The Office of General Counsel issued the following opinion on September 22, 2005 representing the position of the New York State Insurance Department.
Re: Medicare Supplemental Insurance, Pre-Existing Condition Limitations & Underlying Coverage.
Questions Presented:
1. With respect to Medicare Supplemental policies, does coverage under Medicare and Medicaid constitute "creditable coverage" for the purpose of any applicable pre-existing condition limitations?
2. May an insurer issuing a policy of Medicare Supplemental insurance condition coverage upon an individual terminating coverage under Medicaid?
Conclusions:
1. Coverage under Medicare and Medicaid would, with respect to Medicare Supplemental coverage, constitute "creditable coverage" for the purpose of any applicable pre-existing condition limitations.
2. While, because of the specific circumstances attending this matter, the Insurance Department believes that the condition is inappropriate, a definitive answer will have to be secured from the Department of Health, which is the State agency regulating Medicaid.
Facts:
The inquirer's organization develops products designed to address genetically based diseases. After development of the drug and its approval by the United States Food and Drug Administration, ABC Co. manufactures the drug. In some instances, ABC Co. will supply the drug directly to the patient upon the physician's prescription and will assist the patient in securing insurance coverage.
The inquirer's client is a New York resident who is suffering from Gaucher Disease, for which he has been prescribed Drug X®, a product developed and manufactured by ABC Co.. This 51 year old individual has been covered by Medicare by reason of disability since January 2001 and is also eligible for Medicaid. In addition the individual has been covered since August 1, 2005 under a group Medicare Supplemental policy under Plan I issued by DEF Ins. Co. to JKL.
Until 2002, the inquirer's client was covered under a group health plan through his employment, When the continuation benefit to which he was entitled in accordance with 29 U.S.C.A. § 1161 et seq. (West 1999 and 2005 Supplement) expired, he purchased a Medicare Supplemental policy through JKL. He was covered under the policy until 2003, when he could no longer afford the Medicare Supplemental policy.
The inquirer's client then applied for assistance to the Medicaid program, which granted his application for a "Buy-In" program to assist him in paying for private health insurance.
The inquirer has been verbally informed by representatives of DEF Ins. Co. and JKL, when he first raised the issue of the present Medicare Supplemental policy covering the Drug X®, of two reasons why the Medicare Supplemental policy will not cover the prescribed drug. One explanation has been that the Gaucher Disease is a pre-existing condition and that coverage under Medicare and/or Medicaid does not constitute "creditable coverage". Subsequently, the insurer clarified that because the individual did not enroll for the Medicare Supplemental coverage within the first 6 months of eligibility, a pre-existing condition limitation may be imposed.
In addition, the inquirer has been informed that coverage would only be provided if the patient dropped his Medicaid coverage.
The inquirer questions the accuracy of the information that he has received.
Analysis:
Background
Group health insurance policies are issued to JKL in accordance with New York Insurance Law § 4235(c)(1)(K) (McKinney 2000 and 2005 Supplement):
A policy issued to an association . . . to insure association members, subject to the following: (i) Each association shall have: (I) A minimum of two hundred insured members at the policy's date of issue; (II) Been organized and maintained in good faith for purposes principally other than that of obtaining insurance; (III) Been in active existence for at least two years . . . (ii) The premium for the policy shall be paid by the association or the trustees either wholly from funds contributed by the association or by the insured individuals, or from funds contributed jointly by the association and insured individuals. . . . (iii) The amount of insurance under the policy shall be based upon some plan precluding individual selection either by the insured members or by the association. . . . (iv) . . .[S]uch policy shall provide for the payment of benefits to the person insured or to some beneficiary or beneficiaries other than the association or any officials, representatives, trustees or agents thereof and shall provide for the issuance of a certificate to the association for delivery to the member or such beneficiary, as evidence of such insurance. (v) The premiums charged must be reasonable in relation to the benefits provided.
New York Insurance Law § 3201(b)(1) (McKinney 2000 and 2005 Supplement) provides that with respect to group health insurance policies issued to groups outside of New York in accordance with various provisions of the New York Insurance Law (McKinney 2000 and 2005 Supplement), including New York Insurance Law § 4235(c)(1)(K), the certificate issued to New York residents shall be deemed to have been delivered in New York, and thus is subject to New York requirements. Accordingly, although the JKL policy was delivered in the District of Columbia, many of the requirements of the New York Insurance Law and the regulations issued thereunder would be applicable.
Creditable Coverage
As part of the Health Insurance Portability and Accountability Act (HIPAA), Pub. Law No. 104-191 (1996), the United States Congress enacted 42 U.S.C.A. § 300gg (West 2003):
(a) Limitation on preexisting condition exclusion period; crediting for periods of previous coverage. Subject to subsection (d) [provisions relating to newborn coverage and coverage interruptions in excess of 63 days], a . . . health insurance issuer offering group health insurance coverage, may, with respect to a participant or beneficiary, impose a preexisting condition exclusion only if(1) such exclusion relates to a condition (whether physical or mental), regardless of the cause of the condition, for which medical advice, diagnosis, care, or treatment was recommended or received within the 6-month period ending on the enrollment date; (2) such exclusion extends for a period of not more than 12 months (or 18 months in the case of a late enrollee) after the enrollment date; and (3) the period of any such preexisting condition exclusion is reduced by the aggregate of the periods of creditable coverage (if any, as defined in subsection (c)(1)) applicable to the participant or beneficiary as of the enrollment date.
