|Senate Counsel & Research||State of Minnesota|
|S.F. No. 880 - (first engrossment) Changing State Law to Conform with Federal Medicare Prescription Drug Coverage|
|Author:||Senator Brian LeClair|
|Prepared by:||Katie Cavanor, Senate Counsel (651/296-3801)
Tom Pender, House Research (651/296-1885)
|Date:||March 4, 2005|
Article 1 makes technical changes in state law involving Medicare supplement ("Medigap") insurance.
Section 1 (62A.31, subdivision 1f) states that a suspended Medicare supplement policy must be replaced by an equivalent policy (current law), except that it must not cover outpatient prescription drugs if the insured has enrolled in Medicare Part D.
Section 2 (62A.31, subdivision 1k) makes technical formatting changes. States that guaranteed renewability is satisfied if a policy is renewed without coverage of outpatient prescription drugs.
Section 3 (62A.31, subdivision 1n) states that receipt of outpatient drug benefits is not counted in calculating a continuous loss for purposes of extension of coverage beyond a policy's termination date. Clarifies existing language.
Section 4 (62A.31, subdivision 1s) specifies what happens to drug coverage under Medicare supplement policies in various situations. The general principles are: (1) enrollees may keep that existing coverage if they choose not to enroll in Medicare Part D; (2) no new Medicare supplement policies that cover outpatient prescription drugs may be issued; and (3) individuals who choose to enroll in Part D may renew their existing Medicare supplement policy, but without the drug coverage and with a corresponding premium reduction.
Section 5 (62A.31, subdivision 1t) amends the required notice that a policy does not cover drugs to include the effects of the federal changes. Removes obsolete language.
Section 6 (62A.31, subdivision 1u) paragraph (a), makes a clarifying change and a change to conform to federal law.
Paragraph (b) makes changes to conform to the federal name change from Medicare+Choice to Medicare Advantage and creates a new way to be eligible for guaranteed issue involving an individual who had Medicare supplement insurance with prescription drug coverage, who enrolls in Medicare Part D, and therefore needs a new Medicare supplement policy without drug coverage.
Paragraph (c) makes federally required changes regarding when a guaranteed issue period begins and ends.
Paragraph (e) makes federally required changes regarding what kind of Medicare supplement policy in which an individual has guaranteed issue rights to enroll.
Section 7 (62A.31, subdivision 3) makes a number of technical and clarifying changes to definitions. Creates a new definition of "outpatient prescription drugs" to clarify how that term relates to Medicare coverage.
Section 8 (62A.31, subdivision 4) permits Medicare supplement policies issued before January 1, 2006, to cover outpatient prescription drugs even though Medicare Part D covers them.
Section 9 (62A.31, subdivision 7) eliminates language made obsolete by the federal Medicare changes.
Sections 10 and 11 (62A.315 and 62A.316) make changes to conform to federal law by prohibiting the sale of a new Medicare supplement policy that covers outpatient prescription drugs after the end of 2005. Section 10 applies to the extended basic plan and section 11 applies to the basic plan.
Section 12 (62A.318) divides the existing law into subdivisions and paragraphs. Makes changes to conform to federal law by prohibiting the sale of Medicare Select products with drug coverage after 2005.
Section 13 (62A.36) makes technical clarifications. Clarifies how the deletion of prescription drug coverage and related premium reductions will be handled for purposes of regulation. Provides a catch-all failsafe requirement that enrollees be given all federally required notices.
Section 14 instructs the Revisor of Statutes to reorder definitions and make necessary changes in cross-references.
Section 15 states that the effective date of this article is January 1, 2006, except for certain provisions that need to be in place to prepare for that date.
Article 2 creates a procedure for licensing and solvency regulation of stand alone prescription drug plans that could provide prescription drug coverage under Medicare Part D or Medicare Part D prescription drug plans (PDPs).
Section 1 (62A.451) defines terms. Adds a definition of "limited health service," which limits the services to pharmaceutical services covered under Medicare Part D.
Section 2 (62A.4511) requires insurers offering PDPs to be licensed under these sections.
Section 3 (62A.4512) lists what has to be in an application for licensure.
Section 4 (62A.4513) requires the commissioner to approve or deny an application within 90 days, or the application is deemed approved. Requires the commissioner to issue a license if the applicant meets the requirements. Permits the applicant to appeal a denial of the application.
Section 5 (62A.4514) provides a way for an entity that is already licensed under a law that does not permit offering a PDP plan to use a simplified application process to apply for approval from the commissioner.
Section 6 (62A.4515) requires a PDP plan to file with the commissioner for approval any modifications in the information filed at the time of licensing.
Section 7 (62A.4516) requires the PDP plans to provide enrollees with evidence of coverage required under federal law.
Section 8 (62A.4517) provides an exemption from other insurance laws unless another law specifically says it applies to these organizations. States that operating a PDP plan is not a "healing art" and that PDP plans are not covered by laws regulating advertising by health professionals.
Section 9 (62A.4518) permits other group insurance to exclude coverage of things covered by PDP plans if the group is covered separately by group PDP coverage for those benefits.
Section 10 (62A.4519) requires insurers issuing PDPs to comply with federal Medicare requirements regarding complaints from enrollees.
Section 11 (62A.4520) permits the commissioner to examine the records of an entity licensed under these sections.
Section 12 (62A.4521) requires the entity's assets to be invested under the guidelines that apply to health maintenance organizations (HMOs).
Section 13 (62A.4522) requires that PDP coverage be sold only through persons authorized to sell health coverage in this state.
Section 14 (62A.4523) requires that entities maintain net worth of the greater of $100,000 or two percent of its premium income, not to exceed the amount of capital and surplus required of a health insurance company. Requires additional net equity of 25 percent of uncovered expenses in excess of $100,000. Requires a deposit of liquid assets of $50,000 plus 25 percent of required tangible net equity, but the required deposit cannot exceed $200,000. Specifies the status of the deposit. Permits the commissioner to waive the net equity requirement under certain circumstances, including a guarantee provided by a guaranteeing organization. Defines "uncovered expenses."
Section 15 (62A.4524) requires a fidelity bond or an equivalent deposit for that purpose.
Section 16 (62A.4525) requires filing of an annual financial report with the commissioner.
Section 17 (62A.4526) provides the grounds and procedures involved in suspending or revoking a license under these sections.
Section 18 (62A.4527) provides for administrative enforcement of these sections by the commissioner.
Section 19 (62A.4528) states that insolvency of an entity licensed under these sections is handled as insolvency of a regular insurance company. States that the obligations of these entities are not covered by the life and health insurance guaranty association.
Section 20 states that the effective date for this act is March 15, 2005, for licensure procedures to begin, but that no entity can operate a PDP plan until 2006. (Under federal law, an entity can apply for a federal waiver of state licensing of a PDP if there is no state licensing procedure available as of March 15, 2005.)
Article 3 makes miscellaneous technical conforming changes.
Section 1 (62L.12, subdivision 2) updates references to federal Medicare laws.
Section 2 (62Q.01, subdivision 6) updates references to federal Medicare laws.
Section 3 (256.9657, subdivision 3) updates references to federal Medicare laws in a section involving the medical assistance surcharge.
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