(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 §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 June 8, 2018, issue of the Texas Register.)

The Commissioner of Insurance adopts amendments to 28 Texas Administrative Code §§3.3302 - 3.3308, 3.3312, 3.3316, 3.3317, and 3.3323 - 3.3325, and also adopts the repeal of 28 TAC §3.3318, relating to Medicare supplement policies. These amendments and repeal 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). Sections 3.3302 - 3.3305, 3.3312, 3.3316, 3.3317, and the repeal of 28 TAC §3.3318 are adopted without change to the text as proposed in the December 22, 2017, issue of the Texas Register (42 TexReg 7259). Sections 3.3306 - 3.3308 and 3.3323 - 3.3325, are adopted with nonsubstantive changes to the text as proposed, as described in the following paragraphs.

The department changed §3.3306(b) and (c) to capitalize "Standardized" and it changed §3.3306(b)(3)(A) to make "deductible" lowercase for consistency with the department's writing style.

The department changed §3.3306(b)(1)(A)(ii) and §3.3325(c)(8) to replace "which" with "that" for consistency with the department's current writing style. The department also changed the word "subchapter" to "title" in §3.3306(b)(1)(A)(iii) for consistency with the department's writing style.

The department changed 28 TAC §3.3306(c)(5)(F)(ii) to delete the 2017 Plan F high deductible amount of $2,200 and replace it with the 2018 Plan F high deductible amount of $2,240. The department also changed 28 TAC §3.3306(c)(5)(H)(ii) to delete the 2017 Plan G high deductible amount of $2,200 and replace it with the 2018 Plan G high deductible amount of $2,240. The department changed 28 TAC §3.3306(c)(5)(I)(x) to delete the 2017 Plan K out-of-pocket limit of $5,120 and replace it with the 2018 Plan K out-of-pocket limit of $5,240. The department changed 28 TAC §3.3306(c)(5)(J)(iii) to delete the references to 2017 Plan L and Plan K out-of-pocket limits of $2,560 and $5,120 and replace them with the 2018 Plan L and Plan K out-of-pocket limits of $2,620 and $5,240. These changes to 28 TAC §3.3306 are necessary to reflect the dollar amounts to be paid by Medicare, the plan, and the covered person for the 2018 calendar year.

The department changed §§3.3306(c)(6), 3.3307(g), 3.3307(g)(1)(C), 3.3308(c)(2)(E), 3.3323, 3.3325(c)(9), 3.3325(d) - (f), 3.3325(f)(7), 3.3325(g) and (h), and 3.3325(m)(6) and Figure 3.3308(c)(2)(E) to capitalize "Commissioner" for consistency with the department's current writing style.

The department changed §3.3307(d)(2)(B) - (D) to correct punctuation by removing periods that appeared in error.

The department changed 28 TAC §3.3308(c)(2)(E) to delete the reference to LHL 050 Rev. 12/17 and replace it with a reference to LHL 050 Rev. 06/18. This change is necessary because TDI has updated the contents of the form to show the dollar amounts to be paid by Medicare, the plan, and the covered person for the 2018 calendar year.

The department also changed Figure §3.3308(c)(2)(E) to correct nonsubstantive formatting and grammatical errors, including consistent use of hyphens within the term "out-of-pocket" and ensuring consistent capitalization of certain terms, such as "Plan F." The department revised the font size to size 12 throughout the Figure, which is necessary to conform to the requirements of §3.3308(c). This change necessitated additional page breaks, which the department combined with modification of paragraph and table spacing to improve readability. In addition, the department changed symbols and asterisks used within the PLAN K and PLAN L charts to more closely align with the NAIC model.

The department changed §3.3324(e)(1), (2), and (3) to insert spaces, for consistency with the department's current writing style.

The department changed §§3.3306(c)(1)(B), 3.3306(c)(5)(H), and 3.3308(c)(2)(E); and Figure §3.3308(c)(2)(E) in response to public comments, as described in the following paragraphs.

The department changed §3.3306(c)(1)(B) by moving the proposed phrase in §3.3306(c)(1)(B)(ii), "who first became eligible for Medicare before January 1, 2020," to the main body of the text in §3.3306(c)(1)(B) to clarify that the requirement as provided in §3.3306(c)(1)(B) applies to both Plans C and F.

The department changed §3.3306(c)(5)(H) by revising the language to clarify that the Part B deductible is not an expense that would ordinarily be paid by Plan G. The department added language to clarify that the Standardized Medicare supplement Plan G with High Deductible must include 100 percent of the covered expenses following payment of the annual deductible set forth in §3.3306(c)(5)(H)(ii), but that it will not provide coverage for any portion of the Medicare Part B deductible. The language further states that the Medicare Part B deductible paid by a beneficiary will be considered an out-of-pocket expense in meeting the annual high cost deductible.

The department changed §3.3308(c)(2)(E) to require use of the revised outline of coverage form no later than July 1, 2019.

