[Federal Register Volume 59, Number 47 (Thursday, March 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5327]
[[Page Unknown]]
[Federal Register: March 10, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Part 417
[OCC-011-P]
RIN 0938-AE63
Medicare Program; Post-Contract Protections and Other Coordinated
Care Issues
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would amend HCFA regulations to provide
that--
A health maintenance organization (HMO) or a competitive
medical plan (CMP) that has a Medicare risk or cost contract with HCFA
and that ceases to furnish services, for any reason, must provide, for
enrollees who return to the fee-for-service payment system, protection
against loss of coverage because of a preexisting condition exclusion
clause in the enrollee's replacement Medicare supplement insurance
policy.
If the Medicare risk contract of an HMO or CMP is
terminated, not renewed, or renewed with a reduced service area, all
other Medicare risk-contracting organizations operating in any part of
the service area must provide a 30-day special open enrollment period
for the benefit of the affected enrollees.
All contracting HMOs and CMPs, and all health care
prepayment plans (HCPPs), must furnish to Medicare beneficiaries at the
time of application a signed copy of the enrollment application form.
An HCPP must also meet all the other requirements that
contracting HMOs and CMPs must meet in handling applications.
These amendments would provide post-contract protections
for Medicare enrollees of HMOs and CMPs that cease to provide services
under a Medicare contract and would also strengthen the application
procedures for HMOs, CMPs, and HCPPs. The first two amendments
implement, respectively, section 4011 of the Omnibus Budget
Reconciliation Act of 1987 and section 6206 of the Omnibus Budget
Reconciliation Act of 1989.
In addition, this proposed rule would provide that all
HMOs and CMPs with risk contracts must submit their Adjusted Community
Rate (ACR) proposals to HCFA not later than 60 days (rather than 45)
days before the beginning of a contract period. The earlier submission
date for the ACR proposals is necessary to provide more time for HCFA
to review and evaluate the material.
DATES: Written comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m on May 9,
1994.
ADDRESSES: Mail comments (original and three copies) to the following
address: Health Care Financing Administration, Department of Health and
Human Services, Attention: OCC-011-P, P.O. Box 26688, Baltimore, MD
21207.
If you prefer, you may deliver your written comments (original and
three copies) to one of the following addresses: Room 309-G, Hubert H.
Humphrey Building, 200 Independence Ave., SW., Washington, DC 20201, or
room 132, East High Rise Building, 6325 Security Boulevard, Baltimore,
MD 21207.
If comments concern information collection or recordkeeping
requirements, please address a copy of comments to: Office of
Management and Budget, Office of Information and Regulatory Affairs,
room 3001, New Executive Office Building, Washington, DC 20503,
Attention: Allison Herron Eydt.
Due to staffing and resource limitations, we cannot accept comments
by facsimile (FAX) transmission.
In commenting, please refer to file code OCC-011-P. Comments
received timely will be available for public inspection as they are
received, beginning approximately three weeks after publication of this
document, in Room 309-G of the Department's offices at 200 Independence
Avenue, SW., Washington, DC, on Monday through Friday of each week from
8:30 a.m. to 5 p.m., (202) 690-7890.
FOR FURTHER INFORMATION CONTACT: Tracy Jensen, (202) 619-2158.
SUPPLEMENTARY INFORMATION:
I. Background
A. Health Maintenance Organizations and Competitive Medical Plans
Health maintenance organizations (HMOs) and competitive medical
plans (CMPs) are entities that provide specified health care services,
in a defined geographic area, to persons who are enrolled in the
entities, in exchange for a predetermined, fixed, periodic premium
payment. When these entities meet the requirements of section 1876(b)
of the Social Security Act (the Act), they become eligible to contract
with HCFA to provide and be paid for services furnished to Medicare
enrollees. These entities may contract either on a ``risk'' basis or a
``cost'' basis.
When HMOs or CMPs contract with HCFA on a risk basis, HCFA makes
advance monthly payments for each enrolled Medicare beneficiary, and
there is no adjustment at the end of the contract year. The per capita
rate of payment for each class of enrollees under a risk contract is
equal to 95 percent of the Adjusted Average Per Capita Cost (AAPCC).
The AAPCC is the actuarial estimate made by HCFA, before an
organization's contract period, of what the average per capita cost to
the Medicare program would be for each class of Medicare enrollees if
they received covered services other than through the organization or
another organization in the same geographic area. A class of Medicare
enrollees is a grouping of an organization's Medicare enrollees that
HCFA constructs on the basis of actuarial factors such as age, sex,
Medicaid status, institutional status, and other relevant factors that
have a significant effect on the use and costs of health care services.
HMOs or CMPs that contract to be paid on a cost basis also receive
monthly advance payments. However, these payments are based on a
general overall budget submitted by the HMO or CMP and are subject to
an annual reconciliation so that payments cover the reasonable costs of
the specific services that they actually provide to Medicare enrollees.
An HMO or CMP that contracts to be paid on a risk basis must
provide to enrollees all Medicare Part A and Part B services (except
hospice services) that are available to beneficiaries who reside in the
geographic area served by the HMO or CMP. A Medicare beneficiary who
enrolls in a risk HMO or CMP must obtain all services directly from or
under arrangements made by the HMO or CMP. The HMO or CMP is
financially responsible for emergency services and urgently needed
services obtained from other sources while the beneficiary is traveling
or temporarily outside the service area of that HMO or CMP.
An HMO or CMP that contracts with HCFA on a cost basis must offer
the same Medicare services as a risk HMO or CMP. However, the cost plan
enrollee may obtain any Medicare covered services outside the HMO or
CMP and have those services paid for by Medicare intermediaries or
carriers, subject to Medicare deductibles and coinsurance.
