Rule-Making Notices (Hearing Notices)

Initial regulatory flexibility analysis

Types of small businesses that will be affected by the rules.

Businesses that receive payments from funds which become available because of the rules.

Reporting, bookkeeping and other procedures required for compliance with the rules.

No new reporting, bookkeeping or other procedures are necessary for compliance with the rules.

Types of professional skills necessary for compliance with the rules.

No new professional skills are necessary for compliance with the rules.

Do the rules have a significant economic impact on small businesses?

No

Small business regulatory coordinator

Any inquiries for the small business regulatory coordinator for the Department of Commerce can be directed to Carol Dunn, at telephone [phone], or at cdunn@commerce. state.wi.us.

Environmental Analysis

The Department has considered the environmental impact of these emergency rules. In accordance with chapter Comm 1, the rules are a Type III action. A Type III action normally does not have the potential to cause significant environmental effects and normally does not involve unresolved conflicts in the use of available resources. The Department has reviewed these rules and finds no reason to believe that any unusual conditions exist. At this time, the Department has issued this notice to serve as a finding of no significant impact.

Fiscal Estimate

Summary

Due to limited funding, the overall number of CDBG grant awards is not expected to change significantly. The increased workload for grant specialists processing and underwriting more emergency assistance grants will be offset by a decrease in non-emergency grant applications. Therefore, the proposed rule revisions are not expected to have any significant fiscal effect on the Department.

The proposed rules will not impose any significant costs on local governments or the private sector, because CDBG emergency assistance grants also include administrative funds for the local government.

State fiscal effect

None

Local fiscal effect

None

Long-range fiscal implications

None known.

Agency Contact Person

Jeanne Storm, Wisconsin Department of Commerce, Division of Housing and Community Development, P.O. Box 7970, Madison, WI, 53707-7970; telephone [phone]; e-mail: [e-mail]

Copy of Proposed Rule

The emergency rules and an analysis of the rules are available on the Internet by entering “Comm 108" in the search engine at the following Web site: http://adminrules.wisconsin.gov. Paper copies may be obtained without cost from Sam Rockweiler at the Department of Commerce, Division of Environmental and Regulatory Services, P.O. Box 14427, Madison, WI 53707, or at [e-mail], or at telephone [phone] or [phone] (TTY). Copies will also be available at the public hearing.

Notice of Hearing

Employee Trust Funds

rulemaking_notices CR 08-079 CR 08-079

NOTICE IS GIVEN That a public hearing will be held on a proposed rule to repeal and recreate section ETF 40.01, relating to continued group health insurance coverage of an insured dependent after the death of the insured employee or annuitant.

Hearing Information

August 26, 2008 Tuesday at 1:30 p.m.

Dept. of Employee Trust Funds Conference Room GA - lower floor 801 West Badger Road Madison, Wisconsin

Persons wishing to attend should first come to the main reception area up the stairs, or elevator, from the building's main entrance.

Analysis Prepared by the Department of Employee Trust Funds

Statute interpreted

Sections 40.02 (25) (b) 3. and 40.51 (1), Stats.

Statutory authority

Sections 40.03 (2) (ig) and 227.11 (2) (a), Stats.

Explanation of agency authority

Under s. 40.03 (2) (ig), Stats., the DETF Secretary, with the approval of the Group Insurance Board, may promulgate rules required for the administration of the group health insurance plan. As provided by s. 227.11 (2) (a), Stats., each agency may promulgate rules interpreting the provisions of any statute enforced or administered by it, if the agency considers it necessary to effectuate the purpose of the statute.

Related statute or rule

The existing s. ETF 40.01, Wis. Admin. Code, is repealed by this rule-making.

Plain language analysis

Under s. 40.51, Stats., the Group Insurance Board provides group health insurance programs for eligible state employees and the eligible employees of local units of government in Wisconsin that elect to participate. Eligible Wisconsin Retirement System annuitants may also elect to be covered. The group health insurance plans are required to include provisions for continuation of coverage that, at a minimum, comply with s. 632.897, Stats.

Section 632.897 (b) 3., Stats., generally requires that if a member dies while covered by group health insurance, then the spouse or dependent who was also covered through the member must be permitted to continue coverage under the group policy, or convert to individual coverage. Under s. 632.897 (2) (d), Stats., the plan sponsor or group policyholder must give written notice to the insured surviving dependents of their right to continuation coverage within 5 days after learning of the death of the insured employee or annuitant. The notice must include the amount of the payment required and the manner, place and time for making payments. As provided by s. 632.897 (3) (a), Stats., each surviving insured dependent, or the parent in the case of a minor, then has 30 days from the date of the notice to apply for continuation coverage and make the initial required payment. If this application and payment are timely received, then the coverage continues without interruption. Continuation coverage may be terminated if the surviving dependent established residence outside Wisconsin, fails to make timely payment of a required premium or becomes eligible for similar coverage under another group policy. If no such events intervene, then a minimum of 18 months of continuation coverage must be allowed. After that, the insurer may compel the survivor to convert to an individual policy in order to continue coverage.

Under the current s. ETF 40.01 (1), Wis. Admin. Code, an application for health care coverage must be received from the surviving dependent within 90 days after the death of the insured employee (or annuitant) in order for the surviving dependent to continue his or her group health insurance coverage that was in effect prior to the death.

An exception to the 90-day deadline allows the surviving dependent at least 30 days to apply after the Department sends out the standard packet of materials relating to death benefits. This exception conforms to the intent of s. 632.897 (3) (a), Stats. The death benefit packet contains the “Survivor Eligibility to Continue Health Insurance" form (ET-6203) giving notice of the right, if any, to continue group coverage, the deadline for applying and premium payment options. A form ET-4701 schedule of premium rates, the Group Health Insurance brochure (ET-4112) and “Health Insurance Application," form (ET-2301) are all also included in the packet. The 30-day grace period assures that a delay in preparing and mailing out a death benefit packet will not deprive the surviving insured dependent of the opportunity to continue coverage.

In an effort to avoid unintended termination of health insurance coverage, Department staff will often write and telephone surviving dependents to remind them of the need to apply for the coverage within the 90-day deadline. If the 90-day deadline passes and all previously received premiums have been exhausted, the surviving dependents' health insurance coverage is terminated.

Terminated surviving dependents often call or write Department staff to explain why they failed to timely apply and to attempt to obtain coverage. The Department staff estimate from anecdotal data that roughly 98% of surviving insured dependents wish to continue the health insurance coverage. The main reason for not wishing to continue coverage is likely to be that the surviving dependent is already covered under other health coverage which the surviving dependent prefers. This can occur, for example, when two spouses both work and each has family health insurance benefits through their separate employers.

This rule-making is intended to address both customer service and Department work-load issues. The first goal is to reduce or eliminate interruptions in coverage for surviving dependents who wish to continue health coverage. Secondly, the Department would like to reduce staff time spent soliciting applications, reminding surviving dependents of the application deadline and handling telephone calls and correspondence with health care providers and surviving dependents concerning health coverage that was involuntarily terminated due to inaction by the surviving dependent.

This rule-making provides that health insurance coverage for surviving insured dependents will automatically continue despite the death of the insured employee or annuitant who had family health insurance coverage in effect. This is accomplished by having the family coverage remain in effect despite the death. Generally, only those persons actually covered under the family coverage when the insured employee or annuitant died will be covered and no new dependents may be added to the coverage. However, a provision in the rule allows the Group Insurance Board to identify, in the group health insurance contract, certain other persons who may be added to the continuing family coverage. The Board may allow coverage for certain persons the Board identifies who also fall into one of the following two broad categories:

•   Persons previously insured under the group insurance board health insurance contract as dependents of the deceased insured employee, who would have been eligible to resume such coverage if the insured employee had lived. This category might include a child who took a break from school after age 19 and thereby lost coverage, but then became a full-time student while under age 25.

•   A child of the deceased insured employee who first became eligible for coverage under the group insurance board health insurance contract after the death of the insured employee. This category might include a child who was born after the insured employee died.

The rule designates who will be responsible for making decisions about the health insurance coverage following the insured employee's death. Generally this will be the deceased employee's or annuitant's surviving spouse, even if other surviving dependents are not children of, or otherwise dependent upon, the surviving spouse. Absent a surviving spouse, the responsible person will be the oldest of the deceased employee's or annuitant's surviving insured dependents, or that person's guardian. The responsible person will have control over the health insurance coverage and will make the annual dual choice decisions and decide if and when to convert the coverage from family to single coverage or back again.

