Attached is a copy of California Department of Insurance (CDI) Bulletin #94-3, dated February 4, 1994. This bulletin addresses Medicare Select Insurer and the filing of a Plan of Operation with the Commissioner. As noted in the bulletin, questions regarding the filing procedure should be directed to Robin Simpo at the CDI, Legal Division 45 Fremont Street, 24th Floor, San Francisco, CA, 94105, phone number 415-904-6003. Inquiries regarding this bulletin should be directed to Paul Cacioppo, also the Legal Division, phone number 415-904-5671.
Also attached is CDI Bulletin #94-3A, dated February 7, 1994 regarding Assembly Bins 1672 and 1768. This bulletin details the impact of the new law and also provides a question and answer portion to further assist with the provisions of both bills. Further inquiries concerning this bulletin, etc. should be directed to Marsha Seeley, Senior Counsel at the CD1, Legal Division, 45 Fremont Street, San Francisco, CA, 94105, telephone 415-9045724.
Please note, Bulletins #93-4 and #93-4A were issued by the California Department of Insurance. All inquiries should be directed to the appropriate parties as noted above.
James S. Pugh
Assistant Manager
JSP/imb
Attachment
State of California
DEPARTMENT OF INSURANCE
45 Fremont Street
San Francisco, California 94205
Bulletin No. 94-3
February 4, 1994
To: All Insurers Licensed for Disability Insurance
and Other Interested Parties
Subject: Medicare Select
Under California Insurance Code (Ins.C.) SS 10194.4(a)
and (b), every insurer providing Medicare supplement
insurance through a preferred provider organization (PPO)
is a "Medicare Select Insurer" and must file with the
Commissioner a plan of operation in a format prescribed
by the Commissioner. No such coverage may be
marketed, solicited, or sold in California unless the
Commissioner has approved the Plan of Operation.
According to Ins.C. S 10194.4(c)(6), "preferred provider
organization" means a health care provider or an entity
contracting with health care providers that:
(A) establishes alternative or discounted rates of payment,
(B) offers insureds certain advantages for selecting
member providers, or
(C) withholds from insureds certain advantages if they
choose providers other than member providers.
If you provide, or plan to provide, Medicare Supplement
coverage through any of the following arrangements, very
likely you are, or will be, a Medicare Select Insurer
required to file a Plan of operation in a format prescribed
in by the commissioner in filing instructions:
An Exclusive Provider Organization that limits coverage
to services rendered by member providers.
A Hospital Marketing Plan in which hospitals charge
discounted rates or insureds are provided advantages when
using member hospitals.
A Third Party Administrator, or other intermediary,
establishing or operating associations among health care
providers, insurers and/or insureds under which insureds
are limited in the selection of health care providers.
This filing must be in accordance with the Department I
a filing instructions. For a copy of those instructions,
contact Robin Simpo, California Department of Insurance,
Legal Division, 45 Fremont Street, 24th Floor, San Francisco,
CA 94105, telephone (415) 904-6003.
For inquiries about this bulletin,
contact Paul P. Cacioppo, California
Department of Insurance, Legal Division,
45 Fremont Street, 24th Floor, San Francisco,
CA 94105, telephone (415) 904-5671.
JOHN GARMENDI
Insurance Commissioner
STATE OF CALIFORNIA
DEPARTMENT OF INSURANCE
SAN FRANCISCO
Bulletin No. 934A
February 7, 1994
TO: ALL INSURERS PROVIDING "HEALTH" COVERAGE
SUBJECT. Assembly Bills No. 1672 and 1768
This Bulletin updates Bulletin 93-4 of June 25, 1993,
and reflects the 1993 amendments to the "all health
insurance" (previously referred to as "all employer")
sections of AB 1672 (Chapter 1128, Stats 1992). The
1993 substantive amendments were made by AB 1768
(Chapter 1052, Stats; 1993) and are effective January 1,1994
(Minor technical amendments were made by AB 1742.)
As used herein, "all health insurance" means individual or
group coverage which provides medical, hospital, and
surgical benefits. General references to AB 1672 include
all trailer legislation.