Initial contracts between HCFA and an HMO or CMP must be for at
least 1 year, but not more than 23 months, and any contract renewal
must be for a period of 1 year. A contract is renewed automatically
unless HCFA or the HMO or CMP decides not to renew. If the HMO or CMP
decides not to renew its contract, it must give written notice to HCFA
at least 90 days before the end of the current contract period and
notify each Medicare enrollee by mail at least 60 days before the end
of the contract period. It must also provide 30 days notice to the
general public by publishing an announcement in a local newspaper. If
HCFA decides not to renew, it must provide like notice to the Medicare
enrollees, the HMO or CMP, and the general public.
A contract can be terminated before its expiration by mutual
consent or unilaterally by either party if certain conditions are
present, generally if the other party fails to perform its obligations.
The terminating party is responsible for making the necessary
notifications.
Each Medicare beneficiary who wishes to enroll in an HMO or CMP is
required to complete an enrollment application form. 42 CFR 417.430
controls the format and content of the enrollment application form and
prescribes procedures for handling applications. However, it does not
require the HMO or CMP to furnish the beneficiary with a copy of the
executed application at the time of enrollment.
B. Health Care Prepayment Plans
A health care prepayment plan (HCPP) is a prepaid group medical
plan that elects to receive Medicare payment from HCFA for Part B
services on a reasonable cost basis under section 1833(a)(1)(A) of the
Act. The regulations concerning Medicare payment to HCPPs are located
at 42 CFR part 417. Under Sec. 417.800(b)(1), an organization wishing
to participate in Medicare as an HCPP is required to enter into a
written agreement with HCFA to furnish physicians' services, through
employee physicians or contracting physicians, and to furnish other
covered Part B services through Medicare qualified providers and
suppliers. HCFA pays an HCPP directly for physician's services
furnished to its Medicare enrollees through plan employees or
contracting physicians, and for other Part B services furnished under
arrangements with Medicare certified suppliers. Payment for Part B
services furnished to an HCPP enrollee by a provider of services such
as a hospital, as well as payment for any Part A services, is made
directly to the provider.
Section 417.801 sets forth the requirements for written agreements
between HCFA and an HCPP, but it contains no specific procedures
concerning application by Medicare beneficiaries for enrollment in an
HCPP.
II. Supplemental Exclusion Coverage Upon Termination of Contract
A. Current Policy
Under the Medicare fee-for-service payment system, beneficiaries
are liable for deductible and coinsurance amounts associated with
certain Medicare covered services. Beneficiaries may insure for some or
all of these out-of-pocket expenses by purchasing a Medicare supplement
policy, generally referred to as a Medigap policy, from a private
insurance company. Medigap policies supplement Medicare coverage by
reimbursing the beneficiary for some or all coinsurance expenses and
may also reimburse for deductible expenses as well, depending on the
terms of the policy. The Medigap policy may also pay for certain
additional services or costs that are not covered by Medicare.
Medigap policies sometimes contain a preexisting condition
exclusion clause, that is, a provision that the policy will not cover
its share of expenses related to a preexisting condition, until a
specified waiting period has elapsed. The waiting period for coverage
of a preexisting condition may not exceed 6 months. The Medigap policy
may not define a preexisting condition more restrictively than a
condition for which medical advice was given or treatment was
recommended by or received from a physician within 6 months before the
effective date of coverage.
In the HMO or CMP setting, HCFA makes a monthly payment directly to
the HMO or CMP to cover all mandated Medicare benefits, less deductible
and coinsurance amounts. The HMO or CMP is permitted to charge the
beneficiary a premium or other amounts such as copayments in place of
the regular Medicare deductible and coinsurance amounts. When Medicare
beneficiaries enroll in an HMO or CMP, they are advised to cancel their
Medigap insurance policy because the HMO or CMP supplemental coverage
is similar to the coverage afforded by Medigap policies. In addition,
if the enrollee did not cancel the Medigap policy, the HMO or CMP could
be considered in violation of section 1882(d)(3)(A) of the Act, which
makes it unlawful for a person to sell or issue a health insurance
policy to any individual entitled to benefits under Part A or under
Part B of Medicare with knowledge that the policy duplicates health
benefits to which the individual is otherwise entitled.
If the HMO's or CMP's Medicare risk contract is terminated, not
renewed, or renewed with a reduced service area, the affected Medicare
enrollees would be transferred into the fee-for-service payment system
unless they enroll in another HMO or CMP that is having an open
enrollment. Beneficiaries who return to the fee-for-service system and
apply for a Medigap policy could be subject to a waiting period of up
to 6 months before preexisting conditions are covered. During the
exclusion period, beneficiaries would have no coverage for payment of
the coinsurance expenses, and possibly deductible expenses if the
policy covered them, which are incurred as a result of preexisting
conditions. The beneficiaries' only other alternative would be to
purchase a policy with no waiting periods, if it were available, at a
higher premium rate.
Prior to the enactment of the Omnibus Budget Reconciliation Act of
1987 (OBRA '87), Public Law 100-203, there was no statutory requirement
that HMOs or CMPs terminating their contract with HCFA provide or
arrange for terminated enrollees to obtain Medicare supplemental
coverage without exclusion periods related to preexisting conditions.
However, HCFA routinely requested that HMOs or CMPs arrange for such
coverage, and all the HMOs or CMPs that terminated their contracts
complied on a voluntary basis.
