STANDARDS FOR MEDICARE SUPPLEMENTAL INSURANCE POLICIES.

SEC. 171. STANDARDS FOR MEDICARE SUPPLEMENTAL INSURANCE POLICIES. (a) Simplification of Medicare Supplemental Policies.— (1) Section 4351 of OBRA-1990 is amended by striking “(a) In General.—”. (2) Section 1882(p) (42 U.S.C. 1395ss(p)) is amended— (A) in paragraph (1)(A)— (i) by striking “promulgates” and inserting “changes the revised NAIC Model Regulation (described in subsection (m)) to incorporate”, (ii) by striking “(such limitations, language, definitions, format, and standards referred to collectively in this subsection as ‘NAIC standards’),”, and 108 STAT. 4445 (iii) by striking “included a reference to the NAIC standards” and inserting “were a reference to the revised NAIC Model Regulation as changed under this subparagraph (such changed regulation referred to in this section as the ‘1991 NAIC Model Regulation’)”; (B) in paragraph (1)(B)— (i) by striking “promulgate NAIC standards” and inserting “make the changes in the revised NAIC Model Regulation”, (ii) by striking “limitations, language, definitions, format, and standards described in clauses (i) through (iv) of such subparagraph (in this subsection referred to collectively as ‘Federal standards’)” and inserting “a regulation”, and (iii) by striking “included a reference to the Federal standards” and inserting “were a reference to the revised NAIC Model Regulation as changed by the Secretary under this subparagraph (such changed regulation referred to in this section as the ‘1991 Federal Regulation’)”; (C) in paragraph (1)(C)(i), by striking “NAIC standards or the Federal standards” and inserting “1991 NAIC Model Regulation or 1991 Federal Regulation”; (D) in paragraphs (1)(C)(ii)(I), (1)(E), (2), and (9)(B), by striking “NAIC or Federal standards” and inserting “1991 NAIC Model Regulation or 1991 Federal Regulation”; (E) in paragraph (2)(C), by striking “(5)(B)” and inserting “(4)(B)” (F) in paragraph (4)(A)(i), by inserting “or paragraph (6)” after “(B)”; (G) in paragraph (4), by striking “applicable standards” each place it appears and inserting “applicable 1991 NAIC Model Regulation or 1991 Federal Regulation”; (H) in paragraph (6), by striking “in regard to the limitation of benefits described in paragraph (4)” and inserting “described in clauses (i) through (iii) of paragraph (1)(A)”; (I) in paragraph (7), by striking “policyholder” and inserting “policyholders”; (J) in paragraph (8), by striking “after the effective date of the NAIC or Federal standards with respect to the policy, in violation of the previous requirements of this subsection” and inserting “on and after the effective date specified in paragraph (1)(C) (but subject to paragraph (10)), in violation of the applicable 1991 NAIC Model Regulation or 1991 Federal Regulation insofar as such regulation relates to the requirements of subsection (o) or (q) or clause (i), (ii), or (iii) of paragraph (1)(A)”; (K) in paragraph (9), by adding at the end the following new subparagraph: “(D) Subject to paragraph (10), this paragraph shall apply to sales of policies occurring on or after the effective date specified in paragraph (1)(C).”; and (L) in paragraph (10), by striking “this subsection” and inserting “paragraph (l)(A)(i)”. (b) Guaranteed Renewability.— Section 1882(q) (42 U.S.C. 1395ss(q)) is amended— 108 STAT. 4446 (1) in paragraph (2), by striking “paragraph (2)” and inserting “paragraph (4)”, and (2) in paragraph (4), by striking “the succeeding issuer” and inserting “issuer of the replacement policy”. (c) Enforcement of Standards.— (1) Section 1882(a)(2) (42 U.S.C. 1395ss(a)(2)) is amended— (A) in subparagraph (A), by striking “NAIC standards or the Federal standards” and inserting “1991 NAIC Model Regulation or 1991 Federal Regulation”, and (B) by striking “after the effective date of the NAIC or Federal standards with respect to the policy” and inserting “on and after the effective date specified in subsection (p)(1)(C)”. (2) The sentence in section 1882(b)(1) added by section 4353(c)(5) of OBRA-1990 is amended— (A) by striking “The report” and inserting “Each report”, (B) by inserting “and requirements” after “standards”, (C) by striking “and” after “compliance,”, and (D) by striking the comma after “Commissioners”. (3) Section 1882(g)(2)(B) (42 U.S.C. 1395ss(g)(2)(B)) is amended by striking “Panel” and inserting “Secretary”. (4) Section 1882(b)(1) (42 U.S.C. 1395ss(b)(1)) is amended by striking “the the Secretary” and inserting “the Secretary”. (d) Preventing Duplication.