(b) Definitions. For purposes of this part -(1) Preexisting condition exclusion. (A) In general. The term 'preexisting condition exclusion' means, with respect to coverage, a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the date of enrollment for such coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date. . . .
(c) Rules relating to crediting previous coverage. (1) Creditable coverage defined. For purposes of this title, the term 'creditable coverage' means, with respect to an individual, coverage of the individual under any of the following: . . . (C) Part A or part B of title XVIII of the Social Security Act [Medicare], (D) Title XIX of the Social Security Act [Medicaid] . . . .
. . .
A regulation promulgated by the United States Secretary of Health & Human Services (Secretary) to clarify creditable coverage and give examples, 45 C.F.R. § 146.113 (2004), reiterates that coverage under Medicare and Medicaid qualify as creditable coverage.
New York Insurance Law § 3232 (McKinney 2000 and 2005 Supplement) has requirements for New York policies, including certificates issued to New York residents who are members of groups described in New York Insurance Law § 4235(c)(1)(K), that track those imposed by 42 U.S.C.A. § 300gg. In addition, N.Y. Comp. Codes R. & Regs. tit. 11, § 52.22(b)(3) (2002), dealing with Medicare Supplemental insurance, provides:
(i) Notwithstanding section 52.16(c) of this Part [which generally allows pre-existing condition limitations], the only permissible preexisting condition limitations applicable to Medicare supplement insurance are ones which exclude coverage, for no more than six months after the effective date of coverage under the policy or certificate, for a condition for which medical advice was given or treatment was recommended by or received from a physician, within six months before the effective date of the coverage.
(ii) In applying a preexisting condition limitation to a covered person, an issuer shall credit the time the person was previously covered under creditable coverage, including Medicare supplement insurance, Medicare select coverage and Medicare+Choice plans, if the previous creditable coverage was continuous to a date not more than 63 days prior to the enrollment date of the new coverage. . . .
(iii) For purposes of applying the credit of creditable coverage, an issuer shall reduce the period of any preexisting condition limitation by the aggregate of the period of creditable coverage without regard to the specific benefits covered during the period.
. . .
As indicated in N.Y. Comp. Codes R. & Regs. tit. 11, § 52.22(a)(5), creditable coverage is defined in a manner tracking New York Insurance Law § 3232 and 42 U.S.C.A. § 300gg.
Therefore, under both Federal and New York statutes and regulations, coverage under both Medicare and Medicaid constitutes creditable coverage.
Restrictions Applicable to Medicare Supplemental Policies
While Medicare is a wholly Federal program, Medicaid is a joint Federal-state program where the Federal government establishes minimum benefits and states are free to add additional benefits. The Secretary has established standards for coordination of Medicaid with Medicare, 42 C.F.R. § 431.625 (1988), and recently, 42 C.F.R. § 405.908 (2005), which conferred limited standing on states to appeal denials of Medicare benefits.
In accordance with the Medicare and Medicaid Patient and Program Protection Act, Pub. Law No. 100-93 (1987), Congress has extensively regulated the sale and content of Medicare Supplement policies. While Congress has delegated much of the supervision of policy content to the states, 42 U.S.C.A. § 1395ss(b)(1)(H) (West 1992 and 2005 Supplement), it has retained residual authority should states not regulate in accordance with Congressional mandates.
In accordance with the Congressional delegation, the Legislature enacted New York Insurance Law § 3218 (McKinney 2000) and the Insurance Department promulgated N.Y. Comp. Codes R. & Regs. tit. 11, § 52.22.
Congress has, with respect to Medicare Supplemental policies and pre-existing conditions, enacted 42 U.S.C.A. § 1395ss(s)(2)(D):
In the case of a policy issued during the 6-month period described in subparagraph (A) [six month period beginning when one age 65 or older first enrolls in Medicare Part B] to an individual who is 65 years of age or older as of the date of issuance and who as of the date of the application for enrollment [for Medicare Supplemental coverage] has a continuous period of creditable coverage . . . of(i) at least 6 months, the policy may not exclude benefits based on a pre-existing condition . . . .
Since the inquirer's client enrolled for Medicare by reason of disability, not age, and is under age 65, the above authorization for a pre-existing condition limitation is not applicable.
In order to prevent sales of inappropriate Medicare Supplemental policies, Congress enacted 42 U.S.C.A. § 1395ss(d)(3)(A)(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 [Medicaid] . . . .
Based upon the information furnished, it appears that the above restriction would not be applicable. However, since Medicaid is administered in New York by the Department of Health, authoritative determinations concerning this issue should be secured from:
Office of Legal Affairs
Department of Health
Tower Building
Empire State Plaza.
Albany, NY 12237.
Summary
DEF Ins. Co. and JKL are in error regarding Medicare and Medicaid as creditable coverage. Questions concerning Medicaid eligibility and restrictions on private health insurance should be addressed to the Department of Health.
For further information you may contact Principal Attorney Alan Rachlin at the New York City office.