B. Legislation and Provisions of the Proposed Regulations
In order to protect Medicare enrollees from loss of supplemental
coverage for illness resulting from conditions existing prior to the
termination of their HMO or CMP coverage, section 4011 of OBRA '87
added section 1876(c)(3)(F) of the Act. Section 1876(c)(3)(F) states
that each eligible organization that provides Medicare services under a
contract must provide assurances to the Secretary that, in the event it
ceases to provide such services, it will provide or arrange for
supplemental coverage of Medicare benefits related to a preexisting
condition with respect to any exclusion period, to all individuals
enrolled with the entity who receive Medicare benefits for the lesser
of 6 months or the duration of such period.
We propose to follow the standards for preexisting condition
exclusion clauses developed by the National Association of Insurance
Commissioners (NAIC), and contained in the ``Model Regulation to
Implement the NAIC Medicare Supplement Insurance Minimum Standards
Model Act'' (the NAIC model). All States regulate Medicare supplement
insurance (Medigap) policy packages according to the NAIC model (57 FR
37487, August 21, 1992) standards which stipulate that preexisting
condition exclusion clauses may be applied for a maximum of 6 months.
This standard is consistent with the statutory requirement that the HMO
or CMP provide supplemental exclusion coverage for a 6-month period,
since the terminated enrollee may be precluded from obtaining such
coverage when purchasing a Medigap policy on his or her own.
The NAIC model currently describes ten standard Medigap policies,
all of which include the following core benefits: Part A coinsurance,
Part B coinsurance, 100 percent of Medicare Part A eligible
hospitalization expenses for 365 hospital days in addition to Medicare
standard and lifetime reserve days, and the cost of the first 3 pints
of blood each year. The ten policies range in price and benefits from
A, which includes just the core benefits, to plan J, which contains the
most comprehensive package of benefits. At this time, only three of the
NAIC standard policies--Plans C, F, and J--contain the benefits that
are determined to meet our definition of supplemental exclusion
coverage, a definition which is derived from the beneficiary cost-
sharing requirements for Part A and Part B as required under title
XVIII. We define supplemental exclusion coverage to include the
following benefits: The NAIC model core benefits as described above,
Part A deductible, Part B deductible, and skilled nursing facility
coinsurance.
In order to implement section 1876(c)(3)(F) of the Act, we propose
(Sec. 417.440(f)) to require that Medicare cost or risk-contracting
HMOs or CMPs that cease to provide services are responsible for
arranging supplemental coverage for a period of 6 months. This
requirement would not apply when an HMO or CMP ceases to supply
services to enrolled beneficiaries as a result of the beneficiaries'
disenrollment under Secs. 417.460 (a) or (b). As described below and
under proposed Sec. 417.440(f)(4), we propose to require the HMO or CMP
to comply with one of the following supplemental coverage options:
(1) Make available to eligible beneficiaries one or more Medigap
policies without a preexisting condition waiting period; or at the
State-approved rate for the same policy with a preexisting condition
waiting period; or
(2) Allow an eligible beneficiary to purchase a policy of his or
her choice and--
--Reimburse the beneficiary for all expenses related to a
preexisting condition; or
--Arrange for provision of services related to a preexisting
condition without beneficiary cost-sharing.
To exercise option one, we have determined that the most equitable
standard for compliance with section 1876(c)(3)(F) is to require HMOs
and CMPs with a Medicare contract that is terminated, not renewed, or
renewed with a reduced service area, to offer former enrollees the
least expensive NAIC model plan with benefits that meet the definition
of supplemental exclusion coverage (plan C in most cases). Section
1876(c)(3)(F) of the Act requires coverage for ``all individuals
enrolled with the entity.'' Based on this language, we believe that
Medicare enrollees who are under age 65 (that is, those eligible for
Medicare because of disability or end stage renal disease) are intended
to be covered by this regulation to the extent that a Medigap policy is
available to them in the insurance marketplace. If a Medigap policy is
not available, the proposed regulation would not apply, just as it
would not apply to a Medicare enrollee over age 65 who chooses not to
purchase a Medigap policy.
We do not believe that the statute requires supplemental exclusion
coverage to include all benefits that might have been provided by the
HMO or CMP in excess of those benefits mandated and covered by
Medicare. Examples of benefits that need not be included as
supplemental exclusion coverage under this proposed rule would be
``additional benefits'' or benefits not covered by Medicare but
provided by the HMO or CMP for an additional payment by the enrollee,
such as copayments for eyeglasses or hearing aids.
``Additional benefits'' are benefits that are provided by a risk
HMO or CMP to its Medicare enrollees in accordance with Sec. 417.592
which stipulates that, if an eligible organization's Adjusted Community
Rate (ACR) for services to enrolled beneficiaries is less than the
average per capita rate of payment it receives from Medicare, the
entire difference must be accounted for. This must be accomplished
either through HCFA's reducing the payments to the HMO or CMP, or by
the HMO's or CMP's provision of additional benefits not covered by
Medicare to all beneficiaries enrolled under the risk contract, at no
additional charge. These ``additional benefits'' are calculated
separately for those enrolled in both Part A and Part B, and for those
enrolled in Part B only.
Supplemental exclusion coverage would not apply to those
beneficiaries who choose to enroll in another Medicare-contracting HMO
or CMP because these organizations are not permitted to exclude
preexisting conditions.
Since section 1876(c)(3)(F) of the Act states that an HMO or CMP
may either ``provide or arrange for'' supplemental coverage, we propose
to permit an eligible organization to make available to terminated
enrollees the following options to comply with this statute: (1) It may
arrange with a Medigap insurer to make available for purchase by each
eligible beneficiary the least expensive State-approved Medigap policy
that includes the benefits defined as supplemental exclusion coverage.
