverage for the Medicare 
        Part A deductible, coverage for prescription drugs, coverage for 
        at-home recovery services, or coverage for part B excess 
        charges.  Coverage for outpatient prescription drugs is not 
        permitted in Medicare supplement policies or certificates issued 
        on or after January 1, 2006. 
           (n) Subd. 14.  [CONTINUATION OF COVERAGE UNDER CERTAIN 
        CIRCUMSTANCES.] (a) Medicare select policies and certificates 
        shall provide for continuation of coverage if the secretary of 
        health and human services determines that Medicare select 
        policies and certificates issued pursuant to this section should 
        be discontinued due to either the failure of the Medicare select 
        program to be reauthorized under law or its substantial 
        amendment. 
           (1) (b) In the event of a determination under paragraph 
        (a), each Medicare select issuer shall make available to each 
        individual insured under a Medicare select policy or certificate 
        the opportunity to purchase a Medicare supplement policy or 
        certificate offered by the issuer that has comparable or lesser 
        benefits and that does not contain a restricted network 
        provision.  The issuer shall make the policies and certificates 
        available without requiring evidence of insurability. 
           (2) (c) For the purposes of this paragraph subdivision, a 
        Medicare supplement policy or certificate will be considered to 
        have comparable or lesser benefits unless it contains one or 
        more significant benefits not included in the Medicare select 
        policy or certificate being replaced.  For the purposes of this 
        paragraph subdivision, a significant benefit means coverage for 
        the Medicare Part A deductible, coverage for prescription drugs, 
        coverage for at-home recovery services, or coverage for part B 
        excess charges.  Coverage for outpatient prescription drugs must 
        not be included for sale or issuance of a Medicare supplement 
        policy or certificate issued on or after January 1, 2006.  
           (o) Subd. 15.  [PROVISION OF DATA REQUIRED.] A Medicare 
        select issuer shall comply with reasonable requests for data 
        made by state or federal agencies, including the United States 
        Department of Health and Human Services, for the purpose of 
        evaluating the Medicare select program. 
           (p) Subd. 16.  [REGULATION BY COMMERCE DEPARTMENT.] 
        Medicare select policies and certificates under this section 
        shall be regulated and approved by the Department of Commerce. 
           (q) Subd. 17.  [TYPES OF PLANS.] Medicare select policies 
        and certificates must be either a basic plan or an extended 
        basic plan.  Before a Medicare select policy or certificate is 
        sold or issued in this state, the applicant must be provided 
        with an explanation of coverage for both a Medicare select basic 
        and a Medicare select extended basic policy or certificate and 
        must be provided with the opportunity of purchasing either a 
        Medicare select basic or a Medicare select extended basic 
        policy.  The basic plan may also include any of the optional 
        benefit riders authorized by section 62A.316.  Preventive care 
        provided by Medicare select policies or certificates must be 
        provided as set forth in section 62A.315 or 62A.316, except that 
        the benefits are as defined in chapter 62D. 
           (r)  (Expired) 
           Sec. 13.  Minnesota Statutes 2004, section 62A.36, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [LOSS RATIO STANDARDS AND REFUND 
        PROVISIONS.] (a) For purposes of this section, "Medicare 
        supplement policy or certificate" has the meaning given in 
        section 62A.31, subdivision 3, but also includes a policy, 
        contract, or certificate issued under a contract under section 
        1833 or 1876 of the federal Social Security Act, United States 
        Code, title 42, section 1395 et seq.  A Medicare supplement 
        policy form or certificate form shall not be delivered or issued 
        for delivery unless the policy form or certificate form can be 
        expected, as estimated for the entire period for which rates are 
        computed to provide coverage, to return to policyholders and 
        certificate holders in the form of aggregate benefits, not 
        including anticipated refunds or credits, provided under the 
        policy form or certificate form:  
           (1) at least 75 percent of the aggregate amount of premiums 
        earned in the case of group policies; and 
           (2) at least 65 percent of the aggregate amount of premiums 
        earned in the case of individual policies, calculated on the 
        basis of. 
           These ratios must be calculated based upon incurred claims 
        experience, or incurred health care expenses where coverage is 
        provided by a health maintenance organization on a service 
        rather than reimbursement basis, and earned premiums for the 
        period and according to accepted actuarial principles and 
        practices.  For purposes of this calculation, "health care 
        expenses" has the meaning given in section 62A.31, subdivision 
        3, paragraph (j).  An insurer shall demonstrate that the third 
        year loss ratio is greater than or equal to the applicable 
        percentage.  
           All filings of rates and rating schedules shall demonstrate 
        that expected claims in relation to premiums comply with the 
        requirements of this section when combined with actual 
        experience to date.  Filings of rate revisions shall also 
        demonstrate that the anticipated loss ratio over the entire 
        future period for which the revised rates are computed to 
        provide coverage can be expected to meet the appropriate loss 
        ratio standards, and aggregate loss ratio from inception of the 
        policy or certificate shall equal or exceed the appropriate loss 
        ratio standards.  
           An application form for a Medicare supplement policy or 
        certificate, as defined in this section, must prominently 
        disclose the anticipated loss ratio and explain what it means. 
