(Editor's note: In accordance with Texas Government Code, §2002.014, which permits the omission of material which is "cumbersome, expensive, or otherwise inexpedient," the figure in 28 TAC 28 TAC §3.3308(c)(2)(E) is not included in the print version of the Texas Register. The figure is available in the on-line version of the December 22, 2017, issue of the Texas Register.)

The Texas Department of Insurance proposes amendments to 28 Texas Administrative Code §§3.3302 - 3.3308, 3.3312, 3.3316, 3.3317, and 3.3323 - 3.3325, and it proposes the repeal of 28 TAC §3.3318. These sections relate to Medicare supplement policies. These proposed amendments and repeal are necessary to implement the most recent revisions to the National Association of Insurance Commissioner's (NAIC) Medicare supplement insurance model regulation to comply with the Medicare Access and CHIP Reauthorization Act of 2015, Public Law 114-10, at 42 U.S.C. §1395ss(z).

The department proposes amendments to 28 TAC §§3.3302 - 3.3308, 3.3312, 3.3316, 3.3317, and 3.3323 - 3.3325, as necessary, to update outdated contact information and administrative and statutory citations. Proposed amendments to these sections are also necessary for consistency with the agency's writing style.

The department proposes amendments to 28 TAC §3.3306(b)(1)(E). These proposed amendments are necessary to permit, under certain circumstances, an issuer to replace a certificate with a certificate of the same standardized benefit plan when an individual moves from this state to a different state. The department also proposes to amend 28 TAC §3.3306 by deleting subsections (c) and (d), concerning benefit standards for 1990 standardized Medicare supplement plan policies and certificates issued for delivery on or after March 1, 1992, and with an effective date for coverage before June 1, 2010. This proposed amendment is necessary because the 1990 standardized Medicare supplement benefit plans are no longer issued.

The department proposes to amend 28 TAC §3.3307(f) by deleting the current refund calculation form and replacing it with a new refund calculation form. This proposed amendment is necessary to require an issuer to electronically submit the reporting form found on the department's website.

The department proposes the repeal of 28 TAC §3.3318, relating to the effective date of amendments and its impact on existing policies. This proposed repeal is necessary because this provision will be included under 28 TAC §3.3302, relating to applicability and scope.

EXPLANATION. The Medicare Access and CHIP Reauthorization Act (MACRA) was enacted on April 16, 2015. Starting on January 1, 2020, it prohibits the sale of Medicare supplement plans that cover Part B deductibles to a "newly eligible Medicare beneficiary." A "newly eligible Medicare beneficiary" is defined under 42 U.S.C. §1395ss(z)(2) as an individual who: has attained age 65 on or after January 1, 2020; becomes eligible for Medicare due to age, disability, or end-stage renal disease on or after January 1, 2020, by reason of entitlement under 42 U.S.C. §426(b) or 42 U.S.C. §426-1; or who is deemed to be eligible for benefits under 42 U.S.C. §426(a). Plans C, F, and High Deductible F, which include coverage for the Part B deductible, will not be available to a newly eligible individual. NAIC adopted revisions on August 29, 2016, to its NAIC Model Regulation to implement the MACRA requirements concerning Medicare supplement insurance. On September 1, 2017, the Department of Health and Human Services issued a notice in 82 Federal Register 169 recognizing the revised NAIC Model standards for regulation of Medicare supplement insurance for purposes of 42 U.S.C. §1395ss.

If a state's Medicare supplement program does not provide for the application and enforcement of the NAIC Model Standards and requirements in 42 U.S.C. §1395ss(b)(1), no Medicare supplement policy may be issued in that state, unless the policy has been certified by the Secretary of the United States Department of Health and Human Services as meeting minimum standards and requirements under the procedures established in 42 U.S.C. §1395ss(a)(1). Title 42 U.S.C. §1395ss(b)(1) provides that Medicare supplement policies issued in a state are deemed to meet the federal requirements if the state's program regulating Medicare supplement policies provides for the application of standards that are at least as stringent as those contained in the NAIC Model Regulation and if the state's requirements are equal to or more stringent than those in subsection 42 U.S.C. §1395ss(c)(2)-(5).