The department changed Figure §3.3308(c)(2)(E), revising the column heading in the Benefit Chart of Medicare Supplement Plans Sold on or after June 1, 2020, for Plans C and F to say "Medicare first eligible before 2020 only." The department also removed the checkmark for "skilled nursing facility coinsurance" in Plans A and B, because these plans do not provide this benefit. Additionally, the department removed the checkmark for the Medicare A deductible, because Plan A does not provide this benefit.

The department also replaced language that appears in the summary portion about Plan G or High Deductible Plan G for Part A and Part B with the wording used in the NAIC Model. As adopted, the language states that "out-of-pocket expenses for this deductible include expenses for the Medicare Part B deductible, and expenses that would ordinarily be paid by the policy. This does not include the plan's separate foreign travel emergency deductible."

The department also changed the PLAN G or HIGH DEDUCTIBLE Plan G chart to make the column headings for home health care and foreign travel consistent with other benefits for Plan G. As adopted, they say "MEDICARE PAYS, [AFTER YOU PAY $[2,240] DEDUCTIBLE, **] PLAN PAYS, and [IN ADDITION TO [2,240] DEDUCTIBLE, **] YOU PAY."

REASONED JUSTIFICATION. 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 Texas 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 Texas; 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, 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.

Individuals issued a certificate in Texas 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, amendments to 28 TAC §3.3306(b)(1)(E), relating to 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 Texas, 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 amendments to 28 TAC §3.3307(f), relating to refund or credit calculations, are necessary for both efficiency and consistency in reporting the required data.

A description of adopted changes to specific sections follows. Except for where the discussion notes that a change was made to the text as proposed, all the described changes were included as part of the proposed text.

Section 3.3302. The adoption updates a statutory citation. The adoption also adds subsection (b), derived from repealed 28 TAC §3.3318. Adopting these provisions in §3.3302 is more consistent with the subject matter of the applicability and scope of Insurance Code Chapter 1652. New §3.3302(b) 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 adoption adds a new definition to §3.3303 for a "2020 newly eligible individual" for consistency with how such an individual is defined under MACRA, 42 U.S.C. §1395ss(z)(2), and renumbers the remaining definitions as appropriate to reflect the addition of the new definition. The adoption also updates statutory citations in new paragraph (20) to reflect the nonsubstantive recodification of the Insurance Code.

Section 3.3304. The adoption updates Administrative Code citations in paragraph (11) to be consistent with §3.3306 as adopted.

Section 3.3305. The adoption updates Administrative Code citations in subsections (a) and (d) to be consistent with §3.3306 as adopted.

Section 3.3306. The adoption 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 adoption adds a new subsection (a) and redesignates the subsections that follow it to reflect this change. The following descriptions address the redesignated subsections, unless stated otherwise.

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 adoption 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 adoption states that standardized Medicare supplement plans C, F, and High Deductible F may not be offered to 2020 newly eligible individuals.

The adoption 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 adoption makes a correction to a citation in subsection (b)(1)(E)(iii) by changing "(iv)" to "(v)." This amendment is necessary because the previous was inconsistent with the citation reference in the NAIC Model Rule. The adoption 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 Texas 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 adoption adds the words "G with High Deductible" in subsection (b)(2) and clarifies that (c)(1)(B) applies to each prospective policyholder and certificate holder who first became eligible for Medicare before January 1, 2020. The adoption 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 adoption deletes previous 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 adopted §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 new outline of coverage, the adoption updates deductible and out-of-pocket limit amounts to reflect the 2018 coverage levels, as published by Centers for Medicare & Medicaid Services. The adoption also updates Administrative Code citations to reflect the adopted redesignations within the section.

Section 3.3307. The adoption 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 adoption also replaces the previous Figure: 28 TAC §3.3307(f) with 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 adoption also updates the statutory citation in subsection (g) to reflect the nonsubstantive recodification of the Insurance Code.

Section 3.3308. The adoption 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 adoption amends subsection (c)(2)(E), relating to the Outline of Coverage form, Form No. LHL 050 Rev. 06/09, applicable to policies with an effective date for coverage of June 1, 2010, or later. The adoption also repeals LHL 050 Rev. 06/09 and creates an updated version of the form titled "LHL 050 Rev. 06/18."

New LHL 050 Rev. 06/18 includes disclosure provisions (provisions that were inadvertently excluded from LHL 050 Rev. 06/09) to address limitations and exclusions, refund of premium, and grievance procedures, which are consistent with subsections (c)(2)(B) - (D). The adopted form also reflects 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.

As proposed, the adoption makes nonsubstantive editorial and formatting changes to conform to the agency's current style and to improve the rule's clarity. The adoption also updates an Administrative Code citation at subsection (a)(4)(C) to reflect §3.3306 as adopted. 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. 06/18, adopted §3.3308(c)(2)(E) indicates that issuers are not required to begin using the new form until July 1, 2019.

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

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