The Texas Department of Insurance proposes amendments to §§3.3303 - 3.3309, 3.3312, 3.3320, 3.3322, 3.3324, and 3.3325, concerning minimum standards for Medicare supplement policies. These amendments are necessary to conform Texas law to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), as well as to make persons losing eligibility for health benefits under Medicaid eligible for guaranteed issuance of certain Medicare supplement plans. After December 31, 2005, MMA prohibits issuers of Medicare supplement policies from renewing outpatient prescription drug benefits for both prestandardized and standardized Medicare supplement policyholders who enroll in Medicare Part D.

Proposed §3.3303 revises definitions to conform to the MMA, as does proposed §3.3304. Proposed §3.3305 alters requirements for issuance and renewability of plans including an outpatient prescription drug benefit to conform to the MMA. Proposed §3.3306 revises minimum benefit standards to conform to the MMA and the phase-out of the existing forms of outpatient prescription drug benefits; revises payment standards for Medicare Part A expenses; and defines the benefits included in new Plans K and L. Proposed §3.3307 amends loss ratio standards for HMOs to conform to the MMA. Proposed §3.3308 requires issuers to comply with notice requirements of the MMA. Proposed §3.3309 revises standards for applications in accordance with the MMA. Proposed §3.3312 changes standards for guaranteed issuance to conform to the MMA and makes individuals losing eligibility for health benefits under Medicaid eligible for guaranteed issuance of certain Medicare supplement plans. Proposed §3.3320 prohibits issuing Medicare supplement coverage to an individual enrolled in Medicare Part C unless the effective date is after the termination of the Part C coverage. Proposed §3.3322 makes changes to filing requirements to conform to the MMA. Proposed §3.3324 adds §3.3312 to the list of exceptions to an issuer's authority to apply a preexisting condition provision. Proposed §3.3325 addresses the effect of out-of-network expenses on out-of-pocket annual limits in Plans K and L and makes other changes to conform to the MMA.

Throughout the sections the department has made minor changes to correct form and grammar, make clarifications, correct citations and update examples and references to form numbers.

Kim Stokes, Senior Associate Commissioner for the Life, Health and Licensing Program, has determined that for each year of the first five years the proposed amendments will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the amended sections. There will be no measurable effect on local employment or the local economy as a result of the proposal.

Ms. Stokes has determined that for each year of the first five years the amendments are in effect, the public benefits anticipated as a result of the proposed amendments will be Texas's continued compliance with federal standards and requirements relating to regulation of Medicare supplement coverage, as well as expansion of access to Medicare supplement coverage for those persons losing eligibility for health coverage under Medicaid. With the exception of proposed §3.3312(b)(8), the probable economic cost to persons required to comply with the amended sections is due to the MMA and not the result of this proposal. There is no cost to persons required to comply with §3.3312(b)(8), since an issuer will charge an adequate premium to any person entitled to guaranteed issuance under that provision. As there are no costs attributable to the proposal, there is no effect on small and micro-businesses.

Even if this proposed change had a cost, there would be no adverse economic effect on small businesses, as the cost for each hour of labor would be the same for small or micro-businesses and all other businesses. Regardless of the fiscal effect, the department does not believe it legal or feasible to waive the requirements of these rules for small businesses or micro-businesses, as to do so would impair the uniform regulation of Medicare supplement coverage.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on December 27, 2004, to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Bill Bingham, Deputy for Regulatory Matters, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. The department will consider the adoption of the proposed amendments in a public hearing under Docket Number 2609, scheduled for 9:30 a.m., on January 13, 2005, in Room 100 of the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin, Texas.

The amendments are proposed under the Insurance Code Article 3.74, §2(f) and §10 and §36.001. Article 3.74, §2(f) provides that the department's rules must include requirements that are at least equal to those required by federal law, rules, and standards, including 42 U.S.C. §1395ss. Article 3.74, §10 provides that the department shall adopt rules in accordance with federal law applicable to the regulation of Medicare supplement insurance coverage that are necessary for the state to obtain or retain certification as a state with an approved regulatory program under 42 U.S.C. §1395ss, as well as any other reasonable rules that are necessary and proper to carry out this article. Section 36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

The following article is affected by this proposal: Insurance Code Article 3.74