— (1) Section 1882(d)(3)(A) (42 U.S.C. 1395ss(d)(3)(A)) is amended— (A) by amending the first sentence to read as follows: “(i) It is unlawful for a person to sell or issue to an individual entitled to benefits under part A or enrolled under part B of this title— “(I) a health insurance policy with knowledge that the policy duplicates health benefits to which the individual is otherwise entitled under this title or title XIX, “(II) a medicare supplemental policy with knowledge that the individual is entitled to benefits under another medicare supplemental policy, or “(III) a health insurance policy (other than a medicare supplemental policy) with knowledge that the policy duplicates health benefits to which the individual is otherwise entitled, other than benefits to which the individual is entitled under a requirement of State or Federal law.”; (B) by designating the second sentence as clause (ii) and, in such clause, by striking “the previous sentence” and inserting “clause (i)”, (C) by designating the third sentence as clause (iii) and, in such clause— (i) by striking “the previous sentence” and inserting “clause (i) with respect to the sale of a medicare supplemental policy”, and (ii) by striking “and the statement” and all that follows up to the period at the end; and (D) by striking the last sentence. (2) Section 1882(d)(3)(B) (42 U.S.C. 1395ss(d)(3)(B)) is amended— (A) in clause (ii)(II), by striking “65 years of age or older”, 108 STAT. 4447 (B) in clause (iii)(I), by striking “another medicare” and inserting “a medicare”, (C) in clause (iii)(I), by striking “such a policy” and inserting “a medicare supplemental policy”, (D) in clause (iii)(II), by striking “another policy” and inserting “a medicare supplemental policy”, and (E) by amending subclause (III) of clause (iii) to read as follows: (III) If the statement required by clause (i) is obtained and indicates that the individual is entitled to any medical assistance under title XIX, the sale of the policy is not in violation of clause (i) (insofar as such clause relates to such medical assistance), if (aa) a State medicaid plan under such title pays the premiums for the policy, (bb) in the case of a qualified medicare beneficiary described in section 1905(p)(1), the policy provides for coverage of outpatient prescription drugs, or (cc) the only medical assistance to which the individual is entitled under the State plan is medicare cost sharing described in section 1905(p)(3)(A)(ii).”. (3) (A) Section 1882(d)(3)(C) (42 U.S.C. 1395ss(d)(3)(C)) is amended— (i) by striking “the selling” and inserting “(i) the sale or issuance”, and (ii) by inserting before the period at the end the following: “, (ii) the sale or issuance of a policy or plan described in subparagraph (A)(i)(I) (other than a medicare supplemental policy to an individual entitled to any medical assistance under title XIX) under which all the benefits are fully payable directly to or on behalf of the individual without regard to other health benefit coverage of the individual but only if (for policies sold or issued more than 60 days after the date the statements are published or promulgated under subparagraph (D)) there is disclosed in a prominent manner as part of (or together with) the application the applicable statement (specified under subparagraph (D)) of the extent to which benefits payable under the policy or plan duplicate benefits under this title, or (iii) the sale or issuance of a policy or plan described in subparagraph (A)(i)(III) under which all the benefits are fully payable directly to or on behalf of the individual without regard to other health benefit coverage of the individual”. (B) Section 1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is amended by adding at the end the following: “(D) (i) If— “(I) within the 90-day period beginning on the date of the enactment of this subparagraph, the National Association of Insurance Commissioners develops (after consultation with consumer and insurance industry representatives) and submits to the Secretary a statement for each of the types of health insurance policies (other than medicare supplemental policies and including, but not limited to, as separate types of policies, policies paying directly to the beneficiary fixed, cash benefits, and policies that limit benefit payments to specific diseases) which are sold or issued to persons entitled to health benefits under this title, of the extent to which benefits payable under the policy or plan duplicate benefits under this title, and 108 STAT. 4448 “(II) the Secretary approves all the statements