The policy must waive any preexisting condition exclusion clause, and
must be made available to the beneficiary at a premium rate approved by
the State insurance commissioner for the same policy with a preexisting
condition exclusion. This does not impose a requirement on the Medigap
insurer to discount a premium. However, an HMO or CMP that chooses this
option must guarantee that the Medigap policy offered to the former
enrollees covers any preexisting condition related services at the same
premium as a comparable package of benefits with a preexisting
condition exclusion clause. This provision is consistent with what we
believe to be Congressional intent to provide certain former enrollees
of Medicare risk HMOs and CMPs with access to Medigap policies that do
not discriminate on the basis of benefit or price.
(2) It may allow the former enrollee to purchase his or her own
Medigap policy and--
Reimburse the beneficiary for all of the Medicare
deductible or coinsurance expenses for services that would have been
covered by the Medigap policy but are not payable because of the
existence of a preexisting condition exclusion clause; or
Arrange for a physician or provider to furnish the actual
services required as a result of the preexisting condition, with the
HMO or CMP reimbursing the deductible and coinsurance amounts to the
cooperating physician or provider on behalf of the former enrollee.
Section 1876(c)(3)(F) of the Act does not specifically refer to
reductions in service area. However, that section requires supplemental
exclusion coverage ``in the event the organization ceases to provide *
* * items and services'' under a Medicare contract. HCFA interprets
this phrase to apply to beneficiaries who are disenrolled due to a
contract termination or a reduction in the service area. The phrase
does not apply to reduction in benefits as provided in Sec. 417.440 or
to disenrollments under Secs. 417.460 (a) or (b).
We considered permitting the HMO or CMP to satisfy this requirement
by making available any State-approved Medigap policy, regardless of
the benefit level. This option would give the HMO or CMP more
flexibility in making arrangements for supplemental exclusion coverage
and it would still provide the beneficiary with access to the Medigap
market. However, since the NAIC model describes policies with several
different levels of coverage, some conforming policies would not
provide enrollees with coverage comparable to what they had with the
HMO or CMP. We have decided to require the HMO or CMP to offer the
least expensive policy that will comply with the supplemental exclusion
coverage required under section 1876(c)(3)(F) of the Act. Additional
policies may also be offered at a higher premium rate, as long as the
policy includes the defined supplemental exclusion coverage benefits,
at the State-approved premium rate for the same policy with a
preexisting condition exclusion clause.
In summary, we propose to amend Sec. 417.440(e) to require a risk
or cost HMO or CMP whose contract with HCFA is terminated, not renewed,
or renewed with a reduced service area, to offer affected Medicare
enrollees who do not enroll in another Medicare contracting HMO or CMP,
protection against out-of-pocket expenses because of a Medigap
preexisting condition exclusion clause, in accordance with the
requirements in proposed Sec. 417.440(f). Under proposed
Sec. 417.440(f), we would require that the HMO or CMP provide at least
one of the following options to former enrollees for the lesser of 6
months after termination of enrollment or the duration of a Medigap
insurance policy exclusion period:
Make available for purchase by each former enrollee one or
more State-approved Medicare supplement policies that waive the
preexisting condition exclusion clause, at the premium rate approved by
the State insurance commissioner for the same policy with such a
clause. At least one of the policies must cover all of the expenses
specified as supplemental exclusion coverage benefits at the lowest
premium available in the area.
Allow the former enrollee to obtain his or her own Medigap
policy. If the policy imposes a preexisting condition exclusion clause,
the HMO or CMP would be required to--
--Reimburse the former enrollee for any benefits defined as
supplemental exclusion coverage for services that would have been
covered by the Medigap policy but for a preexisting condition exclusion
clause; or
--Arrange for a physician or provider to furnish the actual
services related to the preexisting condition, with the HMO or CMP
reimbursing the deductible and insurance amounts to the cooperating
physician or provider on behalf of the former enrollee.
We propose to add a new Sec. 417.541 to clarify that an HMO or CMP
with a cost contract may not claim reimbursement for costs related to
furnishing of the supplemental exclusion coverage required by the
proposed Sec. 417.440(f).
We also propose to revise Secs. 417.492 and 417.494 to require that
an HMO or CMP whose contract with HCFA is terminated, not renewed, or
modified with a reduced service area comply with Sec. 417.440(e)
regarding the provision of supplemental exclusion coverage for their
affected Medicare enrollees and Sec. 417.488 regarding the delivery of
the appropriate notices to affected enrollees by risk HMOs or CMPs. In
addition, we propose to revise Sec. 417.440(e) in order to clarify that
inpatient hospital services would no longer be the only covered
services that must be provided beyond the date of disenrollment. This
rule would require that, under certain circumstances, supplemental
exclusion coverage must be provided after the date of disenrollment. In
addition, all covered hospital and medical expenses incurred before the
date of termination must be paid by the HMO or CMP.
III. Immediate Open Enrollment for Risk HMOs or CMPs
A. Current Policy
Before passage of the Omnibus Budget Reconciliation Act of 1989
(OBRA '89), Public Law 101-239, there was no specific statutory
requirement that a risk HMO or CMP that continued to operate in an area
in which the contract of another risk HMO or CMP had been terminated,
not renewed, or renewed with a reduced service area, enroll those
Medicare beneficiaries who lost their prepaid health care coverage
under the terminated contract. However, HCFA did require at
Sec. 417.488 that the notice sent to enrollees advising them of their
pending disenrollment, include a listing of other risk HMOs or CMPs
operating in the service area. Also, there was no requirement that an
HMO or CMP that continued to contract with HCFA hold an open enrollment
at any time other than the annual 30-day period mandated by section
1876(c)(A)(i) of the Act. Thus, Medicare beneficiaries who had been
enrolled in the discontinued HMO or CMP had no alternative but to
return to the fee-for-service payment system if no other HMO or CMP in
the area was permitting new enrollment at the time of their
termination.
