Commissioner’s Bulletin # B-0045-00

Life, Health & Licensing Program, Mail Code 107-2A

333 Guadalupe • P. O. Box 149104, Austin, Texas 78714-9104

512-305-7310 telephone • 512-322-4296 fax • www.tdi.state.tx.us

Several HMOs are terminating their Medicare+Choice coverage effective 12/31/00, resulting in thousands of Texas consumers going to the marketplace for health care coverage. The purpose of this bulletin is to remind carriers offering Medicare supplement (including Medicare Select) coverage, or Medicare+Choice plans of their duties and the coverage options available to these individuals under federal law, as well as Texas regulations 28 TAC §§3.3301-3.3325 (relating to Minimum Standards for Medicare Supplement Policies) and 28 TAC §21.2107 (relating to Mandatory Notice Requirements).

In order to facilitate the transition for Texans who are losing their Medicare+Choice coverage, carriers must ensure that Texans having their Medicare+Choice coverage terminated have access to the proper information regarding coverage options. The various open enrollment and guaranteed issue provisions applying to Medicare supplement and Medicare+Choice coverage create a number of coverage options for enrollees whose Medicare+Choice plan is terminating coverage. These options may require time-critical decisions. For example, some enrollees may have additional coverage options if they disenroll prior to the 12/31/00 termination date. The terminating HMO must provide its enrollees with a letter that outlines their individual options. It is extremely important that you inform/educate your agents and administrative staff of the law´s requirements so that you may fully comply. Additionally, you should prepare to handle anticipated additional inquiries and/or applications. To assist in your effort, we have outlined the coverage options available and the corresponding duties of carriers engaged in either the Medicare supplement (including Medicare Select) business or the Medicare+Choice business.

DUTIES OF CARRIERS:

I. HMOs and Private Fee-for-Service (PFFS) continuing Medicare+Choice plans - provide sufficient, informed staff to assist individuals contacting you regarding coverage options and/or enrollment.

• II. HMOs discontinuing Medicare+Choice plans - provide access to quality health care services through 12/31/00. Provide, as required by the Health Care Financing Administration, written notice to enrollees that their coverage is terminating and that explains available coverage options. Provide sufficient, informed staff to assist individuals contacting you requesting clarification regarding the letter, termination, and coverage options. 42 CFR §422.74(d)(7); 28 TAC §21.2107

• III. Carriers offering Medicare supplement (including Medicare Select) coverage - provide sufficient, informed staff to assist individuals contacting you regarding coverage options and/or enrollment.

COVERAGE OPTIONS AVAILABLE:

• I. Coverage under another Medicare+Choice Plan - enrollees wishing to remain in Medicare+Choice may enroll in another Medicare+Choice plan (including a private fee-for-service plan) if they reside in the plan´s service area. A carrier that offers Medicare+Choice coverage must make its coverage available to enrollees whose coverage is being terminated by another Medicare+Choice plan if the affected enrollee resides within its service area. The only exception to this requirement is that enrollees with End Stage Renal Disease cannot enroll in a plan offered by another managed care company. 42 CFR §422.50; 422.62(a)(3).

• II. Coverage under a Medicare supplement (including Medicare Select) plan - Alternatively, enrollees can return to Original Medicare, in which case they may also purchase a Medicare supplement policy. The following paragraphs outline various scenarios resulting in different coverage options for enrollees whose Medicare+Choice plan is terminating coverage on 12/31/00.

• A. Enrollees have the option to allow Medicare+Choice coverage to terminate on 12/31/00 or disenroll from their Medicare+Choice plan prior to 12/31/00.

• 1. An enrollee age 65 and over whose coverage in a Medicare+Choice plan is being terminated on 12/31/00, and who makes no prior election to join another Medicare+Choice organization, will be reenrolled in Original Medicare upon the plan´s termination of coverage. This individual has the option of enrolling, on a guaranteed issue basis, in Medicare supplement Plans A, B, C or F offered to Medicare beneficiaries by any carrier offering Medicare supplement coverage in Texas. To qualify for this guaranteed issuance of coverage, the individual must apply for the Medicare supplement coverage no later than 63 days following the termination of the Medicare+Choice plan. 28 TAC §3.3312(a)(1), (b)(2)(A), (c)(1).