Insurance Code §1652.005 provides that, in addition to other rules required or authorized by Chapter 1652, the commissioner must adopt reasonable rules necessary and proper to carry out Chapter 1652, including rules adopted in accordance with federal law relating to the regulation of Medicare supplement benefit plan coverage that are necessary for this state to retain certification as a state with an approved regulatory program for Medicare supplement insurance.

Insurance Code §1652.051 provides, in part, that the commissioner must adopt reasonable rules to establish specific standards for provisions in Medicare supplement benefit plans and standards for facilitating comparisons of different Medicare supplement benefit plans. The standards are in addition to and must be in accordance with applicable laws of this state; applicable federal law, rules, regulations, and standards; and any model rules and regulations required by federal law, including 42 U.S.C. §1395ss. The standards may include provisions relating to terms of renewability; benefit limitations, exceptions, and reductions; and exclusions required by state or federal law.

Insurance Code §1652.052(a) provides that the commissioner must adopt reasonable rules to establish minimum standards for benefits and claim payments under Medicare supplement benefit plans.

Insurance Code §1652.052(b) states that the standards for benefits and claim payments must include the requirements for certification of Medicare supplement benefit plans under 42 U.S.C. §1395ss. Based on state and federal law, proposed amendments to §§3.3303, 3.3306, 3.3308, and 3.3312 are necessary to retain certification as a state with an approved regulatory program for Medicare supplement insurance.

The department acknowledges that individuals issued a certificate in this state may move for various reasons to a different state and that issuers typically adjust premium rates to reflect costs in a given geographic location. Therefore, proposed amendments to 28 TAC §3.3306(b)(1)(E), concerning group Medicare supplement policies, provide that, if an individual holds a Texas-issued certificate in a group Medicare supplement policy, and the individual moves out of the state in which the certificate was issued, the issuer may replace the certificate with a certificate of the same standardized benefit plan type, approved by the new state of residence, if the issuer acts uniformly in its treatment of certificate holders who move out of state. This change is intended to provide administrative simplification for issuers related to rate filings.

Insurance Code §1652.102(c) provides that the commissioner may adopt rules relating to filing requirements for rates, rating schedules, and loss ratios. The proposed amendments to 28 TAC §3.3307(f), concerning refund or credit calculations, are necessary for both efficiency and consistency in reporting the required data.

A description of changes to specific sections follows.

Section 3.3302. The proposal updates a statutory citation. The proposal also adds subsection (b) derived from current 28 TAC §3.3318, which is proposed for repeal. Placing these provisions in §3.3302 is more consistent with the subject matter of the applicability and scope of Insurance Code Chapter 1652. This proposed new subsection states that policies and certificates delivered or issued for delivery before June 1, 2010, are subject to the laws and rules as they existed at the time the policy was delivered or issued for delivery, and those sections are continued in effect for that purpose.

Section 3.3303. The proposal adds a new definition to §3.3303 for "2020 newly eligible individual" for consistency with how such an individual is defined under MACRA, 42 U.S.C. §1395ss(z)(2), and it renumbers the remaining definitions as appropriate to reflect the addition of the new definition. The proposal also updates statutory citations in proposed new paragraph (20) to reflect the nonsubstantive recodification of the Insurance Code.

Section 3.3304. The proposal updates administrative code citations in paragraph (11) to be consistent with §3.3306 as proposed.

Section 3.3305. The proposal updates administrative code citations in subsections (a) and (d) to be consistent with §3.3306 as proposed.

Section 3.3306. The proposal conforms §3.3306 to amendments made by MACRA that prohibit the sale of Medicare supplement plans that cover Part B deductibles to a newly eligible Medicare beneficiary.