The duration of coverage for a surviving insured dependent other than a spouse is to be established by the terms of the group health insurance contract. A person may outgrow the status of dependent, or no longer qualify by ceasing to be a full-time student or by recovering from disability, for example. On the other hand, a surviving spouse is entitled to insurance coverage under this rule for life, unless the surviving spouse sooner cancels the coverage voluntarily or coverage is cancelled for non-payment of premiums.

To avoid permanent loss of coverage due to voluntary cancellation, a special provision in the rule protects surviving insured dependents who have other comparable health insurance coverage and inherited the deceased insured employee's balance of accumulated sick leave conversion credits. Under s. 40.05 (4) (b) or (be), Stats., surviving insured dependents may elect to delay using the deceased employee's or annuitant's accumulated sick leave conversion credits to pay for the group insurance board's insurance and instead rely on their other comparable health insurance coverage. Under this rule, such a decision is treated as a temporary suspension of the continued coverage under this rule, rather than as a voluntary termination of coverage that would bar any future coverage.

Since family coverage will continue beyond the death of the insured employee or annuitant, the rule also provides for payment of the insurance premiums. First, any remaining advance payments are used. Next, any unused accumulated sick leave conversion credits are applied. Then a deduction is made from any Wisconsin Retirement System annuity being paid to the surviving spouse or the responsible person. If there is no annuity, or it is too small to cover the premiums due, then the surviving spouse or responsible party must pay the premiums directly. Failure to do so will result in cancellation for non-payment.

One effect of this rule-making is that the death of an employee will no longer result in termination of insurance coverage for the surviving insured spouse or dependents. Therefore, the death will not trigger rights to continuation coverage under other state or federal law. However, it is not the purpose of this rule-making to deprive anyone of legal rights to continuation coverage. Therefore, to avoid any unintended consequences, a provision has been included in the rule protecting a person's eligibility and right to apply under applicable state or federal health insurance continuation law.

Comparison with federal regulations

A federal requirement for group health plans to offer continuation coverage to certain individuals whose coverage might otherwise end was enacted in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). COBRA amended the federal tax code, the Employee Retirement Income Security Act (ERISA) and the Public Health Service Act to require continuation coverage. Governmental plans are exempt from ERISA and the regulations of the U.S. Department of Labor regulations based on that Act. See 29 U.S.C. §1003(b)(1). The U. S. Treasury regulations on COBRA continuation coverage expressly except state and local group health plans from the regulations. See 26 CFR 26 C.F.R. § 54.4980B-2 A-4(b)(3).

However, as the IRS expressly noted in 26 CFR 26 C.F.R. § 54.4980B-2 A-4(d), group health plans maintained by state or local governments are generally subject to parallel continuation coverage requirements that COBRA added to the Public Health Services Act. These COBRA continuation provisions apply to states that receive funds under the Public Health Service Act, as well as to their political subdivisions and to agencies or instrumentalities of such states and their political subdivisions. See the Notice published by the U.S. Department of Health and Human Services, 52 FR 604 (January 7, 1987).

The U.S. Department of Health and Human Services has not issued regulations concerning COBRA continuation coverage for the group health plans of state and local governments. If regulations are issued on continuation coverage requirements for state and local governments, then the H&HS regulations must conform to the similar regulations issued by the Treasury and the Department of Labor. See the final rules notice published by the Department of Labor, 69 FR 30084 (May 26, 2004), footnote 4, citing House Conference Report No. 99-453 at 563 (1985). The Department of Labor COBRA continuation regulations begin at 29 CFR §2590.606-1 and the related Treasury regulations begin at 26 CFR § 54.4980B-1.

Meanwhile, the COBRA continuation provisions of the Public Health Services Act are codified beginning at 42 U.S.C. §300bb-1. Under 42 USC § 300bb-3(1), the death of a covered employee is a “qualifying event" giving rise to continuation rights for the surviving spouse and dependent children insured under the employee's coverage if the coverage would terminate because of the death. The term “covered employee," as defined by 42 USC § 300bb-8 (2), includes retired employees. Within 30 days, the employer is required to notify the plan administrator of the employee's death and within 14 days after notification, the plan administrator must send notice of COBRA continuation rights to the affected surviving spouses or dependent children who were covered under the plan. See 42 U.S.C.A. § 300bb-6(2) and (4)(A).

During the “election period" the surviving spouse or dependent child who would otherwise lose coverage under the plan because of the employee's death, is entitled to elect continuation coverage. For this purpose, the “election period" is defined by 42 USC §300bb-5 to be a period of 60 days, beginning on the later of (a) the date of the notice provided to the surviving spouse (or dependent child), or (b) the date coverage would end as a result of the employee's death.

Comparison with rules in adjacent states

A check on WestLaw for rules pertaining to health insurance and surviving dependents found no similar rules in Illinois, Iowa, Michigan or Minnesota except the following:

Illinois. Illinois Admin. Code title 80 § 2160.130 is part of the administrative code pertaining to employee benefits for public officials and employees. The rule relates specifically to the local government health plan. This rule defines the term “survivor" to mean a person who is a surviving dependent of a person who satisfies the definition of “employee" or “annuitant." A survivor is included within the definition of the term “member." The term survivor appears again in Ill. Admin. Code title 80 § 2160.310, concerning enrollment in the local government health plan. Section 2160.310 a) provides that local units of government may offer coverage under the plan to survivors, as well as employees, annuitants and dependents.

Iowa. Iowa Admin. Code r. 11-60.1(8A) 60.1(3) d. and e. include provisions of a 1992 early retirement incentive program that applied to persons 59 and over at termination, with 20 years of service in the Iowa Public Employees' Retirement System or the Public Safety Peace Officers' Retirement, Accident, and Disability System, who were also participating in one of the state's group health or dental insurance plans at the time of termination. Both provisions concern the state's payment of a share of premiums and the effect of a permitted switching between family and single coverage, and back again. Upon the death of a program participant before age 65, state's share of health or dental premium, or both, continues to be paid for the benefit of the surviving insured dependents until the end of the month before the deceased participant's 65th birthday. The dependents could then purchase a conversion policy. Changes in the contract from family to single, and back, are permitted. However, the state's share of premiums will be reduced to the single rate upon a change from family to single coverage and will thereafter be capped at the single rate even if the contract is subsequently changed to family coverage.

Michigan. No similar rule.

Minnesota. Minn. R. 2740.0100 subp. 25 is part of a rule of the Minnesota Department of Commerce related to the Minnesota Comprehensive Health Insurance Act of 1976. It defines the term “individual insured" to include the surviving spouse or surviving dependent of a covered employee. The rule references Minnesota Statutes, section 62A.17, subdivision 6, a provision related to continuation coverage. The term “individual insured" does not appear elsewhere in the rule on comprehensive health insurance.

Summary of factual data and analytical methodologies

In the most recent six month period, from January through June 2008, the Department processed 2,445 annuitant deaths, or an average of 360 per month. In 312 of those 2,445 cases, (or 52 cases per month on average) the annuitant was survived by individuals who had been covered under the annuitant's ch. 40 group health insurance. These figures are consistent with the same period in 2007. About 95% of surviving insured dependents make an effort to keep the health insurance coverage in effect after the annuitant's death.

The proposed rule will directly affect the surviving insured dependents of insured employees and annuitants with family health insurance coverage, when the date of the employee's or annuitant's death occurs after the effective date of the rule.

The rule-making will also affect the administration of coverage under the group health insurance programs by Department of Employee Trust Funds staff, the third-party administrative contractor and the private Health Maintenance Organizations and similar insurers who agree to participate in the group health insurance program.

Analysis and supporting documents used to determine effect on small business

The Group Insurance Board's authority with respect to group health insurance for employees of the state and participating local governments is stated in ss. 40.51, 40.52 and 40.53, Stats. The group health insurance provided under this authority does not cover employees in the private sector.

Anticipated Costs Incurred by Private Sector

None.

Effect on Small Business

No effect.

Fiscal Estimate

This rule-making has no fiscal impact.

Submission of Written Comments

Written comments on the proposed rule may be submitted to Robert Weber, Chief Counsel, Department of Employee Trust Funds, 801 W. Badger Road, P.O. Box 7931, Madison, WI 53707-7931. Written comments must be received at the Department of Employee Trust Funds no later than 4:30 PM on Wednesday, August 27, 2008.

Agency Contact Person

Please direct any questions about the proposed rule to Bonnie Cyganek, Director, Benefit Services Bureau, Division of Retirement Services, Department of Employee Trust Funds, P.O. Box 7931, Madison WI 53707. Telephone: [phone]. E-mail address: [e-mail].

Copy of Proposed Rule

Copies of the proposed rule are available without cost from the Office of the Secretary, Department of Employee Trust Funds, P.O. Box 7931, Madison WI 53707-7931, telephone [phone].

Notice of Proposed Rule-Making