B. Legislation
Section 6206(b)(1)(B) of OBRA '89 amended section 1876(c)(3)(A)(ii)
of the Act to require that if a risk contract is not renewed, is
otherwise terminated, or is renewed with a reduced service area, a
special open enrollment period for the terminated enrollees must be
held by all other risk HMOs or CMPs operating in the same service area.
This special open enrollment period must be for 30 days and must begin
30 days after the date on which HCFA mails notice to the affected risk
HMOs or CMPs informing them of their responsibility under section
1876(c)(3)(A)(ii) of the Act. This period is only required to be open
to those individuals enrolled under the terminated contract as of the
date of termination.
If the special open enrollment period coincides with the annual
open enrollment period, the applications of all Medicare beneficiaries
will be accepted in the order of application. We have considered giving
precedence to the enrollees affected by the termination over new
Medicare beneficiary applicants in cases where the enrollment periods
do coincide. However, section 1876(c)(3)(A)(i) of the Act prohibits the
HMO or CMP from restricting eligible beneficiaries' enrollment during
open enrollment periods and we do not believe that section
1876(c)(3)(A)(ii) allows us to waive this requirement. The special open
enrollment period must be conducted in accordance with all of the
requirements of Sec. 417.426, applicable to annual open enrollments.
Enrollment becomes effective 30 days after the end of the special open
enrollment period, or if HCFA determines that such a date is not
feasible, such other date as HCFA specifies.
C. Provisions of This Proposed Rule
Based on the provisions of section 1876(c)(3)(A)(ii) of the Act, as
amended by section 6206 of OBRA '89, we are proposing to add a new
Sec. 417.426(d) to provide that:
HMOs or CMPs with risk contracts that serve a part of the
same service area as an HMO or CMP whose risk contract is terminated,
not renewed, or renewed with a reduced service area, for any reason,
must provide a special open enrollment period for individuals enrolled
under the terminated or revised contract.
The special open enrollment period would be 30 days in
duration and would begin 30 days after the date on which HCFA mails
notice to the affected HMOs or CMPs informing them of their
responsibility to hold a special open enrollment period.
Coverage would become effective 30 days after the end of
the special open enrollment period unless HCFA specifies a different
effective date.
This special open enrollment period may be in addition to,
or coincide with, any annual open enrollment which the HMO or CMP is
required to hold under Sec. 417.426.
The special open enrollment period must comply with the
requirements of Sec. 417.426.
We are also proposing to amend Sec. 417.488 to require that, upon
termination, nonrenewal, or reduction in the service area of a risk
contract with HCFA, the HMO or CMP must provide to all of its former
Medicare enrollees a list of the other risk HMOs and CMPs that are
still operating in the service area, and a description of the special
open enrollment period.
IV. Documentation of Enrollment for Medicare Enrollees of HMOs,
CMPs, and HCPPs
A. Current Policy
Section 1876(c)(3)(C) of the Act provides that the Secretary may
prescribe the procedures and conditions under which an HMO or CMP may
inform eligible Medicare beneficiaries about the organization, or may
enroll those beneficiaries. Under Sec. 417.422(a)(4), each Medicare
beneficiary requesting enrollment is required to complete an enrollment
application form. Under Sec. 417.430(a)(1), this form must contain the
beneficiary's signature, an authorization for disclosure and exchange
of information between HCFA and the HMO or CMP and must comply with
HCFA instructions regarding format and content. For risk HMOs and CMPs,
the application form must include a notice explaining that the
applicant may only obtain services from within the health care delivery
system of the organization, except for emergency care or urgent care
out of the service area. This notice must contain a statement detailing
the enrollee's liability for non-covered services and for out-of-plan
services when not authorized by a physician or official of the risk HMO
or CMP.
Current regulations at Sec. 417.430 prescribe the application
processing requirements, including a requirement at Sec. 417.430(b)(3)
that the HMO or CMP promptly notify an applicant of acceptance or
denial of an application. However, there is no requirement that an HMO
or CMP furnish to the applicant a copy of the enrollment application
form, signed by the beneficiary and a representative of the HMO or CMP,
at the time that the application is taken. Because there is generally a
30-day lag time between the date on which the beneficiary files an
application and the date that the HMO or CMP sends the notification of
enrollment (which contains the rules that enrollees must follow), many
Medicare enrollees are not fully informed of the requirements of the
plan, especially the limitations on out of plan services. Moreover, our
experience in the administration of the prepaid health care programs
has demonstrated that a certain number of Medicare beneficiaries do not
fully understand the restrictions that apply to enrollment in an HMO or
CMP. As a result, they may continue to obtain services after the
effective date of their enrollment from sources outside the HMO or CMP
and then find that they are liable for payment for these services.
Therefore, we believe that reinforcement of the rules and obligations
inherent in an HMO or CMP enrollment is appropriate.
It has been our policy to recommend that an HMO or CMP give a
signed copy of the enrollment application to Medicare beneficiaries who
apply for enrollment. However, this has been merely a recommendation
and voluntary compliance has been sporadic. Because some Medicare
beneficiaries may have difficulty fully understanding the HMO's or the
CMP's rules and procedures, we believe that the enrollment application
form should be presented to the enrollee on a mandatory basis,
immediately after the actual signing. We believe that this additional
step would strengthen our current enrollment procedures and
significantly lower the number of disenrollments resulting from
misunderstandings by enrollees. In addition, the presentation of the
signed application form would also provide the prospective enrollee
with in-hand documentation of intent to enroll in the HMO or CMP.