2. An enrollee under age 65 whose coverage under a Medicare+Choice plan is being terminated on 12/31/00, and who makes no prior election to join another Medicare+Choice organization, will be reenrolled in Original Medicare upon the plan´s termination of coverage. This individual has the option of enrolling, on a guaranteed issue basis, in Medicare supplement Plans A, B, C or F offered by any carrier issuing Medicare supplement coverage in Texas to Medicare beneficiaries under age 65 (See section entitled "RANGE OF PLANS AVAILABLE TO UNDER-65 MEDICARE BENEFICIARIES" below). To qualify for this guaranteed issuance of coverage, the individual must apply for the Medicare supplement coverage no later than 63 days following the termination of the Medicare+Choice plan. 28 TAC §3.3312(a)(1), (b)(2)(A), (c)(1).

• 3. An enrollee (of any age) whose coverage under a Medicare+Choice plan is being terminated on 12/31/00 may switch to Original Medicare as soon as he or she receives notice that his or her Medicare+Choice plan is being terminated. An individual who elects to do so has 63 days from the date of the final notification letter (from 10/02/00 until 12/04/00) to apply, on a guaranteed issue basis, in Medicare supplement Plans A, B, C or F offered to Medicare beneficiaries by any carrier offering Medicare supplement coverage in Texas. 42 U.S.C. §1395w-21(e)(4)(A)(i). To exercise this option, individuals must disenroll from their Medicare+Choice plan within 63 days from the date of the final notification letter (i.e. disenroll in 10/00 or 11/00), and arrange for their Medicare supplement plan to start the first day of the next month so they will have seamless coverage. Individuals who select this option should be instructed to keep a copy of their Medicare+Choice termination letter to show a Medicare supplement carrier as proof of loss of coverage. They should also be instructed to keep a copy of their Medicare supplement application as proof that they acted within the 63 days.

• B. Enrollees who may lose rights by not disenrolling from the Medicare + Choice Plan before the 12/31/00 termination date.

In addition to the enrollment rights outlined in II. A. above, certain individuals may have additional enrollment options, which may be lost if the individual does not act before 12/31/00. The following paragraphs outline the additional enrollment options.

1. An individual age 65 or older who left a Medicare supplement plan to enroll in a Medicare+Choice plan for the first time can enroll, on a guaranteed issue basis, in the same Medicare supplement plan in which the individual was most recently enrolled, if the carrier is still offering the Medicare supplement plan and if the individual (a) left the Medicare supplement plan to enroll in the Medicare+Choice plan, (b) was never in a another Medicare+Choice plan, (c) disenrolls within one year of initial enrollment in the Medicare+Choice plan, and (d) reapplies for the Medicare supplement plan they previously had no later than 63 days after disenrolling from the Medicare+Choice plan. 28 TAC §3.3312(b)(5), (c)(2).

• 2. An individual age 65 or older who enrolled in a Medicare+Choice plan upon first becoming eligible for Medicare Parts A & B can enroll, on a guaranteed issue basis, in any Medicare supplement plan (A - J) offered in Texas if the individual (a) enrolled in the Medicare+Choice plan upon first becoming eligible for Medicare, (b) disenrolls from the Medicare+Choice plan within one year of initial enrollment, and (c) applies for the Medicare supplement plan no later than 63 days after disenrolling from the Medicare+Choice plan. 28 TAC §3.3312(b)(6), (c)(3).

• 3. An individual age 65 or older who is within the six-month open enrollment period may enroll in any Medicare supplement plan (A - J) offered in Texas so long as the individual applies for coverage within the six-month open enrollment period. An individual´s open enrollment period begins the first date the individual is both (a) age 65 or older and (b) enrolled in Medicare Part B. The individual must disenroll from the Medicare+Choice plan prior to Medicare supplement coverage becoming effective. 28 TAC §3.3324(a).