How AB 1672/AB 1768 AFFECT ALL HEALTH INSURANCE.
A. HIGHLIGHTS OF THE NEW LEGISLATION.
AB 1672 added §§ 10198.6 - 10198.9 to the California
Insurance Code, applicable to employment related individual
or group health insurance programs covering three or more
persons. With the enactment of At 1768, the employment-related
requirement and the "three or more" requirement were eliminated.
As of January 1, 1994, Insurance Code §§ 10198.6 - 10198.8 apply
to individual and group products which cover one or more persons,
regardless of the setting in which the coverage Ass purchased.
Insurance Code §§ 10198.6 - 10198.9:
Apply to essentially all types of health insurance providing benefits to Californians regardless of the situs of the contract or group master policyholder and regardless of the number of persons covered (Ins. C. §§ 10198.6(a) and 10198.8);
Narrowly define what can be excluded as a "preexisting condition" (Ins. C. §§ 10198.6(c) and 10198.7(a));
Establish maximum time limits for preexisting conditions exclusions imposed on newly eligible persons and on waiting periods imposed on 'late enrollees" (Ins. C. § 10198.7);
Require that insurers credit, toward the satisfaction of preexisting conditions exclusions or waiting periods, newly-insured. persons With the time that they were covered under qualifying preceding health coverages in specified circumstance's (Ins. C. § 10198.7(c));
For health benefit plans that cover three or more persons, prohibit waivers, exclusions or special waiting periods for coverage applicable to specific persons (Ins. C- § 10198.7(a))
For health benefit plans that cover one or two persons, prohibit waivers, exclusions or special waiting periods which exceed 12 months (Ins. C- § 10198.7(b) and (d)).
Parallel Health and Safety Code provisions in AB. 1672 and AB 1768 apply to Health Care Service Plans. Please refer to Bulletin 93-3A, of November 15, 1993, and Title 10, California Code of (Please refer Regulations. §§ 2233 - 2233.99 for guidance about AB 1672 as it applies to products covering employers of from 3 to 50 employees.)
B. QUESTIONS AND ANSWERS ABOUT THE PROVISIONS OF AB 1672/AB 1768
Most of the questions below are from Bulletin 93-4, but the responses have been revised in accordance with the 1993 amendments to AB 1672. The comments reflect our understanding of the intended operation of AB 1672 and AB 1768 and are provided to assist you in your analysis of the law. These comments assume that the health benefit plans at issue ARE NOT subject to the "small employer" provisions of AB 1672, except as noted.
What plans are subject to AB 16721AB 1 768?
Any health benefit plan, either individual or group, covering one or more
Californians is subject to the "all health insurance" provisions
of AB 1672 and 1768, to wit, Ins. C. §§ 10198.6 - 10198.8. These provisions
apply regardless. of the presence or absence of an employment setting or
sponsorship.
Note that plans covering employees of employers of between 3 and 50 employees may be subject to the .'all health insurance" provisions of AB 1672/AB 1768 even if they are exempt from the "small employer" provisions of the law - for example, small employer plans which are paid for entirely by the employees. Ins. C. §§ 10198.7(a)(b) and (f).
Are "supplemental coverages" such as "cancer"' or "long-term
care" subject to AB 16721AB 1768?
Yes and no. Insurance Code § 10198.6(a) specifically exempts certain types
of products, such as Medicare supplement, long-term care and dental and
vision products. All other products which provide medical, hospital, and
surgical benefits, regardless of whether they are provided on an "indemnity"
or expense-incurred basis, are subject to the law. Thus, dread disease and
hospital indemnity products must comply with the law. Blanket policies providing
medical, hospital and surgical benefits must also comply.
Must programs established before July 1, 1993 (AB 1672s effective date),
provide a 30 day open enrollment period for previously excluded employees
and dependents, as required of such programs when they cover "small
employers"?
No, unless the carrier wants to impose or has imposed a special limitation
on coverage for "late enrollees", as defined in Ins. C. § 10198.6(b)
and as discussed immediately below.
On its face, Ins. C § 10198. 7(f) forbids exclusion of late enrollees for
more than 12 months. Must a health benefit plan accept all late enrollees
after 12 months regardless of medical status?