There are no current regulations governing application procedures
for enrollment in an HCPP. Thus, a Medicare beneficiary's application
for membership might not be accepted in the order of application, or
the beneficiary may never be notified in writing of the acceptance or
denial of the application. In order to prevent potential problems, we
are proposing to require HCPPs to utilize the same enrollment
application procedures that HMOs and CMPs utilize.
Since HCPPs are similar in organization to HMOs and the payment
basis specified in the Act for HCPPs and cost-based HMOs is similar, we
believe it would be appropriate to apply to HCPPs the same application
procedures required for enrollment in cost-based HMOs. This proposed
change would increase the uniformity of the application format and
procedures for HCPPs and ensure that HCPPs have an effective system for
receiving and processing applications from Medicare beneficiaries.
B. Provisions of This Proposed Rule
We propose to amend Sec. 417.430 by adding a provision that would
require each HMO or CMP to provide Medicare enrollees with a copy of
the application form signed by the applicant and a representative of
the HMO or CMP at the time the form is taken. In cases where the
applicant submits the application by mail, the plan must furnish a copy
to the applicant within 5 working days of receipt. In addition, we
propose to amend Sec. 417.801 to require that HCPPs comply with the
requirements of Sec. 417.430, that is, meet the same enrollment
application procedures as contracting HMOs and CMPs. These procedures--
Specify that a contracting HMO or CMP must comply with
HCFA instructions concerning content of application forms;
Require that a contracting HMO or CMP have an effective
system for receiving, controlling and processing applications from
Medicare beneficiaries; and
Prescribe the details of an effective system for handling
applications.
V. Adjusted Community Rate Proposal
A. Current Policy
Section 1876(a)(1)(A) of the Act requires that HCFA provide risk
HMOs or CMPs with the per capita rates of payment for each class of
Medicare enrollees no later than September 7 before the calendar year
in which the rates take effect. Regulations at Secs. 417.590 through
417.598 specify how eligible organizations use the HCFA payment rates
in determining their new premium rates and benefits for the coming
year. Section 417.592(d)(1) requires that an HMO or CMP provide HCFA
with this rate and benefit information not later than 45 days before
the beginning of its contract period. The package of materials that an
organization submits is called the Adjusted Community Rate Proposal.
HMOs or CMPs generally wait until November 15 (the current deadline) to
submit their adjusted community rates (ACRs) after receiving the per
capita rates from HCFA. This effectively leaves 45 days for HCFA to
review and approve, or disapprove, the ACRs from all risk HMOs or CMPs
that contract with the agency. In November and December of 1986, 1987,
1988, and 1989, HCFA accountants reviewed 139, 133, 135, and 107 ACRs,
respectively, within the 45-day period.
The review process involves the actuarial examination of proposed
payment rates, which is a complex, time consuming operation. Over time,
HCFA has found the 45-day period to be insufficient for allowing agency
personnel to perform a thorough and adequate review of ACRs and to
carry out necessary followup activities. For example, most ACRs contain
errors. HCFA staff must detect these errors and contact the HMO or CMP
to resolve the errors. Often HCFA requests that the HMO or CMP submit
additional materials for review. In addition, program growth (in total
number of Medicare beneficiaries served), and maturation of the
coordinated care industry has led to the development of more
sophisticated ACRs, resulting in the need to devote additional time to
the review of plan materials.
Following the review and approval by HCFA of an organization's ACR,
the HMO or CMP must inform current enrollees of the new benefit package
and rate changes for the coming contract year. This enrollee
notification must occur 30 days before the effective date of the
change. If the ACR has not been approved 30 days before the effective
date, HCFA may allow the HMO or CMP to advertise the new benefit
package. However, the advertisement must indicate that the announced
rates are subject to approval by HCFA.
B. Provision of This Proposed Rule
We propose to revise Sec. 417.592(d)(1) to require that each risk
HMO or CMP submit its proposed ACR at least 60 days prior to the
beginning of a contract period. This change would provide HCFA with an
additional 15 days to review and approve or disapprove the proposed
ACRs.
A change in the deadline for submission of proposed ACRs from 45 to
60 days before the beginning of a contract period would allow HCFA
additional time to evaluate the ACRs, particularly in cases in which
HCFA requests that the HMO or CMP provide supplemental documentation.
The additional time also would permit a more thorough review of the
proposals, reducing the potential for review errors. Making the
deadline for submission of ACR proposals earlier would also help to
ensure that enrollees have adequate notification of any contract
changes in a timely manner.
VI. Response to Public Comments
Because of the large number of items of correspondence we normally
receive on a proposed rule, we are not able to acknowledge or respond
to them individually. However, we will consider all comments that we
receive by the date and time specified in the Dates section of this
preamble, and we will respond to the comments in the preamble of the
final rule that is issued.
VII. Regulatory Impact Statement
We generally prepare a regulatory flexibility analysis that is
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612) unless the Secretary certifies that a proposed rule would
not have a significant economic impact on a substantial number of small
entities.
The RFA defines ``small entity'' as a small business, a nonprofit
enterprise, or a governmental jurisdiction (such as a county, city, or
township) with a population of less than 50,000. We consider all HMOs,
CMPs, and HCPPs to be small entities.