submitted as meeting the requirements of subclause (I), each such statement shall be (for purposes of subparagraph (O) the statement specified under this subparagraph for the type of policy involved. The Secretary shall review and approve (or disapprove) all the statements submitted under subclause (I) within 30 days after the date of their submittal. Upon approval of such statements, the Secretary shall publish such statements. “(ii) If the Secretary does not approve the statements under clause (i) or the statements are not submitted within the 90-day period specified in such clause, the Secretary shall promulgate (after consultation with consumer and insurance industry representatives and not later than 90 days after the date of disapproval or the end of such 90-day period (as the case may be)) a statement for each of the types of health insurance policies (other than medicare supplemental policies and including, but not limited to, as separate types of policies, policies paying directly to the beneficiary fixed, cash benefits, and policies that limit benefit payments to specific diseases) which are sold or issued to persons entitled to health benefits under this title, of the extent to which benefits payable under the policy or plan duplicate benefits under this title, and each such statement shall be (for purposes of subparagraph (C)) the statement specified under this subparagraph for the type of policy involved.”. (C) The requirement of a disclosure under section 1882(d)(3)(C)(ii) of the Social Security Act shall not apply to an application made for a policy or plan before 60 days after the date the Secretary of Health and Human Services publishes or promulgates all the statements under section 1882(d)(3)(D) of such Act. (4) Subparagraphs (A) and (B) of section 1882(q)(5) are amended by striking “of the Social Security Act”. (e) Loss Ratios and Refunds of Premiums.— (1) Section 1882(r) (42 U.S.C. 1395ss(r)) is amended— (A) in paragraph (1), by striking “or sold” and inserting “or renewed (or otherwise provide coverage after the date described in subsection (p)(1)(C))”; (B) in paragraph (1)(A), by inserting “for periods after the effective date of these provisions” after “the policy can be expected”; (C) in paragraph (1)(A), by striking “Commissioners,” and inserting “Commissioners)”; (D) in paragraph (1)(B), by inserting before the period at the end the following: “, treating policies of the same type as a single policy for each standard package”; (E) by adding at the end of paragraph (1) the following: “For the purpose of calculating the refund or credit required under paragraph (1)(B) for a policy issued before the date specified in subsection (p)(1)(C), the refund or credit calculation shall be based on the aggregate benefits provided and premiums collected under all such policies issued by an insurer in a State (separated as to individual and group policies) and shall be based only on aggregate benefits provided and premiums collected under such policies after the date specified in section 171(m)(4) of the Social Security Act Amendments of 1994”; 108 STAT. 4449 (F) in the first sentence of paragraph (2)(A), by striking “by policy number” and inserting “by standard package”; (G) by striking the second sentence of paragraph (2)(A) and inserting the following: “Paragraph (1)(B) shall not apply to a policy until 12 months following issue.”; (H) in the last sentence of paragraph (2)(A), by striking “in order” and all that follows through “are effective”; (I) by adding at the end of paragraph (2)(A), the following new sentence: “In the case of a policy issued before the date specified in subsection (p)(1)(C), paragraph (1)(B) shall not apply until 1 year after the date specified in section 171(m)(4) of the Social Security Act Amendments of 1994.”; (J) in paragraph (2), by striking “policy year” each place it appears and inserting “calendar year”; (K) in paragraph (4), by striking “February”, “disllowance”, “loss-ratios” each place it appears, and “loss-ratio” and inserting “October”, “disallowance”, “loss ratios”, and “loss ratio”, respectively; (L) in paragraph (6)(A), by striking “issues a policy in violation of the loss ratio requirements of this subsection” and “such violation” and inserting “fails to provide refunds or credits as required in paragraph (1)(B)” and “policy issued for which such failure occurred”, respectively; and (M) in paragraph (6)(B), by striking “to policyholders” and inserting “to the policyholder or, in the case of a group policy, to the certificate holder”. (2) Section 1882(b)(1) (42 U.S.C. 1395ss(b)(1)) is amended, in the matter after subparagraph (H), by striking “subsection (F)” and inserting “subparagraph (F)”. (3) Section 4355(d) of OBRA-1990 is amended by striking “sold or issued” and all that follows and inserting “issued or renewed (or otherwise providing coverage after the date described in section 1882(p)(1)(C) of the Social Security Act) on or after the date specified in section 1882(p)(1)(C) of the Social Security Act.”