           (b) An issuer shall collect and file with the commissioner 
        by May 31 of each year the data contained in the National 
        Association of Insurance Commissioners Medicare Supplement 
        Refund Calculating form, for each type of Medicare supplement 
        benefit plan.  
           If, on the basis of the experience as reported, the 
        benchmark ratio since inception (ratio 1) exceeds the adjusted 
        experience ratio since inception (ratio 3), then a refund or 
        credit calculation is required.  The refund calculation must be 
        done on a statewide basis for each type in a standard Medicare 
        supplement benefit plan.  For purposes of the refund or credit 
        calculation, experience on policies issued within the reporting 
        year shall be excluded.  
           A refund or credit shall be made only when the benchmark 
        loss ratio exceeds the adjusted experience loss ratio and the 
        amount to be refunded or credited exceeds a de minimis level.  
        The refund shall include interest from the end of the calendar 
        year to the date of the refund or credit at a rate specified by 
        the secretary of health and human services, but in no event 
        shall it be less than the average rate of interest for 13-week 
        treasury bills.  A refund or credit against premiums due shall 
        be made by September 30 following the experience year on which 
        the refund or credit is based.  
           (c) An issuer of Medicare supplement policies and 
        certificates in this state shall file annually its rates, rating 
        schedule, and supporting documentation including ratios of 
        incurred losses to earned premiums by policy or certificate 
        duration for approval by the commissioner according to the 
        filing requirements and procedures prescribed by the 
        commissioner.  The supporting documentation shall also 
        demonstrate in accordance with actuarial standards of practice 
        using reasonable assumptions that the appropriate loss ratio 
        standards can be expected to be met over the entire period for 
        which rates are computed.  The demonstration shall exclude 
        active life reserves.  An expected third-year loss ratio which 
        is greater than or equal to the applicable percentage shall be 
        demonstrated for policies or certificates in force less than 
        three years. 
           As soon as practicable, but before the effective date of 
        enhancements in Medicare benefits, every issuer of Medicare 
        supplement policies or certificates in this state shall file 
        with the commissioner, in accordance with the applicable filing 
        procedures of this state:  
           (1) a premium adjustment that is necessary to produce an 
        expected loss ratio under the policy or certificate that will 
        conform with minimum loss ratio standards for Medicare 
        supplement policies or certificates.  No premium adjustment that 
        would modify the loss ratio experience under the policy or 
        certificate other than the adjustments described herein shall be 
        made with respect to a policy or certificate at any time other 
        than on its renewal date or anniversary date; 
           (2) if an issuer fails to make premium adjustments 
        acceptable to the commissioner, the commissioner may order 
        premium adjustments, refunds, or premium credits considered 
        necessary to achieve the loss ratio required by this section; 
           (3) any appropriate riders, endorsements, or policy or 
        certificate forms needed to accomplish the Medicare supplement 
        insurance policy or certificate modifications necessary to 
        eliminate benefit duplications with Medicare.  The riders, 
        endorsements, or policy or certificate forms shall provide a 
        clear description of the Medicare supplement benefits provided 
        by the policy or certificate. 
           (d) The commissioner may conduct a public hearing to gather 
        information concerning a request by an issuer for an increase in 
        a rate for a policy form or certificate form if the experience 
        of the form for the previous reporting period is not in 
        compliance with the applicable loss ratio standard.  The 
        determination of compliance is made without consideration of a 
        refund or credit for the reporting period.  Public notice of the 
        hearing shall be furnished in a manner considered appropriate by 
        the commissioner. 
           (e) An issuer shall not use or change premium rates for a 
        Medicare supplement policy or certificate unless the rates, 
        rating schedule, and supporting documentation have been filed 
        with, and approved by, the commissioner according to the filing 
        requirements and procedures prescribed by the commissioner. 
           (f) An issuer must file any riders or amendments to policy 
        or certificate forms to delete outpatient prescription drug 
        benefits as required by the Medicare Prescription Drug, 
        Improvement, and Modernization Act of 2003 only with the 
        commissioner in the state in which the policy or certificate was 
        issued. 
           (g) Issuers are permitted to continue to issue currently 
        approved policy and certificate forms as appropriate through 
        December 31, 2005.  
           (h) Issuers must comply with any requirements to notify 
        enrollees under the Medicare Prescription Drug, Improvement, and 
        Modernization Act of 2003. 
           Sec. 14.  [REVISOR INSTRUCTION.] 
           The revisor of statutes shall, in producing Minnesota 
        Statutes 2006, place in alphabetical order the terms defined in 
        Minnesota Statutes, section 62A.31, subdivision 3, and make any 
        necessary resulting changes in cross-references.  
           Sec. 15.  [EFFECTIVE DATE.] 
           Sections 1 to 13 are effective January 1, 2006, except that 
        section 13, paragraphs (f), (g), and (h), are effective the day 
        following final enactment. 

                                   ARTICLE 2
                       REGULATION OF STAND-ALONE MEDICARE
                         PART D PRESCRIPTION DRUG PLANS
           Section 1.  [62A.451] [DEFINITIONS.] 
           Subdivision 1.  [APPLICABILITY.] For purposes of sections 
        62A.451 to 62A.4528, the terms defined in this section have the 
        meanings given. 
           Subd. 2.  [COMMISSIONER.] "Commissioner" means the 
        commissioner of commerce. 