Also, section 1102(b) of the Act requires the Secretary to prepare
a regulatory impact analysis if a proposed rule may have a significant
impact on the operations of a substantial number of small rural
hospitals. Such an analysis must conform to the provisions of section
604 of the RFA. For purposes of section 1102(b) of the Act, we define a
small rural hospital as a hospital that is located outside of a
Metropolitan Statistical Area and has fewer than 50 beds.
There are currently 98 HMOs and CMPs that contract with HCFA to
provide services on a risk basis to Medicare beneficiaries. Only 3
percent of all Medicare beneficiaries are enrolled under these risk
contracting plans. During the last fiscal year, eight risk-contracting
HMOs and/or CMPs ceased providing services to beneficiaries on a risk
basis. According to these data, the number of impacted small entities
is very low.
We have determined and the Secretary certifies that this proposed
rule will not have a significant effect on a substantial number of
small entities. Therefore, a regulatory flexibility analysis under the
RFA and a rural impact analysis under section 1102(b) of the Act are
not required.
In accordance with the provisions of Executive Order 12866, this
proposed rule was not reviewed by the Office of Management and Budget.
VIII. Information Collection Requirements
Section 417.430 of this proposed rule contains information
collection requirements that are subject to review by the Office of
Management and Budget (OMB) under the Paperwork Reduction Act of 1980
(44 U.S.C. 3501 et seq.).
We have submitted this rule to the OMB for review. The information
collection requirements concern personal information supplied by
Medicare beneficiaries who are applying for membership in HCPPs. Public
reporting burden for this collection of information is estimated to be
\1/2\ hour per application. A notice will be published in the Federal
Register when approval is obtained.
List of Subjects in 42 CFR Part 417
Administrative practice and procedures, Health maintenance
organizations (HMO), Medicare, Reporting and recordkeeping
requirements.
42 CFR part 417 would be amended as set forth below:
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
1. The authority citation for part 417 continues to read as
follows:
Authority: Secs. 1102, 1833(a)(1)(A), 1861(s)(2)(H), 1866(a),
1871, 1874, and 1876 of the Social Security Act (42 U.S.C. 1302,
13951(a)(1)(A), 1395x(s)(2)(H), 1395cc(a), 1395hh, 1395kk, and
1395mm); sec. 114(c) of Pub. L. 972-248 (42 U.S.C. 1395mm note); 31
U.S.C. 9701 and secs. 215 and 1301 through 1318 of the Public Health
Service Act (42 U.S.C. 216 and 300e through 300e-17), unless
otherwise noted.
2. Section 417.426 is amended by adding a new paragraph (d) to read
as follows:
Sec. 417.426 Open enrollment requirements.
* * * * *
(d) Special open enrollment. (1) If an HMO's or a CMP's risk
contract is terminated, not renewed, or renewed with a reduced service
area, all other HMOs or CMPs with risk contracts operating in the same
service area must hold a special open enrollment period for the benefit
of those Medicare enrollees whose enrollment in the HMO or CMP ends
when the contract is terminated or modified.
(2) The special open enrollment period must be 30 days in duration
and begin 30 days after the date on which HCFA mails notice to the
affected HMOs or CMPs, informing them of their responsibility under
this section.
(3) Enrollment is effective 30 days after the end of the special
enrollment period or, if HCFA determines that date is not feasible,
some other date that HCFA specifies.
(4) The special open enrollment period is in addition to, unless it
coincides with, the annual open enrollment period required under
paragraph (a) of this section.
(5) The special open enrollment period must be held in accordance
with all of the requirements applicable to annual open enrollments
under paragraphs (a) through (c) of this section.
3. In Sec. 417.430, the introductory text of paragraph (b), and
paragraph (b)(3) are revised to read as follows:
Sec. 417.430 Application procedures.
* * * * *
(b) Handling of applications. An HMO or CMP must have an effective
system for receiving, controlling, and processing applications from
Medicare beneficiaries. The system must meet the following conditions
and requirements:
* * * * *
(3) The HMO or CMP--
(i) Provides the applicant with a copy of the enrollment
application form signed by the applicant and a representative of the
HMO or CMP either when the application is taken, or, if the application
is submitted by mail, within 5 working days of receipt; and
(ii) Gives the beneficiary prompt written notice of acceptance or
denial of the application.
* * * * *
4. In Sec. 417.440, the section heading and paragraph (e) are
revised, and a new paragraph (f) is added to read as follows:
Sec. 417.440 Entitlement to health care services from an HMO or CMP.
* * * * *
(e) Financial responsibilities of an HMO or CMP after the effective
date of disenrollment of a Medicare enrollee--(1) Inpatient hospital
care. If a Medicare beneficiary's effective date of disenrollment
occurs during an inpatient stay in a hospital paid under part 412 of
this chapter and the HMO or CMP is financially responsible for the
hospitalization, either because it arranged for the stay or, as
provided under paragraph (a)(2) of this section, the financial
responsibility for inpatient services continues through the date the
beneficiary is discharged from the inpatient stay
(2) Payment of outstanding bills. The HMO or CMP must pay for
services furnished before the effective date of the contract
termination or modification if the HMO or CMP would have been
financially responsible for those services under the Medicare contract.
(3) Protection against preexisting condition exclusions in Medicare
supplement policies. For beneficiaries who are disenrolled because the
Medicare contract is terminated or renewed with a reduced service area,
the HMO or CMP must comply with the requirements of paragraph (f) of
this section.