. (f) Treatment of HMO’s.— (1) Section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended by striking “a health maintenance organization or other direct service organization” and all that follows through “1833” and inserting “an eligible organization (as defined in section 1876(b)) if the policy or plan provides benefits pursuant to a contract under section 1876 or an approved demonstration project described in section 603(c) of the Social Security Amendments of 1983, section 2355 of the Deficit Reduction Act of 1984, or section 9412(b) of the Omnibus Budget Reconciliation Act of 1986, or, during the period beginning on the date specified in subsection (p)(1)(C) and ending on December 31, 1995, a policy or plan of an organization if the policy or plan provides benefits pursuant to an agreement under section 1833(a)(1)(A)”. (2) Section 4356(b) of OBRA-1990 is amended by striking “on the date of the enactment of this Act” and inserting “on the date specified in section 1882(p)(1)(C) of the Social Security Act”. (g) Preexisting Condition Limitations.— Section 1882(s) (42 U.S.C. 1395ss(s)) is amended— 108 STAT. 4450 (1) in paragraph (2)(A), by striking “for which an application is submitted” and inserting “in the case of an individual for whom an application is submitted prior to or”, (2) in paragraph (2)(A), by striking “in which the individual (who is 65 years of age or older) first is enrolled for benefits under part B” and inserting “as of the first day on which the individual is 65 years of age or older and is enrolled for benefits under part B”, and (3) in paragraph (2)(B), by striking “before it” and inserting “before the policy”. (h) Medicare Select Policies.— (1) Section 1882(t) (42 U.S.C. 1395ss(t)) is amended— (A) in paragraph (1), by inserting “medicare supplemental” after “If a”, (B) in paragraph (1), by striking “NAIC Model Standards” and inserting “1991 NAIC Model Regulation or 1991 Federal Regulation”, (C) in paragraph (1)(A), by inserting “or agreements” after “contracts”, (D) in subparagraphs (E)(i) and (F) of paragraph (1), by striking “NAIC standards” and inserting “standards in the 1991 NAIC Model Regulation or 1991 Federal Regulation”, and (E) in paragraph (2), by inserting “the issuer” before “is subject to a civil money penalty”. (2) Section 1154(a)(4)(B) (42 U.S.C. 1320c–3(a)(4)(B)) is amended— (A) by inserting “that is” after “(or”, and (B) by striking “1882(t)” and inserting “1882(t)(3)”. (i) Health Insurance Counseling.— Section 4360 of OBRA-1990 is amended— (1) in subsection (b)(2)(A)(ii), by striking “Act” and inserting “Act)”; (2) in subsection (b)(2)(D), by striking “services” and inserting “counseling”; (3) in subsection (b)(2)(I), by striking “assistance” and inserting “referrals”; (4) in subsection (c)(1), by striking “and that such activities will continue to be maintained at such level”; (5) in subsection (d)(3), by striking “to the rural areas” and inserting “eligible individuals residing in rural areas”; (6) in subsection (e)— (A) by striking “subsection (c) or (d)” and inserting “this section”, (B) by striking “and annually thereafter, issue an annual report” and inserting “and annually thereafter during the period of the grant, issue a report”, and (C) in paragraph (1), by striking “State-wide”; (7) in subsection (f), by striking paragraph (2) and by redesignating paragraphs (3) through (5) as paragraphs (2) through (4), respectively; and (8) in the second subsection (f) (relating to authorization of appropriations for grants)— (A) by striking “and 1993” and inserting “1993, 1994, 1995, and 1996”; and (B) by redesignating such subsection as subsection (g). (j) Telephone Information System.— 108 STAT. 4451 (1) Section 1804 (42 U.S.C. 1395b–2) is amended— (A) by adding at the end of the heading the following: “; medicare and medigap information”, (B) by inserting “(a)” after “1804.”, and (C) by adding at the end the following new subsection: “(b) The Secretary shall provide information via a toll-free telephone number on the programs under this title.”