The proposal adds a new subsection (a) and redesignates the subsections that follow it to reflect this change. The following descriptions address the subsections as redesignated, unless stated otherwise.

Proposed new subsection (a)(1) clarifies that the standards and requirements of subsections (b) and (c) apply to all Medicare supplement policies or certificates delivered or issued for delivery to 2020 newly eligible individuals, with the exception of subsections (b)(3)(C), (c)(5)(C), (c)(5)(E), and (c)(5)(F). The proposal further clarifies that 2020 newly eligible individuals are only eligible to purchase standardized Medicare supplement benefit plans A, B, D, G, High Deductible G, K, L, M, and N. The proposal states that standardized Medicare supplement plans C, F, and High Deductible F may not be offered to 2020 newly eligible individuals.

The proposal further states in subsections (b) and (c) that benefit standards applicable to Medicare supplement policies and certificates issued or issued for delivery with an effective date before June 1, 2010, remain subject to the laws and rules in effect when the policy or certificate was delivered or issued for delivery. The proposal makes a correction to a citation in subsection (b)(1)(E)(iii) by changing "(iv)" to "(v)." This proposed amendment is necessary because the citation is inconsistent with the citation reference in the NAIC Model Rule. The proposal adds new subsection (b)(1)(E)(vi), which provides that if an individual is a Texas certificate holder in a group Medicare supplement policy and the individual moves out of the state where the certificate was issued, the issuer may replace the Texas certificate with a certificate of the same standardized benefit plan type, approved by the new state of residence, if the issuer treats all certificate holders who move out of state uniformly.

The proposal adds the words "G with High Deductible" in subsection (b)(2) and clarifies that (c)(1)(B)(i) applies to any individual who first became eligible for Medicare before January 1, 2020. The proposal adds new subsection (c)(5)(H) to provide the standardized plan requirements for Plan G with High Deductible. To streamline and simplify the rules, the proposal deletes current subsections (c) and (d), concerning benefit standards for 1990 Standardized Medicare supplement benefit plans, policies, or certificates, and specific references to these plans and pre-standardized Medicare supplement benefit plans. However, as stated in proposed §3.3302(b), these plans remain subject to the laws and rules in effect when the policy or certificate was delivered or issued for delivery. For consistency with the proposed new outline of coverage, the proposal updates deductible and out-of-pocket limit amounts to reflect 2017 coverage levels, as published by CMS. The proposal also updates administrative code citations to reflect the proposed redesignations within the section.

Section 3.3307. The proposal revises §3.3307(f) to state that an issuer must use the online data reporting form found on the department’s website concerning calculations to electronically submit the required data no later than May 31st of each year. The proposal also deletes the current Figure: 28 TAC §3.3307(f) and replaces it with a proposed new Figure: 28 TAC §3.3307(f) to improve the clarity of the language and grammar within the form and to add a checkbox that enables an issuer with no data to report to automatically populate zeros in all relevant form fields. The proposal also updates the statutory citation in subsection (g) to reflect the nonsubstantive recodification of the Insurance Code.

Section 3.3308. The proposal deletes §3.3308(c)(2)(F), relating to Outline of Coverage form, relating to policies sold with an effective date for coverage before June 1, 2010, and on or after March 1, 1992, and repeals Form No. LHL 050 Rev. 12/04. The proposal amends subsection (c)(2)(E), concerning the Outline of Coverage form, Form No. LHL 050 Rev. 06/09, applicable to policies with an effective date for coverage of June 2010 or later. The proposal also repeals LHL 050 Rev. 06/09 and creates an updated version of the form titled "LHL 050 Rev. 12/17."

Proposed new LHL 050 Rev. 12/17 includes disclosure provisions that were inadvertently excluded from LHL 050 Rev. 06/09 that address limitations and exclusions, refund of premium, and grievance procedures, which are consistent with subsections (c)(2)(B)-(D). The proposed new form also reflects proposed amendments to §3.3306, by including a new benefit chart of Medicare supplement plans sold on or after January 1, 2020, and by modifying the Plan G summary to reflect the new high deductible option.