We believe that the Section means that there may not be any special limitation,
lasting more than 12 months, based on a person's being a late enrollee as
defined in Ins. C. § 10198.6(b). Therefore, at the end of 12 months, the
late enrollee should have the same rights as a new enrollee - if new entrants
are not medically underwritten, then neither should 'late enrollees' be,
at the end of the 12 month waiting period. Similarly, a person who is not
a late enrollee under 10198.6(b), because, for example, he or she has lost
other group' coverage, would have to be treated as a new enrollee upon application
for coverage. In cases where new employees or dependents may be excluded
for underwriting reasons, late enrollees may also be so excluded.
Mat preexisting conditions exclusions or waivers may be used as of January
1, 1994?
As of January 1, 1994, the effective date of AB 1768, Ins. C. § 10198.7
establishes two sets of rules for preexisting conditions and waived conditions,
depending on the number of persons covered by the particular policy.
If three or more persons are covered, a health benefit plan may not use a preexisting condition provision more stringent than a "six and six" provision, i.e., one that excludes for six months from the effective date those conditions for which the person received medical advice, etc. during the six months preceding the effective date. Waivers of coverage of a specific condition applicable to specific insureds are prohibited, but if no preexisting condition provision is imposed, a 60 day waiting period may be used. If one or two persons are covered, the health benefit plan may not use a preexisting condition exclusion more stringent than a "12 and 12", i.e., one that excludes from the effective date those conditions for which the person received medical advice, etc. during the twelve months preceding the effective date. If the plan does not contain a preexisting conditions exclusion provision, then it may include a waiver of a specific illness for twelve months; the waived condition must be one for which the insured received advice, etc. during the twelve months preceding the effective date. If neither a preexisting conditions exclusion or a waiver is used, a 60 day wait may be imposed.
Insurance Code §§ 10198.6(c) and 10198.7(a) and (b) seem to limit definitions
of 'preexisting conditions' to those for which 'Medical advice, diagnosis,
care, or treatment . . . was recommended or received. . . " within
six months before the effective date of coverage. May an insurer also include
conditions for which a "reasonable" or "prudent" person
would have sought advice or treatment within that six months?
May the definition include conditions which became "Manifest"
within that period?
No. Only those conditions described in the cited Code Sections may be 'preexisting
conditions". An insurer may make the definition of "preexisting
conditions" more precise, such as by defining -medical advice",
etc., more specifically, but it may not expand the definition beyond the
boundaries established by the Code Sections. A preexisting condition 'may
not include a pregnancy which existed in the specified time period (6 or
12 months) before the effective date unless the insured had received medical
advice, etc. within that time period.
When must a plan be brought into compliance with the new law?
The operative provisions (sub§§ (a) and (f) of Ins. C. § 10198.7) of AB
1672 apply to any product issued, renewed or written by any insurer on or
after the effective date of the law - July 1, 1993. We understand that the
intent of the word "written" was to make the law apply to all
programs in force as of that date. Similarly, the amendments made by AB
1768 apply to any product in force as of January 1, 1994, the effective
date of AB 1768.
Do the 'waiting period' limitations of AB 1672 apply to emp1oyer-imposed
rules postponing new employees' eligibility for fringe benefits until they
have been at work for some period of time ('probationary periods)?
No. AB 1672 does not generally regulate employers' activities. However,
such probationary periods are included in the term "any waiting period"
as used in Ins. C. § 10198.7(e) - see Part II, below.
If a carrier wants to cover immediately a 'late enrollee' who could be
excluded entirely for one year, could it impose a waiver of coverage for
a specified preexisting condition for that year?
Yes. It would appear to be consistent with the law to allow carriers to
impose individual 'waiver' riders on late enrollees in lieu of totally excluding
them from coverage, for the period of time that the late enrollee could
be excluded entirely. We construe the "small employer" provisions
of AB 1672 similarly. Ins. C. §§ 10198.6(b) and 10198.7(f).
Does AB 1672 apply to insured Taft-Hartley plans?