(f) Supplemental exclusion coverage--(1) Definition. For the
purposes of this section, supplemental exclusion coverage means payment
for certain expenses incurred by a beneficiary for health care services
related to a condition that exists at the time the beneficiary is
disenrolled from a Medicare-contracting HMO or CMP according to
paragraphs (f)(2) and (f)(3) of this section. Expenses included in
supplemental exclusion coverage are Part A and Part B deductibles and
coinsurance, SNF coinsurance, 100 percent of Medicare eligible Part A
hospitalization expenses for 365 lifetime days after all Medicare
hospital days (including lifetime reserve days) have been exhausted,
and the annual cost of three pints of blood.
(2) Basic rule. An HMO or CMP that ceases to provide health care
services under a Medicare contract, or reduces its service area, must
provide or arrange for supplemental exclusion coverage for any Medicare
enrollee who--
(i) Is disenrolled as a result of the cessation of services;
(ii) Does not enroll in another Medicare-contracting HMO or CMP;
and
(iii) Would become liable for Medicare deductibles and coinsurance
because he or she is unable to purchase a Medicare supplement policy
without a waiting period for preexisting conditions.
(3) Duration of coverage. Supplemental exclusion coverage must
extend for 6 months after the termination or modification of the
contract, or for the duration of any preexisting condition exclusion
period imposed by the Medicare supplement policy, whichever is less.
(4) Methods of providing supplemental exclusion coverage. To
fulfill the supplemental exclusion coverage required under paragraph
(f)(2) of this section, an HMO or CMP must select at least one of the
following options: (i) Make available for purchase by each of its
terminated Medicare enrollees, one or more State-approved Medicare
supplement insurance policies that waive the preexisting condition
exclusion clause, at the premium rate approved by the State Insurance
Commissioner for the same policy with a preexisting condition exclusion
clause. At least one of these policies must cover all of the expenses
specified in Sec. 417.440(f)(1) of this section, at the lowest premium
available in the area.
(ii) Allow each former Medicare enrollee to purchase the Medicare
supplement policy of his or her choice and, if that policy includes a
preexisting condition exclusion clause, provide protection through
either of the following:
(A) Reimburse the former enrollee for all Medicare deductible and
coinsurance expenses that are required to be paid under supplemental
exclusion coverage as specified in paragraph (f)(1) of this section
that are not payable by the Medicare supplement policy because of a
preexisting condition exclusion clause.
(B) Arrange for a physician or provider to furnish the services
required as a result of the preexisting condition. The HMO or CMP must
reimburse all deductible and coinsurance expenses identified as
supplemental exclusion coverage and incurred for services provided in
accordance with Sec. 417.440(e)(3) to the cooperating physician or
provider on behalf of the former enrollee.
5. In Sec. 417.488, the introductory text is revised; and new
paragraphs (c) and (d) are added to read as follows:
Sec. 417.488 Written notice of termination.
A risk contract must provide that if, for any reason, the contract
is terminated, not renewed, or renewed with a reduced service area, the
HMO or CMP agrees to provide to its affected Medicare enrollees, and to
be responsible for the cost of, the following notices:
* * * * *
(c) A list of all HMOs or CMPs with risk contracts that operate in
the same service area and that must hold a special open enrollment for
the affected Medicare enrollees, as required by Sec. 417.426(d).
(d) A description of the special open enrollment process.
6. In Sec. 417.492, a new paragraph (c) is added to read as
follows:
Sec. 417.492 Nonrenewal of contract.
* * * * *
(c) Supplemental exclusion coverage after nonrenewal by either HCFA
or the HMO or CMP. If either HCFA or an HMO or CMP decides, for any
reason, not to renew the contract, the HMO or CMP must provide
supplemental exclusion coverage, as required under Sec. 417.440(f) for
each Medicare enrollee whose coverage with the HMO or CMP will
terminate. In addition, each HMO or CMP with a risk contract must
provide the written notices required under Sec. 417.488.
7. In Sec. 417.494, a new paragraph (d) is added to read as
follows:
Sec. 417.494 Modification or termination of contract.
* * * * *
(d) Supplemental exclusion coverage after modification or
termination by either HCFA or the HMO or CMP. If either HCFA or an HMO
or CMP, for any reason, terminates the contract or modifies it in such
a manner that the service area is reduced, the HMO or CMP must provide
supplemental exclusion coverage as required under Sec. 417.440(f) for
each Medicare enrollee whose coverage with the HMO or CMP will
terminate. In addition, each HMO or CMP with a risk contract must
provide the written notices required under Sec. 417.488.
8. A new Sec. 417.541 is added to read as follows:
Sec. 417.541 Supplemental exclusion coverage costs.
Costs incurred by an organization for furnishing the supplemental
exclusion coverage as required by Sec. 417.440(f) are not allowable.
9. In Sec. 417.592, paragraph (d)(1) is revised to read as follows:
Sec. 417.592 Determination of required additional benefits.
* * * * *
(d) Notification to HCFA. (1) The HMO or CMP must notify HCFA, not
later than 60 days before the beginning of the contract period, of its
ACR and its weighted average of its per capita rates of payment (as
computed under Sec. 417.590) for the contract period.
* * * * *
10. In Sec. 417.801, the introductory text of paragraph (b) is
republished; paragraph (b)(6) is redesignated as paragraph (b)(7); and
a new paragraph (b)(6) is added to read as follows:
Sec. 417.801 Agreements between HCFA and health care prepayment plans.
* * * * *
(b) Terms. The agreement must provide that the HCPP agrees to--
* * * * *
(6) Comply with the application procedures set forth in
Sec. 417.430.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: June 2, 1993.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: November 9, 1993.
Donna E. Shalala,
Secretary.
[FR Doc. 94-5327 Filed 3-9-94; 8:45 am]
BILLING CODE 4120-01-P