The proposal makes nonsubstantive editorial and formatting changes to conform to the agency's current style and to improve the rule's clarity. The proposal also updates an administrative code citation at subsection (a)(4)(C) to reflect §3.3306 as proposed. In order to provide adequate time for issuers to make changes to the outline of coverage and file new forms, consistent with LHL 050 Rev. 12/17, proposed §3.3308(c)(2)(E) indicates that issuers are not required to begin using the proposed new form until July 1, 2018.

Section 3.3312. The proposal amends §3.3312(c) to clarify the products that 2020 newly eligible individuals are entitled to purchase under the guaranteed issue provisions.

Section 3.3316. The proposal updates a statutory citation to reflect the nonsubstantive recodification of the Insurance Code.

Section 3.3317. The proposal updates a statutory citation to reflect the nonsubstantive recodification of the Insurance Code.

Section 3.3318. The proposal repeals current §3.3318. Proposed amendments to §3.3302(b) incorporate some of the provisions repealed in §3.3318, as previously described.

Section 3.3323. The proposal corrects a citation to include the full name of a section title and updates a statutory citation to reflect the nonsubstantive recodification of the Insurance Code.

Section 3.3324. The proposal deletes outdated language related to enrollment prior to 1997. The proposal also updates an administrative code citation in subsection (d), consistent with proposed §3.3306.

In addition to the proposed changes previously described, the proposal makes nonsubstantive editorial and formatting changes in §§3.3303, 3.3304, 3.3305, 3.3306, 3.3307, 3.3312, 3.3316, 3.3317, 3.3323, 3.3324, and 3.3325.

This proposal includes provisions related to NAIC model rules, regulations, directives, or standards, and, the department must consider whether authority exists to enforce or adopt NAIC model rules, regulations, directives, or standards under Insurance Code §36.004 and §36.007. The department has determined that Insurance Code §36.004 and §36.007 do not prohibit the proposed amendments because Insurance Code §1652.005 provides that, in addition to other rules required or authorized by Chapter 1652, the commissioner must adopt reasonable rules necessary and proper to carry out Chapter 1652. These rules include those adopted in accordance with federal law relating to the regulation of Medicare supplement benefit plan coverage that are necessary for this state to retain certification as a state with an approved regulatory program for Medicare supplement insurance.

FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Patricia Brewer, team lead for the Life and Health Regulatory Initiatives Team, has determined that for each year of the first five years the proposed amendments and repeal will be in effect, there will be no measureable fiscal impact on state and local governments as a result of the enforcement or administration of this proposal. Ms. Brewer does not anticipate any measurable effect on local employment or the local economy as a result of this proposal.

PUBLIC BENEFIT AND COST NOTE. For each of the first five years the proposed amendments and repeal are in effect, Ms. Brewer expects that administering and enforcing the proposed amendments and repeal will have the public benefits of: (1) ensuring that the department's rules and outline-of-coverage form comply with Insurance Code §§1652.005, 1652.051, 1652.052, 1652.102, 1652.151, and 1652.152 in order to retain certification as a state with an approved regulatory program for Medicare supplement insurance; (2) adopting a new refund calculation data reporting form that will ease issuers’ reporting and submission process; and (3) ensuring that Texas certificate holders who move to a different state retain the same standardized benefit plan type when the issuer satisfies certain requirements concerning certificate holders who move to a different state.

Ms. Brewer expects that the proposed amendments and repeal will not increase the cost of compliance with Insurance Code Chapter 1652 because it does not impose requirements beyond those under state and federal law. Insurance Code §1652.005 provides that, in addition to other rules required or authorized by this chapter, the commissioner must adopt reasonable rules necessary and proper to carry out Chapter 1652, including rules adopted in accordance with federal law relating to the regulation of Medicare supplement benefit plan coverage that are necessary for this state to retain certification as a state with an approved regulatory program for Medicare supplement insurance.