           Subd. 3.  [ENROLLEE.] "Enrollee" means an individual who is 
        entitled to limited health services under a contract with an 
        entity authorized to provide or arrange for such services under 
        sections 62A.451 to 62A.4528. 
           Subd. 4.  [EVIDENCE OF COVERAGE.] "Evidence of coverage" 
        means the certificate, agreement, or contract issued under 
        section 62A.4516 setting forth the coverage to which an enrollee 
        is entitled. 
           Subd. 5.  [LIMITED HEALTH SERVICE.] "Limited health service"
        means pharmaceutical services covered under Medicare Part D.  
        Limited health service does not include hospital, medical, 
        surgical, or emergency services. 
           Subd. 6.  [PREPAID LIMITED HEALTH SERVICE 
        ORGANIZATION.] "Prepaid limited health service organization" 
        means any corporation, partnership, or other entity that, in 
        return for a prepayment, undertakes to provide or arrange for 
        the provision of limited health services to enrollees.  Prepaid 
        limited health service organization does not include: 
           (1) an entity otherwise authorized under the laws of this 
        state either to provide any limited health service on a 
        prepayment or other basis or to indemnify for any limited health 
        service; 
           (2) an entity that meets the requirements of section 
        62A.4514; or 
           (3) a provider or entity when providing or arranging for 
        the provision of limited health services under a contract with a 
        prepaid limited health service organization or with an entity 
        described in clause (1) or (2). 
           Subd. 7.  [PROVIDER.] "Provider" means a physician, 
        pharmacist, health facility, or other person or institution that 
        is licensed or otherwise authorized to deliver or furnish 
        limited health services under sections 62A.451 to 62A.4528. 
           Subd. 8.  [SUBSCRIBER.] "Subscriber" means the person whose 
        employment or other status, except for family dependency, is the 
        basis for entitlement to limited health services under a 
        contract with an entity authorized to provide or arrange for 
        such services under sections 62A.451 to 62A.4528. 
           Sec. 2.  [62A.4511] [CERTIFICATE OF AUTHORITY REQUIRED.] 
           No person, corporation, partnership, or other entity may 
        operate a prepaid limited health service organization in this 
        state without obtaining and maintaining a certificate of 
        authority from the commissioner under sections 62A.451 to 
        62A.4528. 
           Sec. 3.  [62A.4512] [APPLICATION FOR CERTIFICATE OF 
        AUTHORITY.] 
           An application for a certificate of authority to operate a 
        prepaid limited health service organization must be filed with 
        the commissioner on a form prescribed by the commissioner.  The 
        application must be verified by an officer or authorized 
        representative of the applicant and must set forth, or be 
        accompanied by, the following: 
           (1) a copy of the applicant's basic organizational 
        document, such as the articles of incorporation, articles of 
        association, partnership agreement, trust agreement, or other 
        applicable documents and all amendments to these documents; 
           (2) a copy of all bylaws, rules and regulations, or similar 
        documents, if any, regulating the conduct of the applicant's 
        internal affairs; 
           (3) a list of the names, addresses, official positions, and 
        biographical information of the individuals who are responsible 
        for conducting the applicant's affairs, including but not 
        limited to, all members of the board of directors, board of 
        trustees, executive committee, or other governing board or 
        committee, the principal officers, and any person or entity 
        owning or having the right to acquire ten percent or more of the 
        voting securities of the applicant, and the partners or members 
        in the case of a partnership or association; 
           (4) a statement generally describing the applicant, its 
        facilities, personnel, and the limited health services to be 
        offered; 
           (5) a copy of the form of any contract made or to be made 
        between the applicant and any providers regarding the provision 
        of limited health services to enrollees; 
           (6) a copy of the form of any contract made, or to be made 
        between the applicant and any person listed in clause (3); 
           (7) a copy of the form of any contract made or to be made 
        between the applicant and any person, corporation, partnership, 
        or other entity for the performance on the applicant's behalf of 
        any functions including, but not limited to, marketing, 
        administration, enrollment, investment management, and 
        subcontracting for the provision of limited health services to 
        enrollees; 
           (8) a copy of the form of any group contract that is to be 
        issued to employers, unions, trustees, or other organizations 
        and a copy of any form of evidence of coverage to be issued to 
        subscribers; 
           (9) a copy of the applicant's most recent financial 
        statements audited by independent certified public accountants.  
        If the financial affairs of the applicant's parent company are 
        audited by independent certified public accountants but those of 
        the applicant are not, then a copy of the most recent audited 
        financial statement of the applicant's parent company, certified 
        by an independent certified public accountant, attached to which 
        shall be consolidating financial statements of the applicant, 
        satisfies this requirement unless the commissioner determines 
        that additional or more recent financial information is required 
        for the proper administration of sections 62A.451 to 62A.4528; 
           (10) a copy of the applicant's financial plan, including a 
        three-year projection of anticipated operating results, a 
        statement of the sources of working capital, and any other 
        sources of funding and provisions for contingencies; 
           (11) a statement acknowledging that all lawful process in 
        any legal action or proceeding against the applicant on a cause 
        of action arising in this state is valid if served in accordance 
        with section 45.028; 
           (12) a description of how the applicant will comply with 
        section 62A.4523; and 
           (13) such other information as the commissioner may 
        reasonably require to make the determinations required by 
        sections 62A.451 to 62A.4528. 
           Sec. 4.  [62A.4513] [ISSUANCE OF CERTIFICATE OF AUTHORITY; 
        DENIAL.] 
           Subdivision 1.  [ISSUANCE.] Following receipt of an 
        application filed under section 62A.4512, the commissioner shall 
        review the application and notify the applicant of any 
        deficiencies.  The commissioner must approve or deny an 
        application within 90 days after receipt of a substantially 
        complete application, or the application is deemed approved.  
        The commissioner shall issue a certificate of authority to an 
        applicant provided that the following conditions are met: 
           (1) the requirements of section 62A.4512 have been 
        fulfilled; 
           (2) the individuals responsible for conducting the 
        applicant's affairs are competent, trustworthy, and possess good 
        reputations, and have had appropriate experience, training, or 
        education; 
           (3) the applicant is financially responsible and may 
        reasonably be expected to meet its obligations to enrollees and 
        to prospective enrollees.  In making this determination, the 
        commissioner may consider: 
           (i) the financial soundness of the applicant's arrangements 
        for limited health services; 
           (ii) the adequacy of working capital, other sources of 
        funding, and provisions for contingencies; 
           (iii) any agreement for paying the cost of the limited 
        health services or for alternative coverage in the event of 
        insolvency of the prepaid limited health service organization; 
        and 
           (iv) the manner in which the requirements of section 
        62A.4523 have been fulfilled; and 
           (4) any deficiencies identified by the commissioner have 
        been corrected. 
           Subd. 2.  [DENIALS.] If the certificate of authority is 
        denied, the commissioner shall notify the applicant and shall 
        specify the reasons for denial in the notice.  The prepaid 
        limited health service organization has 30 days from the date of 
        receipt of the notice to request a hearing before the 
        commissioner under chapter 14. 
           Sec. 5.  [62A.4514] [FILING REQUIREMENTS FOR AUTHORIZED 
        ENTITIES.] 
           (a) An entity authorized under the laws of this state to 
        operate a health maintenance organization, an accident and 
        health insurance company, a nonprofit health service plan 
        corporation, a fraternal benefit society, or a multiple employer 
        welfare arrangement, and that is not otherwise authorized under 
        the laws of this state to offer limited health services on a per 
        capita or fixed prepayment basis, may do so by filing for 
        approval with the commissioner the information requested by 
        section 62A.4512, clauses (4), (5), (7), (8), and (10), and any 
        subsequent material modification or addition to those provisions.
           (b) If the commissioner disapproves the filing, the 
        procedures provided in section 62A.4513, subdivision 2, must be 
        followed. 
           Sec. 6.  [62A.4515] [MATERIAL MODIFICATIONS.] 
           Subdivision 1.  [MATERIAL MODIFICATIONS.] A prepaid limited 
        health service organization shall file with the commissioner 
        prior to use, a notice of any material modification of any 
        matter or document furnished under section 62A.4512, together 
        with supporting documents necessary to fully explain the 
        modification.  If the commissioner does not disapprove the 
        filing within 60 days of its filing, the filing is deemed 
        approved. 
           Subd. 2.  [PROCEDURE FOR DISAPPROVAL.] If a filing under 
        this section is disapproved, the commissioner shall notify the 
        prepaid limited health service organization and specify the 
        reasons for disapproval in the notice.  The prepaid limited 
        health service organization has 30 days from the date of receipt 
        of notice to request a hearing before the commissioner under 
        chapter 14. 
           Sec. 7.  [62A.4516] [EVIDENCE OF COVERAGE.] 
           Every subscriber must be issued an evidence of coverage 
        consistent with the requirements of Medicare Part D. 
           Sec. 8.  [62A.4517] [CONSTRUCTION WITH OTHER LAWS.] 
           Subdivision 1.  [APPLICATION OF OTHER INSURANCE LAWS.] (a) 
        A prepaid limited health service organization organized under 
        the laws of this state is deemed to be a domestic insurer for 
        purposes of chapter 60D unless specifically exempted in writing 
        from one or more of the provisions of that chapter by the 
        commissioner, based upon a determination that the provision is 
        not applicable to the organization or to providing coverage 
        under Medicare Part D. 
           (b) No other provision of chapters 60 to 72C applies to a 
        prepaid limited health service organization unless such an 
        organization is specifically mentioned in the provision. 
           Subd. 2.  [NOT A HEALING ART.] The provision of limited 
        health services by a prepaid limited health service organization 
        or other entity under sections 62A.451 to 62A.4528 must not be 
        deemed to be the practice of medicine or other healing arts. 
           Subd. 3.  [SOLICITATION AND ADVERTISING.] Solicitation to 
        arrange for or provide limited health services in accordance 
        with sections 62A.451 to 62A.4528 shall not be construed to 
        violate any provision of law relating to solicitation or 
        advertising by health professionals. 
           Sec. 9.  [62A.4518] [NONDUPLICATION OF COVERAGE.] 
           Notwithstanding any other law of this state, a prepaid 
        limited health service organization, health maintenance 
        organization, accident and health insurance company, nonprofit 
        health service plan corporation, or fraternal benefit society 
        may exclude, in any contract or policy issued to a group, any 
        coverage that would duplicate the coverage for limited health 
        services, whether in the form of services, supplies, or 
        reimbursement, insofar as the coverage or service is provided in 
        accordance with sections 62A.451 to 62A.4528 under a contract or 
        policy issued to the same group or to a part of that group by a 
        prepaid limited health service organization, a health 
        maintenance organization, an accident and health insurance 
        company, a nonprofit health service corporation, or a fraternal 
        benefit society. 
           Sec. 10.  [62A.4519] [COMPLAINT SYSTEM.] 
           Every prepaid limited health service organization shall 
        establish and maintain a complaint system providing reasonable 
        procedures for resolving written complaints initiated by 
        enrollees and providers, consistent with the requirements of 
        Medicare Part D. 
           Sec. 11.  [62A.4520] [EXAMINATION OF ORGANIZATION.] 
           (a) The commissioner may examine the affairs of any prepaid 
        limited health service organization as often as is reasonably 
        necessary to protect the interests of the people of this state, 
        but not less frequently than once every three years. 
           (b) Every prepaid limited health service organization shall 
        make its relevant books and records available for an examination 
        and in every way cooperate with the commissioner to facilitate 
        an examination. 
           (c) In lieu of an examination, the commissioner may accept 
        the report of an examination made by the commissioner of another 
        state. 
           Sec. 12.  [62A.4521] [INVESTMENTS.] 
           The funds of a prepaid limited health service organization 
        shall be invested only in accordance with the guidelines under 
        chapter 62D for investments by health maintenance organizations. 
           Sec. 13.  [62A.4522] [AGENTS.] 
           No individual may apply, procure, negotiate, or place for 
        others any policy or contract of a prepaid limited health 
        service organization unless that individual holds a license or 
        is otherwise authorized to sell accident and health insurance 
        policies, nonprofit health service plan contracts, or health 
        maintenance organization contracts. 
           Sec. 14.  [62A.4523] [PROTECTION AGAINST INSOLVENCY; 
        DEPOSIT.] 
           Subdivision 1.  [NET EQUITY.] (a) Except as approved in 
        accordance with subdivision 4, each prepaid limited health 
        service organization shall at all times have and maintain 
        tangible net equity equal to the greater of: 
           (1) $100,000; or 
           (2) two percent of the organization's annual gross premium 
        income, up to a maximum of the required capital and surplus of 
        an accident and health insurer. 
           (b) A prepaid limited health service organization that has 
        uncovered expenses in excess of $100,000, as reported on the 
        most recent annual financial statement filed with the 
        commissioner, shall maintain tangible net equity equal to 25 
        percent of the uncovered expense in excess of $100,000 in 
        addition to the tangible net equity required by paragraph (a). 
           Subd. 2.  [DEFINITIONS.] For the purpose of this section: 
           (1) "net equity" means the excess of total assets over 
        total liabilities, excluding liabilities which have been 
        subordinated in a manner acceptable to the commissioner; and 
           (2) "tangible net equity" means net equity reduced by the 
        value assigned to intangible assets including, but not limited 
        to, goodwill; going concern value; organizational expense; 
        start-up costs; long-term prepayments of deferred charges; 
        nonreturnable deposits; and obligations of officers, directors, 
        owners, or affiliates, except short-term obligations of 
        affiliates for goods or services arising in the normal course of 
        business that are payable on the same terms as equivalent 
        transactions with nonaffiliates and that are not past due. 
           Subd. 3.  [DEPOSIT.] (a) Each prepaid limited health 
        service organization shall deposit with the commissioner or with 
        any organization or trustee acceptable to the commissioner 
        through which a custodial or controlled account is utilized, 
        cash, securities, or any combination of these or other measures 
        that is acceptable to the commissioner, in an amount equal to 
        $50,000 plus 25 percent of the tangible net equity required in 
        subdivision 1; provided, however, that the deposit must not be 
        required to exceed $200,000. 
           (b) The deposit is an admitted asset of the prepaid limited 
        health service organization in the determination of tangible net 
        equity. 
           (c) All income from deposits is an asset of the prepaid 
        limited health service organization.  A prepaid limited health 
        service organization may withdraw a deposit or any part of it 
        after making a substitute deposit of equal amount and value.  
        Any securities must be approved by the commissioner before being 
        substituted. 
           (d) The deposit must be used to protect the interests of 
        the prepaid limited health service organization's enrollees and 
        to ensure continuation of limited health care services to 
        enrollees of a prepaid limited health service organization that 
        is in rehabilitation or conservation.  If a prepaid limited 
        health service organization is placed in receivership or 
        liquidation, the deposit is an asset subject to provisions of 
        chapter 60B. 
           (e) The commissioner may reduce or eliminate the deposit 
        requirement if the prepaid limited health service organization 
        has made an acceptable deposit with the state or jurisdiction of 
        domicile for the protection of all enrollees, wherever located, 
        and delivers to the commissioner a certificate to that effect, 
        duly authenticated by the appropriate state official holding the 
        deposit. 
           Subd. 4.  [WAIVER OF NET EQUITY REQUIREMENT.] Upon 
        application by a prepaid limited health service organization, 
        the commissioner may waive some or all of the requirements of 
        subdivision 1 for any period of time the commissioner deems 
        proper upon a finding that either: 
           (1) the prepaid limited health service organization has a 
        net equity of at least $10,000,000; or 
           (2) an entity having a net equity of at least $10,000,000 
        furnishes to the commissioner a written commitment, acceptable 
        to the commissioner, to provide for the uncovered expenses of 
        the prepaid limited health service organization. 
           Subd. 5.  [DEFINITION; UNCOVERED EXPENSES.] For the 
        purposes of this section, "uncovered expense" means the cost of 
        health care services that are the obligation of a prepaid 
        limited health organization (1) for which an enrollee may be 
        liable in the event of the insolvency of the organization and 
        (2) for which alternative arrangements acceptable to the 
        commissioner have not been made to cover the costs.  Costs 
        incurred by a provider who has agreed in writing not to bill 
        enrollees, except for permissible supplemental charges, must be 
        considered a covered expense. 
           Sec. 15.  [62A.4524] [OFFICERS AND EMPLOYEES FIDELITY 
        BOND.] 
           (a) A prepaid limited health service organization shall 
        maintain in force a fidelity bond in its own name on its 
        officers and employees in an amount not less than $20,000,000 or 
        in any other amount prescribed by the commissioner.  Except as 
        otherwise provided by this paragraph, the bond must be issued by 
        an insurance company that is licensed to do business in this 
        state or, if the fidelity bond required by this paragraph is not 
        available from an insurance company that holds a certificate of 
        authority in this state, a fidelity bond procured by a licensed 
        surplus lines agent resident in this state in compliance with 
        sections 60A.195 to 60A.2095 satisfies the requirements of this 
        paragraph. 
           (b) In lieu of the bond specified in paragraph (a), a 
        prepaid limited health service organization may deposit with the 
        commissioner cash or securities or other investments of the 
        types set forth in section 62A.4521.  Such a deposit must be 
        maintained by the commissioner in the amount and subject to the 
        same conditions required for a bond under this paragraph. 
           Sec. 16.  [62A.4525] [REPORTS.] 
           (a) Every prepaid limited health service organization shall 
        file with the commissioner annually, on or before April 1, a 
        report verified by at least two principal officers covering the 
        preceding calendar year. 
           (b) The report must be on forms prescribed by the 
        commissioner and must include: 
           (1) a financial statement of the organization, including 
        its balance sheet, income statement, and statement of changes in 
        financial position for the preceding year, certified by an 
        independent public accountant, or a consolidated audited 
        financial statement of its parent company certified by an 
        independent public accountant, attached to which must be 
        consolidating financial statements of the prepaid limited health 
        service organization; 
           (2) the number of subscribers at the beginning of the year, 
        the number of subscribers at the end of the year, and the number 
        of enrollments terminated during the year; and 
           (3) such other information relating to the performance of 
        the organization as is necessary to enable the commissioner to 
        carry out the commissioner's duties under sections 62A.451 to 
        62A.4528. 
           (c) The commissioner may require more frequent reports 
        containing information necessary to enable the commissioner to 
        carry out the commissioner's duties under sections 62A.451 to 
        62A.4528. 
           (d) The commissioner may suspend the organization's 
        certificate of authority pending the proper filing of the 
        required report by the organization. 
           Sec. 17.  [62A.4526] [SUSPENSION OR REVOCATION OF 
        CERTIFICATE OF AUTHORITY.] 
           Subdivision 1.  [GROUNDS FOR SUSPENSION OR REVOCATION.] The 
        commissioner may suspend or revoke the certificate of authority 
        issued to a prepaid limited health service organization under 
        sections 62A.451 to 62A.4528 upon determining that any of the 
        following conditions exist: 
           (1) the prepaid limited health service organization is 
        operating significantly in contravention of its basic 
        organizational document or in a manner contrary to that 
        described in and reasonably inferred from any other information 
        submitted under section 62A.4512, unless amendments to the 
        submissions have been filed with and approved by the 
        commissioner; 
           (2) the prepaid limited health service organization issues 
        an evidence of coverage that does not comply with the 
        requirements of section 62A.4516; 
           (3) the prepaid limited health service organization is 
        unable to fulfill its obligations to furnish limited health 
        services; 
           (4) the prepaid limited health service organization is not 
        financially responsible and may reasonably be expected to be 
        unable to meet its obligations to enrollees or prospective 
        enrollees; 
           (5) the tangible net equity of the prepaid limited health 
        service organization is less than that required by section 
        62A.4523 or the prepaid limited health service organization has 
        failed to correct any deficiency in its tangible net equity as 
        required by the commissioner; 
           (6) the prepaid limited health service organization has 
        failed to implement in a reasonable manner the complaint system 
        required by section 62A.4519; 
           (7) the continued operation of the prepaid limited health 
        service organization would be hazardous to its enrollees; or 
           (8) the prepaid limited health service organization has 
        otherwise failed to comply with sections 62A.451 to 62A.4528. 
           Subd. 2.  [PROCEDURE FOR SUSPENSION OR REVOCATION.] If the 
        commissioner has cause to believe that grounds for the 
        suspension or revocation of a certificate of authority exist, 
        the commissioner shall notify the prepaid limited health service 
        organization in writing specifically stating the grounds for 
        suspension or revocation and fixing a time not more than 60 days 
        after the date of notification for a hearing on the matter in 
        accordance with chapter 14. 
           Subd. 3.  [WINDING UP AFTER REVOCATION.] When the 
        certificate of authority of a prepaid limited health service 
        organization is revoked, the organization shall proceed, 
        immediately following the effective date of the order of 
        revocation, to wind up its affairs, and shall conduct no further 
        business except as may be essential to the orderly conclusion of 
        the affairs of the organization.  It shall engage in no further 
        advertising or solicitation whatsoever.  The commissioner may, 
        by written order, permit such further operation of the 
        organization as the commissioner may find to be in the best 
        interest of enrollees, to the end that enrollees will be 
        afforded the greatest practical opportunity to obtain continuing 
        limited health services. 
           Sec. 18.  [62A.4527] [PENALTIES.] 
           In lieu of any penalty specified elsewhere in sections 
        62A.451 to 62A.4528, or when no penalty is specifically 
        provided, whenever a prepaid limited health service organization 
        or other person, corporation, partnership, or entity subject to 
        those sections has been found, pursuant to chapter 14, to have 
        violated any provision of sections 62A.451 to 62A.4528, the 
        commissioner may: 
           (1) issue and cause to be served upon the organization, 
        person, or entity charged with the violation a copy of the 
        findings and an order requiring the organization, person, or 
        entity to cease and desist from engaging in the act or practice 
        that constitutes the violation; and 
           (2) impose a monetary penalty of not more than $1,000 for 
        each violation, but not to exceed an aggregate penalty of 
        $10,000. 
           Sec. 19.  [62A.4528] [REHABILITATION, CONSERVATION, OR 
        LIQUIDATION.] 
           (a) Any rehabilitation, conservation, or liquidation of a 
        prepaid limited health service organization must be deemed to be 
        the rehabilitation, conservation, or liquidation of an insurance 
        company and must be conducted under chapter 60B. 
           (b) A prepaid limited health service organization is not 
        subject to the laws and rules governing insurance insolvency 
        guaranty funds, nor shall any insurance insolvency guaranty fund 
        provide protection to individuals entitled to receive limited 
        health services from a prepaid limited health service 
        organization. 
           Sec. 20.  [EFFECTIVE DATE.] 
           Sections 1 to 19 are effective March 15, 2005, but no 
        coverage may become effective prior to January 1, 2006. 

                                   ARTICLE 3 
                        TECHNICAL AND CONFORMING CHANGES 
           Section 1.  Minnesota Statutes 2004, section 62L.12, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EXCEPTIONS.] (a) A health carrier may sell, 
        issue, or renew individual conversion policies to eligible 
        employees otherwise eligible for conversion coverage under 
        section 62D.104 as a result of leaving a health maintenance 
        organization's service area. 
           (b) A health carrier may sell, issue, or renew individual 
        conversion policies to eligible employees otherwise eligible for 
        conversion coverage as a result of the expiration of any 
        continuation of group coverage required under sections 62A.146, 
        62A.17, 62A.21, 62C.142, 62D.101, and 62D.105. 
           (c) A health carrier may sell, issue, or renew conversion 
        policies under section 62E.16 to eligible employees. 
           (d) A health carrier may sell, issue, or renew individual 
        continuation policies to eligible employees as required. 
           (e) A health carrier may sell, issue, or renew individual 
        health plans if the coverage is appropriate due to an unexpired 
        preexisting condition limitation or exclusion applicable to the 
        person under the employer's group health plan or due to the 
        person's need for health care services not covered under the 
        employer's group health plan. 
           (f) A health carrier may sell, issue, or renew an 
        individual health plan, if the individual has elected to buy the 
        individual health plan not as part of a general plan to 
        substitute individual health plans for a group health plan nor 
        as a result of any violation of subdivision 3 or 4. 
           (g) Nothing in this subdivision relieves a health carrier 
        of any obligation to provide continuation or conversion coverage 
        otherwise required under federal or state law. 
           (h) Nothing in this chapter restricts the offer, sale, 
        issuance, or renewal of coverage issued as a supplement to 
        Medicare under sections 62A.31 to 62A.44, or policies or 
        contracts that supplement Medicare issued by health maintenance 
        organizations, or those contracts governed by section 1833, 1851 
        to 1859, 1860D, or 1876 of the federal Social Security Act, 
        United States Code, title 42, section 1395 et seq., as amended. 
           (i) Nothing in this chapter restricts the offer, sale, 
        issuance, or renewal of individual health plans necessary to 
        comply with a court order. 
           (j) A health carrier may offer, issue, sell, or renew an 
        individual health plan to persons eligible for an employer group 
        health plan, if the individual health plan is a high deductible 
        health plan for use in connection with an existing health 
        savings account, in compliance with the Internal Revenue Code, 
        section 223.  In that situation, the same or a different health 
        carrier may offer, issue, sell, or renew a group health plan to 
        cover the other eligible employees in the group. 
