The Commissioner of Insurance adopts amendments to §§3.3303 - 3.3309, 3.3312, 3.3320, 3.3322, 3.3324, and 3.3325 concerning minimum standards for Medicare supplement policies. Sections 3.3305, 3.3306, 3.3308, 3.3312 and 3.3322 are adopted with changes to the proposed text as published in the November 26, 2004, issue of the Texas Register (29 TexReg 10873). Sections 3.3303, 3.3304, 3.3307, 3.3309, 3.3320, 3.3324, and 3.3325 are adopted without changes.

These amendments are necessary to implement provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), as well as to make under age 65 persons losing eligibility for health benefits under Medicaid eligible for guaranteed issuance of Medicare supplement Plan A. After December 31, 2005, the 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.

Section 3.3303 revises definitions to conform to the MMA, as does §3.3304. Section 3.3305 alters requirements for issuance and renewability of plans including an outpatient prescription drug benefit to conform to the MMA. Section 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. Section 3.3307 amends loss ratio standards for HMOs to conform to the MMA. Section 3.3308 requires issuers to comply with notice requirements of the MMA. Section 3.3309 revises standards for applications in accordance with the MMA. Section 3.3312 changes standards for guaranteed issuance to conform to the MMA and makes under age 65 individuals losing eligibility for health benefits under Medicaid eligible for guaranteed issuance of Medicare supplement Plan A. Section 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. Section 3.3322 makes changes to filing requirements to conform to the MMA. Section 3.3324 adds §3.3312 to the list of exceptions to an issuer's authority to apply a preexisting condition provision. Section 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. The department added language to §3.3312, in response to comments, to clarify which products are guaranteed issue for eligible persons under 65 years of age losing eligibility for Medicaid. In §§3.3305, 3.3306, 3.3308 and 3.3322 the department has made minor changes to correct form, typographical errors and update and correct citations.

General: Commenters have made several suggestions regarding the effective date of the rules and their effect on a carrier's ability to offer and issue certain plans. Some commenters requested that the department revise the rules to permit insurers to continue to use currently approved forms as appropriate through December 31, 2005. Another commenter requested that the rules specify that insurers may begin to offer plans with the newly adopted changes prior to January 1, 2006, subject to approval by the Commissioner of Insurance.

Agency Response: While the department declines to revise the proposal in the manner requested by commenters, the department does confirm that insurers can continue to use currently approved plans as appropriate, reminding carriers of their obligation to offer the standard plans which include prescription drugs until the advent of Medicare Part D prescription drug coverage. The department also confirms that, once the adopted rules take effect and prior to January 1, 2006, insurers may offer approved plans as authorized by these rules.

§3.3312(b)(8): Some commenters expressed concern that the proposed amendment providing guaranteed issue rights to Medicare recipients losing Medicaid eligibility would allow the newly-eligible individuals access to Plans A, B, C, and F.

Agency Response: Texas law guarantees to Medicare recipients under the age of 65 access only to Plan A. Staff has had several discussions with the commenters, as well as with the National Association of Insurance Commissioners (NAIC), the Center for Medicare and Medicaid Services, and the Texas Health and Human Services Commission staff regarding this issue. The department has added language to §3.3312(c) to clarify that an under 65 Medicare recipient losing coverage under Medicaid would be entitled only to guaranteed issuance of Plan A.

For, with changes: America's Health Insurance Plans, Texas Association of Life and Health Insurers, and UnitedHealth Group. Against: None.

The amendments are adopted under the Insurance Code §1652.051 (formerly Article 3.74, §2(f)) and §1652.005 (formerly Article 3.74, §10), and §36.001. Section 1652.051 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. Section 1652.005 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.