Insurance products issued to such plans must comply with AB 1672s "all
health insurance" provisions pertaining to preexisting conditions limitations
and late enrollees regardless of the size of the employers involved. Note
that Title 10, California Code of Regulations § 2233. 10(b) exempts some
insured "Taft-Hartley" plans from the "small employer"
provisions of AB 1672 but there is no similar exemption from the "all
health insurance" provisions. Ins. C. § 10198.6(a).
Does AB 1672 apply to self-insured 'large employer plans'? )
:Self-insured" plans operated by state and local government entities
(if not otherwise exempted) and religious organizations must comply with
Ins. C. §§ 10198.6 - 10198.8. Such plans are not subject to ERISA and are
thus not exempt from state regulation under that law's "preemption
provision". Ins. C. § 10198.7(a)(b) and (0.))
Lawful private single-employer or labor-management ("Taft-Hartley") fully self-insured plans which are otherwise legitimately exempt from state regulation under ERISA need not comply with the requirements of Ins. C. § 10198.7. (Note that "MEWAs" are illegal under California law.) However, sub§(g) of the Section prohibits carriers from providing 'stop loss' coverages to such self-insured plans that have preexisting conditions or late enrollee provisions that are inconsistent with AB 1672/AB 1768.
What policy form filings are required as a result of the 'all health insurance"
provisions of AB 16721AB 1768? ).
Due to the important changes in coverage made by the legislation, insurance
companies should notify existing insureds of the changes as soon as possible.
An existing policy affected by the legislation should be revised, via rider
or a new policy or certificate, which forms must be filed or approved as
otherwise required by law. ).
II.
DETERMINING WHETHER A NEW PLAN ENTRANT GETS CREDIT FOR "TIME SERVED"
IN A PRIOR QUALIFYING PLAN. ).
We understand that the intent underlying the "credit for time served" concept is that, once someone has entered the private health care sector, he or she need "pay their dues" only once, unless that person leaves the sector for so long that his or her re-entry suggests an anti-selection motive. A new employee or dependent should not have to suffer new preexisting conditions exclusions because the employer or insurer imposes delays between the start of employment and eligibility for coverage which, when added to his or her time between employment periods or coverages, exceed the 30 or 90 day period applicable under the law.
Insurance Code § 10198.7(e) - pertaining to all health insurance - and § 10708(c) - pertaining to "small employer" health insurance - provide that a carrier shall ignore "any waiting period" in determining whether to give a new plan entrant "credit for time served" under qualifying prior coverage against any limitations in the carrier's plan applicable to new entrants. Similarly, the cited Sections require that time attributable to applying for coverage "within the applicable enrollment period" be ignored in determining whether to give a new plan entrant "credit for time served." We believe that the phrase "any waiting period", as used in the Sections, includes both employer-imposed "probationary periods" and carrier-imposed waiting periods for coverage. We also believe that the phrase 'becomes eligible within 30 (or 90) days of termination of prior coverage" should be read as meaning "becomes employed or has a new health benefit plan take effect. "The credit for qualifying prior coverage provision found in Ins. C. § 10198.7(e) is not limited to employment related coverage. An individual shall be given credit for time served under a prior plan whether or not the prior or new plan is employment related. The prior plan and the new plan need not be similar in coverage or contain similar exclusions and prior plans' need not have contained a preexisting conditions exclusion. Please note the broad definition of "qualifying prior coverage", Which includes COBRA or other continuation coverage and public programs; exclusions are limited to those specified. Qualifying prior coverage is not limited to a single plan which preceded the new plan; if a continuous series of continuous plans preceded the new plan, all such plans would constitute qualifying prior coverage. Also, qualifying prior coverage need not be "accrued" or "earned" after July 1, 1993 or after January 1, 1994 the respective effective dates of AD 1672 and AB 1768.
III.
INQUIRIES about this Bulletin or AS 1672 as it applies to Department of Insurance
licensees should be directed to:
Marsha Seeley, Senior Counsel
California Department of Insurance
45 Fremont Street
San Francisco, CA 94105
Telephone (415) 904-5724
JOHN GARAMENDI
Insurance Commissioner