           Sec. 2.  Minnesota Statutes 2004, section 62Q.01, 
        subdivision 6, is amended to read: 
           Subd. 6.  [MEDICARE-RELATED COVERAGE.] "Medicare-related 
        coverage" means a policy, contract, or certificate issued as a 
        supplement to Medicare, regulated under sections 62A.31 to 
        62A.44, including Medicare select coverage; policies, contracts, 
        or certificates that supplement Medicare issued by health 
        maintenance organizations; or policies, contracts, or 
        certificates governed by section 1833 (known as "cost" or "HCPP" 
        contracts), 1851 to 1859 (Medicare Advantage), 1860D (Medicare 
        Part D), or 1876 (known as "TEFRA" or "risk" contracts) of the 
        federal Social Security Act, United States Code, title 42, 
        section 1395, et seq., as amended; or Section 4001 of the 
        Balanced Budget Act of 1997 (BBA)(Public Law 105-33), Sections 
        1851 to 1859 of the Social Security Act establishing part C of 
        the Medicare program, known as the "Medicare+Choice Medicare 
        Advantage program." 
           Sec. 3.  Minnesota Statutes 2004, section 256.9657, 
        subdivision 3, is amended to read: 
           Subd. 3.  [HEALTH MAINTENANCE ORGANIZATION; COMMUNITY 
        INTEGRATED SERVICE NETWORK SURCHARGE.] (a) Effective October 1, 
        1992, each health maintenance organization with a certificate of 
        authority issued by the commissioner of health under chapter 62D 
        and each community integrated service network licensed by the 
        commissioner under chapter 62N shall pay to the commissioner of 
        human services a surcharge equal to six-tenths of one percent of 
        the total premium revenues of the health maintenance 
        organization or community integrated service network as reported 
        to the commissioner of health according to the schedule in 
        subdivision 4.  
           (b) For purposes of this subdivision, total premium revenue 
        means: 
           (1) premium revenue recognized on a prepaid basis from 
        individuals and groups for provision of a specified range of 
        health services over a defined period of time which is normally 
        one month, excluding premiums paid to a health maintenance 
        organization or community integrated service network from the 
        Federal Employees Health Benefit Program; 
           (2) premiums from Medicare wrap-around subscribers for 
        health benefits which supplement Medicare coverage; 
           (3) Medicare revenue, as a result of an arrangement between 
        a health maintenance organization or a community integrated 
        service network and the Centers for Medicare and Medicaid 
        Services of the federal Department of Health and Human Services, 
        for services to a Medicare beneficiary, excluding Medicare 
        revenue that states are prohibited from taxing under sections 
        4001 and 4002 of Public Law 105-33 received by a health 
        maintenance organization or community integrated service network 
        through risk sharing or Medicare Choice Plus contracts 1854, 
        1860D-12, and 1876 of title XVIII of the federal Social Security 
        Act, codified as United States Code, title 42, sections 1395mm, 
        1395w-112, and 1395w-24, respectively, as they may be amended 
        from time to time; and 
           (4) medical assistance revenue, as a result of an 
        arrangement between a health maintenance organization or 
        community integrated service network and a Medicaid state 
        agency, for services to a medical assistance beneficiary. 
           If advance payments are made under clause (1) or (2) to the 
        health maintenance organization or community integrated service 
        network for more than one reporting period, the portion of the 
        payment that has not yet been earned must be treated as a 
        liability. 
           (c) When a health maintenance organization or community 
        integrated service network merges or consolidates with or is 
        acquired by another health maintenance organization or community 
        integrated service network, the surviving corporation or the new 
        corporation shall be responsible for the annual surcharge 
        originally imposed on each of the entities or corporations 
        subject to the merger, consolidation, or acquisition, regardless 
        of whether one of the entities or corporations does not retain a 
        certificate of authority under chapter 62D or a license under 
        chapter 62N. 
           (d) Effective July 1 of each year, the surviving 
        corporation's or the new corporation's surcharge shall be based 
        on the revenues earned in the second previous calendar year by 
        all of the entities or corporations subject to the merger, 
        consolidation, or acquisition regardless of whether one of the 
        entities or corporations does not retain a certificate of 
        authority under chapter 62D or a license under chapter 62N until 
        the total premium revenues of the surviving corporation include 
        the total premium revenues of all the merged entities as 
        reported to the commissioner of health. 
           (e) When a health maintenance organization or community 
        integrated service network, which is subject to liability for 
        the surcharge under this chapter, transfers, assigns, sells, 
        leases, or disposes of all or substantially all of its property 
        or assets, liability for the surcharge imposed by this chapter 
        is imposed on the transferee, assignee, or buyer of the health 
        maintenance organization or community integrated service network.
           (f) In the event a health maintenance organization or 
        community integrated service network converts its licensure to a 
        different type of entity subject to liability for the surcharge 
        under this chapter, but survives in the same or substantially 
        similar form, the surviving entity remains liable for the 
        surcharge regardless of whether one of the entities or 
        corporations does not retain a certificate of authority under 
        chapter 62D or a license under chapter 62N. 
           (g) The surcharge assessed to a health maintenance 
        organization or community integrated service network ends when 
        the entity ceases providing services for premiums and the 
        cessation is not connected with a merger, consolidation, 
        acquisition, or conversion. 
           Presented to the governor March 28, 2005 
           Signed by the governor March 31, 2005, 3:45 p.m.