• 4. An individual under age 65 who is within the six-month open enrollment period (beginning when the individual is under age 65 and first enrolls in Medicare Part B) may enroll in any Medicare supplement plan offered to Medicare beneficiaries under age 65 by carriers offering Medicare supplement in Texas. To qualify for this coverage, the individual must apply for Medicare supplement coverage within the six-month open enrollment period. An individual would only want to exercise this option if a carrier is offering Medicare supplement Plans D, E, G, H, I, or J in Texas to Medicare beneficiaries under age 65. 28 TAC §3.3324(b).

RANGE OF PLANS AVAILABLE TO UNDER-65 MEDICARE BENEFICIARIES

28 TAC §3.3324(b) requires issuers of Medicare supplement (including Medicare Select) coverage to offer at least Plan A to individuals who qualify for Medicare before attaining age 65; therefore, all carriers offering Medicare supplement coverage in Texas are required to offer Plan A to individuals under age 65 whose coverage under the Medicare+Choice plan is being terminated. Additionally, if you offer Plans B, C or F to Medicare beneficiaries under age 65, even on an underwritten basis, you must offer those plans on a guaranteed issue basis to individuals under age 65 whose Medicare+Choice plan is terminating 12/31/00. If you do not offer Medicare supplement Plans B, C or F to Medicare beneficiaries under age 65, you are not required to begin offering those plans to individuals under age 65 whose Medicare+Choice plan is being terminated.

TIMING OF APPLICATION

To ensure that there is no gap in coverage for supplement benefits, enrollees whose Medicare+Choice coverage is being terminated may be applying for Medicare supplement (including Medicare Select) coverage prior to 12/31/00 and requesting an effective date of 01/01/01 or earlier. While law prohibits the sale of a health insurance policy that duplicates benefits, including a Medicare supplement plan that duplicates benefits a person has under a Medicare+Choice plan, Medicare supplement carriers can and should sell Medicare+Choice enrollees Medicare supplement plans that will take effect as soon as their Medicare+Choice plan ends. Accordingly, you should clarify this issue with your agents and staff and amend your procedures, if necessary.

In evaluating the coverage options outlined above, your staff should be aware that Medicare beneficiaries should consider not only the different enrollment rights, but also the different protections offered by open enrollment and guaranteed issue. For example, when you issue coverage to an individual under their guaranteed issue rights, the following protections apply:

• (a) You cannot impose a waiting period or preexisting condition exclusion, and

• (b) You cannot discriminate in the price of the policy based on the beneficiary´s health status, claim experience, receipt of health care or an existing medical condition. 28 TAC §3.3312(a)(2).

When you issue coverage to an individual under open enrollment (see II (B)(3) and (4) under the section entitled COVERAGE OPTIONS AVAILABLE), you may apply a preexisting condition exclusion; however, for an individual age 65 or older you must credit the individual´s prior health coverage against the exclusion. 28 TAC §3.3324(c).

For example, an individual turns 65 on 06/1700, and enrolls and becomes covered in Original Medicare, as well as Medicare supplement Plan H, on 07/01/00. The individual then becomes enrolled in a Medicare+Choice plan on 08/01/00. The individual's Medicare+Choice plan is now leaving the market. The individual would like to return to Original Medicare and enroll in Medicare supplement Plan J. The individual has been diagnosed with cancer and had no creditable coverage prior to his enrollment in Original Medicare. The individual could:

• (a) enroll in Medicare supplement Plan J under open enrollment. The length of the individual's enrollment in Original Medicare and the Medicare+Choice plan will affect the length of the individual's preexisting condition exclusion. If the individual disenrolls effective 11/30/00, with an effective date of 12/01/00 for his Medicare supplement Plan J coverage, the carrier issuing Plan J must reduce its preexisting condition exclusion by five months because of the individual's creditable coverage; or

• (b) enroll in Medicare supplement Plans A, B, C, or F under guaranteed issue provisions with no preexisting condition exclusion. The individual can access guaranteed issue enrollment either by allowing the Medicare+Choice plan to terminate, or terminating his Medicare+Choice enrollment within 63 days of the date of the final notification letter.

If you have any questions or concerns in determining compliance with state and federal law in this area, please contact a member of the A&H Section at 512/322-3409 or the HMO Compliance Section at 512/322-4266.

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Kimberly Stokes

Senior Associate Commissioner

Life/Health and licensing program