. (2) Section 1882(f) (42 U.S.C. 1395ss(f)) is amended by adding at the end the following new paragraph: “(3) The Secretary shall provide information via a toll-free telephone number on medicare supplemental policies (including the relationship of State programs under title XIX to such policies).”. (3) Section 1889 is repealed. (k) Mailing of Policies.— Section 1882(d)(4) (42 U.S.C. 1395ss(d)(4)) is amended— (1) in subparagraph (D), by striking “, if such policy” and all that follows up to the period at the end, and (2) by adding at the end the following new subparagraph: “(E) Subparagraph (A) shall not apply in the case of an issuer who mails or causes to be mailed a policy, certificate, or other matter solely to comply with the requirements of subsection (q).”. (l) Effective Date.— The amendments made by this section shall be effective as if included in the enactment of OBRA-1990; except that— (1) the amendments made by subsection (d)(1) shall take effect on the date of the enactment of this Act, but no penalty shall be imposed under section 1882(d)(3)(A) of the Social Security Act (for an action occurring after the effective date of the amendments made by section 4354 of OBRA-1990 and before the date of the enactment of this Act) with respect to the sale or issuance of a policy which is not unlawful under section 1882(d)(3)(A)(i)(II) of the Social Security Act (as amended by this section); (2) the amendments made by subsection (d)(2)(A) and by subparagraphs (A), (B), and (E) of subsection (e)(1) shall be effective on the date specified in subsection (m)(4); and (3) the amendment made by subsection (g)(2) shall take effect on January 1, 1995, and shall apply to individuals who attain 65 years of age or older on or after the effective date of section 1882(s)(2) of the Social Security Act (and, in the case of individuals who attained 65 years of age after such effective date and before January 1, 1995, and who were not covered under such section before January 1, 1995, the 6-month period specified in that section shall begin January 1, 1995). (m) Transition Provisions.— (1) In general.— If the Secretary of Health and Human Services identifies a State as requiring a change to its statutes or regulations to conform its regulatory program to the changes made by this section, the State regulatory program shall not be considered to be out of compliance with the requirements of section 1882 of the Social Security Act due solely to failure to make such change until the date specified in paragraph (4). (2) NAIC standards.— If, within 6 months after the date of the enactment of this Act, the National Association of Insurance Commissioners (in this subsection referred to as the108 STAT. 4452 “NAIC”) modifies its 1991 NAIC Model Regulation (adopted in July 1991) to conform to the amendments made by this section and to delete from section 15C the exception which begins with “unless”, such revised regulation incorporating the modifications shall be considered to be the 1991 Regulation for the purposes of section 1882 of the Social Security Act. (3) Secretary standards.— If the NAIC does not make the modifications described in paragraph (2) within the period specified in such paragraph, the Secretary of Health and Human Services shall make the modifications described in such paragraph and such revised regulation incorporating the modifications shall be considered to be the 1991 Regulation for the purposes of section 1882 of the Social Security Act. (4) Date specified.— (A) In general.— Subject to subparagraph (B), the date specified in this paragraph for a State is the earlier of— (i) the date the State changes its statutes or regulations to conform its regulatory program to the changes made by this section, or (ii) 1 year after the date the NAIC or the Secretary first makes the modifications under paragraph (2) or (3), respectively. (B) Additional legislative action required.— In the case of a State which the Secretary identifies as— (i) requiring State legislation (other than legislation appropriating funds) to conform its regulatory program to the changes made in this section, but (ii) having a legislature which is not scheduled to meet in 1996 in a legislative session in which such legislation may be considered, the date specified in this paragraph is the first day of the first calendar quarter beginning after the close of the first legislative session of the State legislature that begins on or after January 1, 1996. For purposes of the previous sentence, in the case of a State that has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature.