Rule-making notices
Notice of Hearing
Insurance
NOTICE IS HEREBY GIVEN that pursuant to the authority granted under s.
601.41 (3), Stats., and the procedures set forth in under s.
227.18, Stats., OCI will hold a public hearing to consider the adoption of the attached proposed rulemaking order affecting s.
Ins 3.39, Wis. Adm. Code, relating to Medicare supplement, replacement, cost-sharing, select, advantage and Medicare D prescription drug plans.
Hearing Information
Date: November 30, 2004
Time: 1:00 p.m., or as soon thereafter as the
matter may be reached
Location: Office of the Commissioner of Insurance
2nd Floor
125 South Webster Street
Madison, Wisconsin
Written comments or comments submitted through the Wisconsin Administrative Rule website at: https:// adminrules.wisconsin.gov on the proposed rule will be considered. The deadline for submitting comments is 4:00 p.m. on the 14th day after the date for the hearing stated in this Notice of Hearing.
Written comments should be sent to:
Julie E. Walsh
Legal Unit - OCI Rule Comment for Rule Ins 3.39
Office of the Commissioner of Insurance
PO Box 7873
Madison WI 53707-7873
Analysis prepared by the Office of the Commissioner of Insurance (OCI)
1. Statutes interpreted: Sections
185.983 (1m),
600.03,
601.01 (2),
609.01 (1g) (b),
625.16,
628.34 (12),
628.38,
631.20 (2),
632.73 (2m),
632.76 (2) (b),
632.81,
632.895 (6) and
(9), Stats.
3. OCI's authority: The Centers For Medicare and Medicaid (CMS) has delegated through the National Association of Insurance Commissioners, (NAIC) the function of regulating insurers offering Medicare supplement, replacement, cost, select and Medicare Part D prescription drug plan insurance products in accordance with NAIC Model laws. This rule replaces the use of the name Medicare + Choice with Medicare Advantage, due to a federal change in the name of the program. The rule implements the requirement that by January 1 2006, Medicare supplemental, replacement, cost-sharing, select and Advantage plans cannot offer a Medicare Part D prescription drug benefit, except as permitted by s.
632.895 (6), Stat., due to the fact that Wisconsin is one of three states that has been granted a waiver from being required to offer the standard plans as described by CMS.
4. Related statutes or rules: The Medicare supplement, replacement, cost-sharing, select plans are currently regulated through s.
Ins 3.39, Wis. Adm. Code including the appendices. This rule modifies s.
Ins 3.39 and several appendices in order to comply with the federal and NAIC requirements related to the MMA to the extent Wisconsin need comply due to the status of being a waiver state. Section
632.895 (6), Stats., requirement for prescription drugs remain a mandated benefit for insurers offering Medicare supplement, replacement, cost-sharing, and select plans since Wisconsin is a waiver state and as such, is permitted to continue requiring this benefit.
5. Plain language analysis and summary: The federal Medicare Prescription Drugs, Improvement and Modernization Act (MMA) of 2003 was signed into law on December 8, 2003. It provided that the National Association of Insurance Commissioners (NAIC) had nine months to make changes to the NAIC Medicare Supplement Model Regulation. The amendments to the NAIC Model Regulation were adopted September 8, 2004.
The MMA created Medicare Part D for outpatient prescription drug coverage and made changes to basic Medicare supplement, Medicare replacement and Medicare select policies (Medigap policies). Medigap policies are policies purchased by Medicare beneficiaries to cover Medicare deductibles and selected services that Medicare does not cover. Medicare establishes eligibility rules, benefits and coverage limits. Medigap policies are designed to supplement only those benefits covered by the Medicare program for Medicare eligible beneficiaries.
The proposed rule incorporates the NAIC Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act into Wisconsin's current Medicare supplement rules. The proposed rule would create two high deductible Medicare supplement policies basic Medicare supplement policies and Medicare select policies. It would revise the standards for Medigap policies to eliminate outpatient prescription drug coverage for those who enroll in Medicare Part D; and prohibit the sale of outpatient prescription drug coverage in Medigap policies after December 30, 2005, when Medicare Part D comes into effect, except to the extent required under s.
632.895, Stats.
The proposed rule allows individuals currently covered by Medigap policies that provide outpatient prescription drug coverage the opportunity to maintain their current coverage. However, the federal MMA provides that insured individuals who choose to maintain existing coverage with the drug benefit will be subject to a penalty if they decide to apply for Medicare Part D coverage after January 1, 2006.
Failure to amend the current rule will mean that persons turning 65 or qualifying for Medicare due to disability will not be able to purchase in Wisconsin coverage that supplements payment by Medicare.
In order to meet the deadlines required by the MMA and to implement the requirements of the NAIC Model regulation, the OCI has created a task list of activities necessary to ensure that Wisconsin continues to maintain a competitive Medigap insurance market for its Medicare beneficiaries. In addition to drafting amendments to s.
Ins 3.39, Wis. Adm. Code, and assisting with the timely adoption of these amendments, implementing the proposed rule will require that the OCI review and approve riders and new Medigap policy forms. To assist insurance companies in filing riders and policy forms, the OCI will edit its existing Medigap policy form checklist and publish the revised checklist on its website. The OCI will draft bulletins for insurers explaining the requirements for compliance and policy form approval. The OCI will also publish information in “
WIN" (Wisconsin Insurance Newsletter), its agents' newsletter, and produce periodic additional information for agents as deemed necessary.
To assist Medigap insurance consumers, the OCI will edit its “Wisconsin Guide to Health Insurance for People with Medicare,“ and redraft its “Medicare Supplement Insurance Approved Policies“ booklet to include new policies that meet the requirements of During 2005, the OCI will also develop and publish consumer information, and make presentations to consumers advocacy organizations, insurance agents, trade organizations and insurance companies. The OCI has assigned three insurance examiners and a insurance supervisor with the responsibility for reviewing and approving Medigap policy forms, reviewing advertising materials, for drafting consumer, insurer and agent information, and for making presentations to Medigap consumers, agents, insurers and other interested parties.
6. Summary of and comparison with existing federal regulations: The Medicare program was created in 1965 under the Title XVIII of the Social Security Act. Medicare is the national health insurance program for people age 65 or older, some people under age 65 with disabilities, and people with end-stage renal disease (ESRD).
The Omnibus Budget Reconciliation Act (OBRA) of 1990 required that Medigap policies sold to Medicare beneficiaries conform to 10 standardized benefit packages, identified as Plans A through J. States were required to adopt the federal standards for Medigap policies available to their Medicare beneficiaries
Wisconsin was one of three states that received a waiver from the federal standardization regulations regarding Medicare supplement insurance policies. Wisconsin's Medicare beneficiaries were allowed to purchase Medigap policies that consisted of a basic benefit plan with optional riders.
Federal legislation called the Medicare Prescription Drugs, Improvement and Modernization Act (MMA) of 2003 was signed into law on December 8, 2003. It provides significant changes to the Medicare program, including creating Medicare Part D for outpatient prescription drug coverage and requiring changes to Medicare supplement policies that are regulated by state insurance departments. The MMA also required that the National Association of Insurance Commissioners (NAIC) amend its NAIC Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act by September 8, 2004.
Specifically, the MMA required that the NAIC Model Regulation be revised to include the following:
1. Add two new plans called K and L to the standard Medigap plans A through J,
2. Revise the standard H, I and J Medigap plans to eliminate prescription drug coverage for those who enroll in Medicare Part D,
3. Prohibit the sale of outpatient prescription drug coverage in Medigap policies after December 30, 2005, when Medicare Part D becomes comes into effect,
4. Make any other changes to the NAIC Model Regulation that might be required as a result of the federal legislation,
The NAIC Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act was adopted by the NAIC on September 8, 2004.
Wisconsin's Medicare supplement rule, s.
Ins 3.39, Wis. Adm. Code, currently requires that Medigap policies include a catastrophic coverage for 80% of outpatient prescription drug charges that exceed $6,250 per calendar year. In addition, three Medigap policies offer an optional outpatient prescription drug rider.
The proposed rule is based on the NAIC Model Regulation as adopted September 8, 2004. The proposed rule:
1. Creates two new high deductible basic Medicare and Medicare select policies,
2. Eliminates outpatient prescription drug coverage under basic Medicare supplement, Medicare replacement, and Medicare select insurance plans,
3. Prohibits the sales of outpatient prescription drug coverage under Medicare supplement, Medicare replacement, and Medicare select insurance plans after December 30, 2004, except to the extent required under s.
632.895, Stats., and
4. Makes other changes to the proposed rule as a result of the federal legislation.
7. Comparison of similar rules in adjacent states:
Iowa: Iowa makes available to its Medicare beneficiaries Medigap policies A through J as required by the Medicare reform provisions under OBRA 1990 and the prior NAIC Model Regulation. Iowa will have to amend its regulations to create new Medigap plans K and L, and to eliminate prescription drug coverage under its standard H, I and J Medigap policies for those who enroll in Medicare Part D. It also will have to amend its regulations to include the prohibitions and other changes under MMA.
Illinois: Illinois makes available to its Medicare beneficiaries Medigap policies A through J as required by the Medicare reform provisions under OBRA 1990, and the prior NAIC Model Regulation. Illinois will have to amend its regulations to create new Medigap plans K and L, and to eliminate prescription drug coverage under its standard H, I and J Medigap policies for those who enroll in Medicare Part D. It also will have to amend its regulations to include the prohibitions and other changes under MMA.
Minnesota: Minnesota, like Wisconsin, received a waiver from the federal standardization regulations. Minnesota makes available to its Medicare beneficiaries two standardized policies (basic and extended basic), both of which may include optional riders to cover prescription drugs. Minnesota will have to amend its Medicare supplement regulations to create two cost-sharing (high deductible) plans, and eliminate the optional riders that cover prescription drugs. It also will have to amend its regulations to include the prohibitions and other changes under MMA.
Michigan: Michigan makes available to its Medicare beneficiaries Medigap policies A through J as required by the Medicare reform provisions under OBRA 1990, and the prior NAIC Model Regulation. Michigan will have to amend its regulations to create new Medigap plans K and L, and to eliminate prescription drug coverage under its standard H, I and J Medigap policies for those who enroll in Medicare Part D. It also will have to amend its regulations to include the prohibitions and other changes under MMA.
8. Factual data and analytical methodologies: The Medicare Prescription Drugs, Improvement and Modernization Act (MMA) of 2003 required that the NAIC amend the NAIC Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act.
The NAIC Senior Issues Task Force drafted amendments to the NAIC Model Regulation that were adopted by the NAIC on September 8, 2004. Prior to adoption, the amendments to the NAIC Model Regulation were subject to review and comment by state insurance departments, insurance companies, insurance trade groups, consumer advocates, and the CMS.
The CMS is the federal agency responsible for administering the Medicare program. CMS data indicates that Medicare currently covers 40 million Americans, 806,000 of whom are Wisconsin residents. An estimated 27 percent of Medicare beneficiaries are covered by Medigap policies.
Information collected by the OCI indicates that 40 insurance companies offer basic Medicare supplement, Medicare replacement and Medicare select (Medigap) policies to Wisconsin consumers eligible for Medicare due to age or disability. In addition, there are 25 insurance companies that have Medigap policyholders although the companies no longer market Medigap coverage in Wisconsin. At year end 2003, there were 308,875 Wisconsin Medicare beneficiaries with Medigap policies. The majority of these Wisconsin Medicare beneficiaries have Medigap policies that will be affected by the Medigap reforms under the MMA.
A 2000 report by CMS, Office of Research, Development, and Information, based on 1999 Medicare data indicates that Medicare paid 53% of the health care expenses of persons 65 or over, and private health insurance, including Medicare supplement policies paid 12% of these health care expenses. The report indicated that overall annual medical expenses per Medicare beneficiaries equaled $9,573. The involuntary withdrawal from the Medigap market by insurance companies due to Wisconsin's failure to amend its Medicare supplement rule will significantly affect payment of medical expenses to Wisconsin hospitals and providers.
9. Any analysis and supporting documentation that OCI used in support of OCI's determination of the rule's effect on small businesses under s. 227.114: OCI reviewed financial statements and other reports filed by life, accident and health insurers and determined that none qualify as small businesses.
Wisconsin currently has 40 insurance companies offering basic Medicare supplement, Medicare replacement and Medicare select insurance plans. None of these insurers meet the definition of a small business.
10. Fiscal impact on the private sector: The proposed rule will not significantly impact the private sector. Insurers offering Medigap policies (basic Medicare supplement, Medicare replacement, and Medicare select policies) will incur costs associated with developing new Medigap policies and marketing materials, mailing riders and explanatory materials to existing policyholders and reprogramming claim processing systems. However, these costs are offset by the insurers' ability to continue offering Medigap policies to Wisconsin consumers.
The MMA prohibits insurance companies and insurance agents from marketing in Wisconsin current Medigap policies after December 31, 2005. Failure to amend s.
Ins 3.39, Wis. Adm. Code, will mean that Wisconsin Medicare beneficiaries will not have access to coverage that supplements Medicare benefits.
11. Effect on small business: This rule does not have a significant impact on regulated small businesses as defined in s. 227.114 (1), Wis. Stat. OCI maintains a database of all licensed insurers in Wisconsin. Included with that information required to be submitted to OCI, the database includes information submitted by the companies related to premium revenue and employment. In an examination of this database, OCI identified that 40 insurance companies offer basic Medicare supplement, Medicare replacement and Medicare select (Medigap) policies to Wisconsin consumers eligible for Medicare due to age or disability and none of those companies qualify by definition as a small business. In addition, there are 25 insurance companies that have Medigap policyholders although the companies no longer market Medigap coverage in Wisconsin, again, none of these 25 companies qualify by definition as a small business.
Fiscal Estimate
There will be no state or local government fiscal effect.
Initial Regulatory Flexibility Analysis
This rule does not impose any additional requirements on small businesses.
The OCI small business coordinator is Eileen Mallow and may be reached by phone at (608) 266-7843 or at email address:
Eileen.Mallow@oci.state.wi.us
Copy of Rule and Contact Person
A copy of the full text of the proposed rule changes, analysis and fiscal estimate may be obtained from the WEB sites at:
http://oci.wi.gov/ocirules.htm or by contacting Inger Williams, OCI Services Section; at:
