BILL NUMBER: SB 764 CHAPTERED 09/27/00 CHAPTER 706 FILED WITH SECRETARY OF STATE SEPTEMBER 27, 2000 APPROVED BY GOVERNOR SEPTEMBER 25, 2000 PASSED THE SENATE AUGUST 30, 2000 PASSED THE ASSEMBLY AUGUST 25, 2000 AMENDED IN ASSEMBLY AUGUST 18, 2000 AMENDED IN ASSEMBLY JUNE 19, 2000 AMENDED IN ASSEMBLY SEPTEMBER 1, 1999 AMENDED IN ASSEMBLY JULY 8, 1999 AMENDED IN SENATE MAY 18, 1999 INTRODUCED BY Committee on Insurance (Senators Speier (Chair), Figueroa, Hughes, Johnson, Johnston, Leslie, Lewis, and Sher) FEBRUARY 24, 1999 An act to add Article 3.5 (commencing with Section 1358.1) to Chapter 2.2 of Division 2 of, and to repeal Article 3.5 (commencing with Section 1358) of Chapter 2.2 of Division 2 of, the Health and Safety Code, and to add Article 6 (commencing with Section 10192.1) to Chapter 1 of Part 2 of Division 2 of, and to repeal Article 6 (commencing with Section 10192.05) of Chapter 1 of Part 2 of Division 2 of, the Insurance Code, relating to Medicare supplement insurance. LEGISLATIVE COUNSEL'S DIGEST SB 764, Committee on Insurance. Medicare supplement insurance. (1) Existing law provides for the regulation of Medicare supplement insurance policies by the Insurance Commissioner, and for the regulation of Medicare supplement contracts issued by health care service plans by the Department of Managed Care. These provisions establish benefit standards for various coverage options offered by the policies and contracts, impose disclosure, marketing, and reporting requirements on insurers and health care service plans offering these policies and contracts, and provide for various other related regulations. The willful violation of the provisions governing health care service plans and the knowing or intentional violation of the provisions governing persons in the business of insurance are crimes. This bill would repeal these provisions and enact other, similar provisions. Because the bill's provisions governing health care service plans and persons in the business of insurance would change the definitions of crimes, this bill would impose a state-mandated local program. (2) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Article 3.5 (commencing with Section 1358) of Chapter 2.2 of Division 2 of the Health and Safety Code is repealed. SEC. 2. Article 3.5 (commencing with Section 1358.1) is added to Chapter 2.2 of Division 2 of the Health and Safety Code, to read: Article 3.5. Additional Requirements for Medicare Supplement Contracts 1358.1. Every health care service plan that offers any contract that primarily or solely supplements Medicare or that is advertised or represented as a supplement to Medicare, shall, in addition to complying with this chapter and rules of the director, comply with this article. The basic health care services required to be provided pursuant to Sections 1345 and 1367 shall not be included in Medicare supplement contracts subject to this article, to the extent that California is required to disallow coverage for these health care services under the federal Medicare supplement standardization requirements set forth in Section 1882 of the federal Social Security Act (42 U.S.C.A. Sec. 1395ss). 1358.2. The purpose of this article is to provide for the reasonable standardization of coverage and simplification of terms and benefits of Medicare supplement contracts, to facilitate public understanding and comparison of those contracts, to eliminate provisions contained in those contracts that may be misleading or confusing in connection with the purchase of the contracts or with the settlement of claims, and to provide for full disclosures in the sale of Medicare supplement contracts to persons eligible for Medicare. 1358.3. (a) Except as otherwise provided in this section or in Sections 1358.7, 1358.12, 1358.13, 1358.16, and 1358.21, this article shall apply to all group and individual Medicare supplement contracts advertised, solicited, or issued for delivery in this state on or after January 1, 2001. (b) This article shall not apply to a contract of one or more employers or labor organizations, or of the trustees of a fund established by one or more employers or labor organizations, or combination thereof, for employees or former employees, or a combination thereof, or for members or former members, or a combination thereof, of the labor organizations. (c) This article shall not apply to Medicare supplement policies or certificates subject to Article 6 (commencing with Section 10192.1) of Chapter 1 of Part 1 of Division 2 of the Insurance Code. 1358.4. For the purposes of this article, the following terms have the following meanings: (a) "Applicant" means: (1) An individual enrollee who seeks to contract for health coverage, in the case of an individual Medicare supplement contract. (2) An enrollee who seeks to obtain health coverage through a group, in the case of a group Medicare supplement contract. (b) "Bankruptcy" means that situation in which a Medicare+Choice organization that is not an issuer has filed, or has had filed against it, a petition for declaration of bankruptcy and has ceased doing business in the state. (c) "Continuous period of creditable coverage" means the period during which an individual was covered by creditable coverage, if during the period of the coverage the individual had no breaks in coverage greater than 63 days. (d) (1) "Creditable coverage" means, with respect to an individual, coverage of the individual provided under any of the following: (A) Any individual or group contract, policy, certificate, or program that is written or administered by a health care service plan, disability insurer, fraternal benefits society, self-insured employer plan, or any other entity, in this state or elsewhere, and that arranges or provides medical, hospital, and surgical coverage not designed to supplement other private or governmental plans. The term includes continuation or conversion coverage. (B) Part A or B of Title XVIII of the federal Social Security Act (Medicare). (C) Title XIX of the federal Social Security Act (medicaid), other than coverage consisting solely of benefits under Section 1928 of that act. (D) Chapter 55 of Title 10 of the United States Code (CHAMPUS). (E) A medical care program of the Indian Health Service or of a tribal organization. (F) A state health benefits risk pool. (G) A health plan offered under Chapter 89 of Title 5 of the United States Code (Federal Employees Health Benefits Program). (H) A public health plan as defined in federal regulations authorized by Section 2701(c)(1)(I) of the federal Public Health Service Act, as amended by Public Law 104-191, the federal Health Insurance Portability and Accountability Act of 1996. (I) A health benefit plan under Section 5(e) of the federal Peace Corps Act (Section 2504(e) of Title 22 of the United States Code). (J) Any other publicly sponsored program, provided in this state or elsewhere, of medical, hospital, and surgical care. (K) Any other creditable coverage as defined by subsection (c) of Section 2701 of Title XXVII of the federal Public Health Services Act (42 U.S.C. Sec. 300gg(c)). (2) "Creditable coverage" shall not include one or more, or any combination of, the following: (A) Coverage for accident-only or disability income insurance, or any combination thereof. (B) Coverage issued as a supplement to liability insurance. (C) Liability insurance, including general liability insurance and automobile liability insurance. (D) Workers' compensation or similar insurance. (E) Automobile medical payment insurance. (F) Credit-only insurance. (G) Coverage for onsite medical clinics. (H) Other similar insurance coverage, specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits. (3) "Creditable coverage" shall not include the following benefits if they are provided under a separate policy, certificate, or contract or are otherwise not an integral part of the plan: (A) Limited scope dental or vision benefits. (B) Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof. (C) Other similar, limited benefits as are specified in federal regulations. (4) "Creditable coverage" shall not include the following benefits if offered as independent, noncoordinated benefits: (A) Coverage only for a specified disease or illness. (B) Hospital indemnity or other fixed indemnity insurance. (5) "Creditable coverage" shall not include the following if offered as a separate policy, certificate, or contract: (A) Medicare supplemental health insurance as defined under Section 1882(g)(1) of the federal Social Security Act. (B) Coverage supplemental to the coverage provided under Chapter 55 of Title 10 of the United States Code. (C) Similar supplemental coverage provided to coverage under a group health plan. (e) "Employee welfare benefit plan" means a plan, fund, or program of employee benefits as defined in Section 1002 of Title 29 of the United States Code (Employee Retirement Income Security Act). (f) "Insolvency" means when an issuer, licensed to transact the business of a health care service plan in this state, has had a final order of liquidation entered against it with a finding of insolvency by a court of competent jurisdiction in the issuer's state of domicile. (g) "Issuer" means a health care service plan delivering, or issuing for delivery, Medicare supplement contracts in this state, but does not include entities subject to Article 6 (commencing with Section 10192.1) of Chapter 1 of Division 2 of the Insurance Code. (h) "Medicare" means the federal Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965, as amended. (i) "Medicare+Choice Plan" means a plan of coverage for health benefits under Medicare Part C and includes: (1) Coordinated care plans that provide health care services, including, but not limited to, health care service plans (with or without a point-of-service option), plans offered by provider-sponsored organizations, and preferred provider organizations plans. (2) Medical savings account plans coupled with a contribution into a Medicare+Choice medical savings account. (3) Medicare+Choice private fee-for-service plans. (j) "Medicare supplement contract" means a group or individual plan contract of hospital and medical service associations or health care service plans, other than a contract issued pursuant to a contract under Section 1876 of the federal Social Security Act (42 U.S.C.A. Section 1395mm) or an issued contract under a demonstration project specified in Section 1395ss(g)(1) of Title 42 of the United States Code, which is advertised, marketed, or designed primarily as a supplement to reimbursements under Medicare for the hospital, medical, or surgical expenses of persons eligible for Medicare. "Contract" means "Medicare supplement contract," unless the context requires otherwise. (k) "Secretary" means the Secretary of the United States Department of Health and Human Services. 1358.5. (a) A contract shall not be advertised, solicited, or issued for delivery as a Medicare supplement contract unless the contract contains definitions or terms that conform to the requirements of this section. (1) (A) "Accident," "accidental injury," or "accidental means" shall be defined to employ "result" language and shall not include words that establish an accidental means test or use words such as "external, violent, visible wounds" or other similar words of description or characterization. (B) The definition shall not be more restrictive than the following: "injury or injuries for which benefits are provided means accidental bodily injury sustained by the covered person that is the direct result of an accident, independent of disease or bodily infirmity or any other cause, and occurs while coverage is in force." (C) The definition may provide that injuries shall not include injuries for which benefits are provided or available under any workers' compensation, employer's liability, or similar law, unless prohibited by law. (2) "Benefit period" or "Medicare benefit period" shall not be defined more restrictively than as defined in the Medicare program. (3) "Convalescent nursing home," "extended care facility," or "skilled nursing facility" shall not be defined more restrictively than as defined in the Medicare program. (4) (A) "Health care expenses" means expenses of health care service plans associated with the delivery of health care services, which expenses are analogous to incurred losses of insurers. (B) "Health care expenses" shall not include any of the following: (i) Home office and overhead costs. (ii) Advertising costs. (iii) Commissions and other acquisition costs. (iv) Taxes. (v) Capital costs. (vi) Administrative costs. (vii) Claims processing costs. (5) "Hospital" may be defined in relation to its status, facilities, and available services or to reflect its accreditation by the Joint Commission on Accreditation of Hospitals, but not more restrictively than as defined in the Medicare program. (6) "Medicare" shall be defined in the contract. "Medicare" may be substantially defined as "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965, as amended," or "Title I, Part I of Public Law 89-97, as enacted by the 89th Congress and popularly known as the Health Insurance for the Aged Act, as amended," or words of similar import. (7) "Medicare eligible expenses" shall mean expenses of the kinds covered by Medicare, to the extent recognized as reasonable and medically necessary by Medicare. (8) "Physician" shall not be defined more restrictively than as defined in the Medicare program. (9) (A) "Sickness" shall not be defined more restrictively than as follows: "sickness means illness or disease of an insured person that first manifests itself after the effective date of insurance and while the insurance is in force." (B) The definition may be further modified to exclude sicknesses or diseases for which benefits are provided under any workers' compensation, occupational disease, employer's liability, or similar law. (b) Nothing in this section shall be construed as prohibiting any contract, by definitions or express provisions, from limiting or restricting any or all of the benefits provided under the contract, except in-area and out-of-area emergency services, to those health care services that are delivered by issuer, employed, owned, or contracting providers, and provider facilities, so long as the contract complies with the provisions of Sections 1358.14 and 1367 and with Section 1300.67 of the California Code of Regulations. (c) Nothing in this section shall be construed as prohibiting any contract that limits or restricts any or all of the benefits provided under the contract in the manner contemplated in subdivision (b) from limiting its obligation to deliver services, and disclaiming any liability from any delay or failure to provide those services (1) in the event of a major disaster or epidemic or (2) in the event of circumstances not reasonably within the control of the issuer, such as the partial or total destruction of facilities, war, riot, civil insurrection, disability of a significant part of its health personnel, or similar circumstances so long as the provisions comply with the provisions of subdivision (h) of Section 1367. 1358.6. (a) (1) Except for permitted preexisting condition clauses as described in Sections 1358.7 and 1358.8, a contract shall not be advertised, solicited, or issued for delivery as a Medicare supplement contract if the contract contains definitions, limitations, exclusions, conditions, reductions, or other provisions that are more restrictive or limiting than that term as officially used in Medicare, except as expressly authorized by this article. (2) No issuer may advertise, solicit, or issue for delivery any Medicare supplement contract with hospital or medical coverage if the contract contains any of the prohibited provisions described in subdivision (b). (b) The following provisions shall be deemed to be unfair, unreasonable, and inconsistent with the objectives of this chapter and shall not be contained in any Medicare supplement contract: (1) Any waiver, exclusion, limitation, or reduction based on or relating to a preexisting disease or physical condition, unless that waiver, exclusion, limitation, or reduction (A) applies only to coverage for specified services rendered not more than six months from the effective date of coverage, (B) is based on or relates only to a preexisting disease or physical condition defined no more restrictively than 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 coverage, (C) does not apply to any coverage under any group contract, and (D) is approved in advance by the director. Any limitations with respect to a preexisting condition shall appear as a separate paragraph of the contract and be labeled "Preexisting Condition Limitations." (2) Except with respect to a group contract subject to, and in compliance with, Section 1399.62, any provision denying coverage, after termination of the contract, for services provided continuously beginning while the contract was in effect, during the continuous total disability of the subscriber or enrollee, except that the coverage may be limited to a reasonable period of time not less than the duration of the contract benefit period, if any, and may be limited to the maximum benefits provided under the contract. (c) A Medicare supplement contract in force shall not contain benefits that duplicate benefits provided by Medicare. 1358.7. A contract shall not be advertised, solicited, or issued for delivery as a Medicare supplement contract prior to January 1, 2001, unless it meets or exceeds requirements applicable pursuant to this code that were in effect prior to that date. 1358.8. The following standards are applicable to all Medicare supplement contracts advertised, solicited, or issued for delivery on or after January 1, 2001. A contract shall not be advertised, solicited, or issued for delivery as a Medicare supplement contract unless it complies with these benefit standards. (a) The following general standards apply to Medicare supplement contracts and are in addition to all other requirements of this article: (1) A Medicare supplement contract shall not exclude or limit benefits for losses incurred more than six months from the effective date of coverage because it involved a preexisting condition. The contract shall 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 six months before the effective date of coverage. (2) A Medicare supplement contract shall not indemnify against losses resulting from sickness on a different basis than losses resulting from accidents. (3) A Medicare supplement contract shall provide that benefits designed to cover cost-sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible amount and copayment percentage factors. Prepaid or periodic charges may be modified to correspond with those changes. (4) A Medicare supplement contract shall not provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the covered person, other than the nonpayment of the prepaid or periodic charge. (5) Each Medicare supplement contract shall be guaranteed renewable. (A) The issuer shall not cancel or nonrenew the contract solely on the ground of health status of the individual. (B) The issuer shall not cancel or nonrenew the contract for any reason other than nonpayment of the prepaid or periodic charge or misrepresentation of the risk by the applicant that is shown by the plan to be material to the acceptance for coverage. The contestability period for Medicare supplement contracts shall be two years. (C) If a group Medicare supplement contract is terminated by the subscriber and is not replaced as provided under subparagraph (E), the issuer shall offer enrollees an individual Medicare supplement contract that, at the option of the enrollee, either provides for continuation of the benefits contained in the terminated contract or provides for benefits that otherwise meet the requirements of this subsection. (D) If an individual is an enrollee in a group Medicare supplement contract and the individual membership in the group is terminated, the issuer shall either offer the enrollee the conversion opportunity described in subparagraph (C) or, at the option of the subscriber, shall offer the enrollee continuation of coverage under the group contract. (E) If a group Medicare supplement contract is replaced by another group Medicare supplement contract purchased by the same subscriber, the issuer of the replacement contract shall offer coverage to all persons covered under the old group contract on its date of termination. Coverage under the new contract shall not result in any exclusion for preexisting conditions that would have been covered under the group contract being replaced. (6) Termination of a Medicare supplement contract shall be without prejudice to any continuous loss that commenced while the contract was in force, but the extension of benefits beyond the period during which the contract was in force may be predicated upon the continuous total disability of the covered person, limited to the duration of the contract benefit period, if any, or to payment of the maximum benefits. (7) (A) A Medicare supplement contract shall provide that benefits and prepaid or periodic charges under the contract shall be suspended at the request of the enrollee for the period, not to exceed 24 months, in which the enrollee has applied for and is determined to be entitled to medical assistance under Title XIX of the federal Social Security Act, but only if the enrollee notifies the issuer of the contract within 90 days after the date the individual becomes entitled to assistance. (B) If suspension occurs and if the enrollee loses entitlement to medical assistance, the contract shall be automatically reinstituted, effective as of the date of termination of entitlement, as of the termination of entitlement if the enrollee provides notice of loss of entitlement within 90 days after the date of loss and pays the prepaid or periodic charge attributable to the period, effective as of the date of termination of entitlement. (C) Reinstitution of coverages: (i) Shall not provide for any waiting period with respect to treatment of preexisting conditions. (ii) Shall provide for coverage which is substantially equivalent to coverage in effect before the date of suspension. (iii) Shall provide for classification of prepaid or periodic charges on terms at least as favorable to the enrollee as the prepaid or periodic charge classification terms that would have applied to the enrollee had the coverage not been suspended. (8) A Medicare supplement contract shall not be limited to coverage for a single disease or affliction. (9) A Medicare supplement contract shall provide an examination period of 30 days after the receipt of the contract by the applicant for purposes of review, during which time the applicant may return the contract as described in subdivision (e) of Section 1358.17. (10) A Medicare supplement contract shall additionally meet any other minimum benefit standards as established by the director. (11) Within 30 days prior to the effective date of any Medicare benefit changes, an issuer shall file with the director, and notify its subscribers and enrollees of, modifications it has made to Medicare supplement contracts. (A) The notice shall include a description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement contract. (B) The notice shall inform each subscriber and enrollee as to when any adjustment in the prepaid or periodic charges will be made due to changes in Medicare benefits. (C) The notice of benefit modifications and any adjustments to the prepaid or periodic charges shall be in outline form and in clear and simple terms so as to facilitate comprehension. The notice shall not contain or be accompanied by any solicitation. (12) No modifications to existing Medicare supplement coverage shall be made at the time of, or in connection with, the notice requirements of this article except to the extent necessary to eliminate duplication of Medicare benefits and any modifications necessary under the contract to provide indexed benefit adjustment. (b) With respect to the standards for basic (core) benefits common to all benefit plans, every issuer shall make available a contract including only the following basic "core" package of benefits to each prospective applicant. This "core" package of benefits shall be referred to as standardized Medicare supplement benefit plan "A". An issuer may make available to prospective applicants any of the other Medicare supplement insurance benefit plans in addition to the basic core package, but not in lieu of it. (1) Coverage of Part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the 61st day to the 90th day, inclusive, in any Medicare benefit period. (2) Coverage of Part A Medicare eligible expenses incurred for hospitalization to the extent not covered by Medicare for each Medicare lifetime inpatient reserve day used. (3) Upon exhaustion of the Medicare hospital inpatient coverage including the lifetime reserve days, coverage of the Medicare Part A eligible expenses for hospitalization paid at the Medicare diagnostic related group (DRG) day outlier per diem or other appropriate standard of payment, subject to a lifetime maximum benefit of an additional 365 days. The provider shall accept the issuer's payment as payment in full and may not bill the enrollee or subscriber for any balance. (4) Coverage under Medicare Parts A and B for the reasonable cost of the first three pints of blood, or equivalent quantities of packed red blood cells, as defined under federal regulations, unless replaced in accordance with federal regulations. (5) Coverage for the coinsurance amount, or in the case of hospital outpatient services, the copayment amount, of Medicare eligible expenses under Part B regardless of hospital confinement, subject to the Medicare Part B deductible. (c) The following additional benefits shall be included in Medicare supplement benefit plans B to J, inclusive, only as provided by Section 1358.9. (1) With respect to the Medicare Part A deductible, coverage for all of the Medicare Part A inpatient hospital deductible amount per benefit period. (2) With respect to skilled nursing facility care, coverage for the actual billed charges up to the coinsurance amount from the 21st day to the 100th day, inclusive, in a Medicare benefit period for posthospital skilled nursing facility care eligible under Medicare Part A. (3) With respect to the Medicare Part B deductible, coverage for all of the Medicare Part B deductible amount per calendar year regardless of hospital confinement. (4) With respect to 80 percent of the Medicare Part B excess charges, coverage for 80 percent of the difference between the actual Medicare Part B charge as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved Part B charge. (5) With respect to 100 percent of the Medicare Part B excess charges, coverage for all of the difference between the actual Medicare Part B charge as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved Part B charge. (6) With respect to the basic outpatient prescription drug benefit, coverage for 50 percent of outpatient prescription drug charges, after a two hundred fifty dollar ($250) calendar year deductible, to a maximum of one thousand two hundred fifty dollars ($1,250) in benefits received by the insured per calendar year, to the extent not covered by Medicare. (7) With respect to the extended outpatient prescription drug benefit, coverage for 50 percent of outpatient prescription drug charges, after a two hundred fifty dollar ($250) calendar year deductible, to a maximum of three thousand dollars ($3,000) in benefits received by the insured per calendar year, to the extent not covered by Medicare. (8) With respect to medically necessary emergency care in a foreign country, coverage to the extent not covered by Medicare for 80 percent of the billed charges for Medicare-eligible expenses for medically necessary emergency hospital, physician, and medical care received in a foreign country, which care would have been covered by Medicare if provided in the United States and which care began during the first 60 consecutive days of each trip outside the United States, subject to a calendar year deductible of two hundred fifty dollars ($250), and a lifetime maximum benefit of fifty thousand dollars ($50,000). For purposes of this benefit, "emergency care" shall mean care needed immediately because of an injury or an illness of sudden and unexpected onset. (9) With respect to the preventive medical care benefit, coverage for the following preventive health services: (A) An annual clinical preventive medical history and physical examination that may include tests and services from subparagraph (B) and patient education to address preventive health care measures. (B) Any one or a combination of the following preventive screening tests or preventive services, the frequency of which is considered medically appropriate: (i) Fecal occult blood test or digital rectal examination, or both. (ii) Mammogram. (iii) Dipstick urinalysis for hematuria, bacteriuria, and proteinuria. (iv) Pure tone, air only, hearing screening test, administered or ordered by a physician. (v) Serum cholesterol screening every five years. (vi) Thyroid function test. (vii) Diabetes screening. (C) Influenza vaccine administered at any appropriate time during the year and tetanus and diphtheria booster every 10 years. (D) Any other tests or preventive measures determined appropriate by the attending physician. Reimbursement shall be for the actual charges up to 100 percent of the Medicare-approved amount for each service, as if Medicare were to cover the service as identified in American Medical Association Current Procedural Terminology (AMA CPT) codes, to a maximum of one hundred twenty dollars ($120) annually under this benefit. This benefit shall not include payment for any procedure covered by Medicare. (10) With respect to the at-home recovery benefit, coverage for services to provide short-term, at-home assistance with activities of daily living for those recovering from an illness, injury, or surgery. (A) For purposes of this benefit, the following definitions shall apply: (i) "Activities of daily living" include, but are not limited to, bathing, dressing, personal hygiene, transferring, eating, ambulating, assistance with drugs that are normally self-administered, and changing bandages or other dressings. (ii) "Care provider" means a duly qualified or licensed home health aide or homemaker, or a personal care aide or nurse provided through a licensed home health care agency or referred by a licensed referral agency or licensed nurses registry. (iii) "Home" shall mean any place used by the insured as a place of residence, provided that the place would qualify as a residence for home health care services covered by Medicare. A hospital or skilled nursing facility shall not be considered the insured's place of residence. (iv) "At-home recovery visit" means the period of a visit required to provide at-home recovery care, without any limit on the duration of the visit, except that each consecutive four hours in a 24-hour period of services provided by a care provider is one visit. (B) With respect to coverage requirements and limitations, the following shall apply: (i) At-home recovery services provided shall be primarily services that assist in activities of daily living. (ii) The covered person's attending physician shall certify that the specific type and frequency of at-home recovery services are necessary because of a condition for which a home care plan of treatment was approved by Medicare. (iii) Coverage is limited to the following: (I) No more than the number and type of at-home recovery visits certified as necessary by the covered person's attending physician. The total number of at-home recovery visits shall not exceed the number of Medicare-approved home health care visits under a Medicare-approved home care plan of treatment. (II) The actual charges for each visit up to a maximum reimbursement of forty dollars ($40) per visit. (III) One thousand six hundred dollars ($1,600) per calendar year. (IV) Seven visits in any one week. (V) Care furnished on a visiting basis in the insured's home. (VI) Services provided by a care provider as defined in subparagraph (A). (VII) At-home recovery visits while the covered person is covered under the policy or certificate and not otherwise excluded. (VIII) At-home recovery visits received during the period the covered person is receiving Medicare-approved home care services or no more than eight weeks after the service date of the last Medicare-approved home health care visit. (C) Coverage is excluded for the following: (i) Home care visits paid for by Medicare or other government programs. (ii) Care provided by family members, unpaid volunteers, or providers who are not care providers. (11) With respect to new or innovative benefits, an issuer may, with the prior approval of the director, offer contracts with new or innovative benefits in addition to the benefits provided in a contract that otherwise complies with the applicable standards. The new or innovative benefits may include benefits that are appropriate to Medicare supplement contracts, new or innovative, not otherwise available, cost-effective, and offered in a manner which is consistent with the goal of simplification of Medicare supplement contracts. (d) A contract shall not contain any provision delaying the effective date of coverage beyond the first day of the month following the date of receipt by the issuer of the applicant's properly completed application, except that the effective date of coverage may be delayed until the 65th birthday of an applicant who is to become eligible for Medicare by reason of age if the application is received any time during the three months immediately preceding the applicant's 65th birthday. 1358.9. (a) An issuer shall make available to each prospective enrollee a contract form containing only the basic (core) benefits, as defined in subdivision (b) of Section 1358.8. (b) No groups, packages, or combinations of Medicare supplement benefits other than those listed in this section shall be offered for sale in this state, except as may be permitted by paragraph (11) of subdivision (c) of Section 1358.8 and by Section 1358.10. (c) Benefit plans shall be uniform in structure, language, designation and format to the standard benefit plans A to J, inclusive, listed in subdivision (e), and shall conform to the definitions in Section 1358.4. Each benefit shall be structured in accordance with the format provided in subdivisions (b) and (c) of Section 1358.8 and list the benefits in the order listed in subdivision (e). For purposes of this section, "structure, language, and format" means style, arrangement, and overall content of a benefit. (d) An issuer may use, in addition to the benefit plan designations required in subdivision (c), other designations to the extent permitted by law. (e) With respect to the makeup of benefit plans, the following shall apply: (1) Standardized Medicare supplement benefit plan A shall be limited to the basic (core) benefit common to all benefit plans, as defined in subdivision (b) of Section 1358.8. (2) Standardized Medicare supplement benefit plan B shall include only the following: the core benefit, plus the Medicare Part A deductible as defined in paragraph (1) of subdivision (c) of Section 1358.8. (3) Standardized Medicare supplement benefit plan C shall include only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, and medically necessary emergency care in a foreign country as defined in paragraphs (1), (2), (3), and (8) of subdivision (c) of Section 1358.8, respectively. (4) Standardized Medicare supplement benefit plan D shall include only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country, and the at-home recovery benefit as defined in paragraphs (1), (2), (8), and (10) of subdivision (c) of Section 1358.8, respectively. (5) Standardized Medicare supplement benefit plan E shall include only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country, and preventive medical care as defined in paragraphs (1), (2), (8), and (9) of subdivision (c) of Section 1358.8, respectively. (6) Standardized Medicare supplement benefit plan F shall include only the following: the core benefit, plus the Medicare Part A deductible, the skilled nursing facility care, the Medicare Part B deductible, 100 percent of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in paragraphs (1), (2), (3), (5), and (8) of subdivision (c) of Section 1358.8, respectively. (7) Standardized Medicare supplement benefit high deductible plan F shall include only the following: 100 percent of covered expenses following the payment of the annual high deductible plan F deductible. The covered expenses include the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, the Medicare Part B deductible, 100 percent of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in paragraphs (1), (2), (3), (5), and (8) of subdivision (c) of Section 1358.8, respectively. The annual high deductible plan F deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan F policy, and shall be in addition to any other specific benefit deductibles. The annual high deductible Plan F deductible shall be one thousand five hundred dollars ($1,500) for 1998 and 1999, and shall be based on the calendar year, as adjusted annually thereafter by the secretary to reflect the change in the Consumer Price Index for all urban consumers for the 12-month period ending with August of the preceding year, and rounded to the nearest multiple of ten dollars ($10). (8) Standardized Medicare supplement benefit plan G shall include only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, 80 percent of the Medicare Part B excess charges, medically necessary emergency care in a foreign country, and the at-home recovery benefit as defined in paragraphs (1), (2), (4), (8), and (10) of Section 1358.8, respectively. (9) Standardized Medicare supplement benefit plan H shall consist of only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, basic outpatient prescription drug benefit, and medically necessary emergency care in a foreign country as defined in paragraphs (1), (2), (6), and (8) of Section 1358.8, respectively. (10) Standardized Medicare supplement benefit plan I shall consist of only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, 100 percent of the Medicare Part B excess charges, basic outpatient prescription drug benefit, medically necessary emergency care in a foreign country, and at-home recovery benefit as defined in paragraphs (1), (2), (5), (6), (8), and (10) of subdivision (c) of Section 1358.8, respectively. (11) Standardized Medicare supplement benefit plan J shall consist of only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, 100 percent of the Medicare Part B excess charges, extended outpatient prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care, and at-home recovery benefit as defined in paragraphs (1), (2), (3), (5), (7), (8), (9), and (10) of subdivision (c) of Section 1358.8, respectively. (12) Standardized Medicare supplement benefit high deductible plan J shall consist of only the following: 100 percent of covered expenses following the payment of the annual high deductible plan J deductible. The covered expenses include the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, 100 percent of the Medicare Part B excess charges, extended outpatient prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care benefit, and at-home recovery benefit as defined in paragraphs (1), (2), (3), (5), (7), (8), (9), and (10) of subdivision (c) of Section 1358.8, respectively. The annual high deductible plan J deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan J policy, and shall be in addition to any other specific benefit deductibles. The annual deductible shall be one thousand five hundred dollars ($1,500) for 1998 and 1999, and shall be based on a calendar year, as adjusted annually thereafter by the secretary to reflect the change in the Consumer Price Index for all urban consumers for the 12-month period ending with August of the preceding year, and rounded to the nearest multiple of ten dollars ($10). 1358.10. (a) (1) This section shall apply to Medicare Select contracts, as defined in this section. (2) A contract shall not be advertised as a Medicare Select contract unless it meets the requirements of this section. (b) For the purposes of this section: (1) "Complaint" means any dissatisfaction expressed by an individual concerning a Medicare Select issuer or its network providers. (2) "Grievance" means dissatisfaction expressed in writing by an individual covered by a Medicare Select contract with the administration, claims practices, or provision of services concerning a Medicare Select issuer or its network providers. (3) "Medicare Select issuer" means an issuer offering, or seeking to offer, a Medicare Select contract. (4) "Medicare Select contract" means a Medicare supplement contract that contains restricted network provisions. (5) "Network provider" means a provider of health care, or a group of providers of health care, which has entered into a written agreement with the issuer to provide benefits covered under a Medicare Select contract. "Provider network" means a grouping of network providers. (6) "Restricted network provision" means any provision which conditions the payment of benefits, in whole or in part, on the use of network providers. (7) "Service area" means the geographic area approved by the director within which an issuer is authorized to offer a Medicare Select contract. (c) The director may authorize an issuer to offer a Medicare Select contract pursuant to Section 4358 of the federal Omnibus Budget Reconciliation Act (OBRA) of 1990 if the director finds that the issuer's Medicare Select contracts are in compliance with this chapter and if the director finds that the issuer has satisfied all of the requirements of this section. (d) A Medicare Select issuer shall not issue a Medicare Select contract in this state until its plan of operation has been approved by the director. (e) A Medicare Select issuer shall file a proposed plan of operation with the director in a format prescribed by the director. The plan of operation shall contain at least the following information: (1) Evidence that all covered services that are subject to restricted network provisions are available and accessible through network providers, including a demonstration of all of the following: (A) That services can be provided by network providers with reasonable promptness with respect to geographic location, hours of operation, and afterhour care. The hours of operation and availability of afterhour care shall reflect usual practice in the local area. Geographic availability shall reflect the usual travel times within the community. (B) That the number of network providers in the service area is sufficient, with respect to current and expected enrollees, as to either of the following: (i) To deliver adequately all services that are subject to a restricted network provision. (ii) To make appropriate referrals. (C) There are written agreements with network providers describing specific responsibilities. (D) Emergency care is available 24 hours per day and seven days per week. (E) In the case of covered services that are subject to a restricted network provision and are provided on a prepaid basis, that there are written agreements with network providers prohibiting the providers from billing or otherwise seeking reimbursement from or recourse against any individual covered under a Medicare Select contract. This subparagraph shall not apply to supplemental charges or coinsurance amounts as stated in the Medicare Select contract. (2) A statement or map providing a clear description of the service area. (3) A description of the grievance procedure to be utilized. (4) A description of the quality assurance program, including all of the following: (A) The formal organizational structure. (B) The written criteria for selection, retention, and removal of network providers. (C) The procedures for evaluating quality of care provided by network providers, and the process to initiate corrective action when warranted. (5) A list and description, by specialty, of the network providers. (6) Copies of the written information proposed to be used by the issuer to comply with subdivision (i). (7) Any other information requested by the director. (f) (1) A Medicare Select issuer shall file any proposed changes to the plan of operation, except for changes to the list of network providers, with the director prior to implementing the changes. Changes shall be considered approved by the director after 30 days unless specifically disapproved. (2) An updated list of network providers shall be filed with the director at least quarterly. (g) A Medicare Select contract shall not restrict payment for covered services provided by nonnetwork providers if: (1) The services are for symptoms requiring emergency care or are immediately required for an unforeseen illness, injury, or condition. (2) It is not reasonable to obtain services through a network provider. (h) A Medicare Select contract shall provide payment for full coverage under the contract for covered services that are not available through network providers. (i) A Medicare Select issuer shall make full and fair disclosure in writing of the provisions, restrictions, and limitations of the Medicare Select contract to each applicant. This disclosure shall include at least the following: (1) An outline of coverage sufficient to permit the applicant to compare the coverage and charges of the Medicare Select contract with both of the following: (A) Other Medicare supplement contracts offered by the issuer. (B) Other Medicare Select contracts. (2) A description, including address, telephone number, and hours of operation, of the network providers, including primary care physicians, specialty physicians, hospitals, and other providers. (3) A description of the restricted network provisions, including payments for coinsurance and deductibles when providers other than network providers are utilized. (4) A description of coverage for emergency and urgently needed care and other out-of-service area coverage. (5) A description of limitations on referrals to restricted network providers and to other providers. (6) A description of the enrollee's rights to purchase any other Medicare supplement contract otherwise offered by the issuer. (7) A description of the Medicare Select issuer's quality assurance program and grievance procedure. (j) Prior to the sale of a Medicare Select contract, a Medicare Select issuer shall obtain from the applicant a signed and dated form stating that the applicant has received the information provided pursuant to subdivision (i) and that the applicant understands the restrictions of the Medicare Select contract. (k) A Medicare Select issuer shall have and use procedures for hearing complaints and resolving written grievances from the enrollees. The procedures shall be aimed at mutual agreement for settlement and may include arbitration procedures. (1) The grievance procedure shall be described in the contract and in the outline of coverage. (2) At the time the contract is issued, the issuer shall provide detailed information to the enrollee describing how a grievance may be registered with the issuer. (3) Grievances shall be considered in a timely manner and shall be transmitted to appropriate decisionmakers who have authority to fully investigate the issue and take corrective action. (4) If a grievance is found to be valid, corrective action shall be taken promptly. (5) All concerned parties shall be notified about the results of a grievance. (6) The issuer shall report no later than each March 31st to the director regarding its grievance procedure. The report shall be in a format prescribed by the director and shall contain the number of grievances filed in the past year and a summary of the subject, nature, and resolution of those grievances. (l) At the time of initial purchase, a Medicare Select issuer shall make available to each applicant for a Medicare Select contract the opportunity to purchase any Medicare supplement contract otherwise offered by the issuer. (m) (1) At the request of an enrollee under a Medicare Select contract, a Medicare Select issuer shall make available to the enrollee the opportunity to purchase a Medicare supplement contract offered by the issuer that has comparable or lesser benefits and that does not contain a restricted network provision, if a Medicare supplement contract of that nature is offered by the issuer. The issuer shall make the contracts available without regard to the health status of the enrollee and without requiring evidence of insurability after the Medicare Select contract has been in force for six months. (2) For the purposes of this subdivision, a Medicare supplement contract will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare Select contract being replaced. For the purposes of this paragraph, a significant benefit means coverage for the Medicare Part A deductible, coverage for prescription drugs, coverage for at-home recovery services, or coverage for Medicare Part B excess charges. (n) Medicare Select contracts shall provide for continuation of coverage in the event the secretary determines that Medicare Select contracts issued pursuant to this section should be discontinued due to either the failure of the Medicare Select program to be reauthorized under law or its substantial amendment. (1) Each Medicare Select issuer shall make available to each enrollee covered by a Medicare Select contract the opportunity to purchase any Medicare supplement contract offered by the issuer that has comparable or lesser benefits and that does not contain a restricted provider network provision, if a Medicare supplement contract of that nature is offered by the issuer. The issuer shall make the contracts available without regard to the health status of the enrollee and without requiring evidence of insurability after the Medicare Select contract has been in force for six months. (2) For the purposes of this subdivision, a Medicare supplement contract will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare Select contract being replaced. For the purposes of this paragraph, a significant benefit means coverage for the Medicare Part A deductible, coverage for prescription drugs, coverage for at-home recovery services, or coverage for Medicare Part B excess charges. (o) An issuer offering Medicare Select contracts shall comply with reasonable requests for data made by state or federal agencies, including the United States Department of Health and Human Services, for the purpose of evaluating the Medicare Select program. An issuer shall not issue a Medicare Select contract in this state until the contract has been approved by the director. 1358.11. (a) An issuer shall not deny or condition the offering or effectiveness of any Medicare supplement contract available for sale in this state, nor discriminate in the pricing of a contract because of the health status, claims experience, receipt of health care, or medical condition of an applicant in the case of an application for a contract that is submitted prior to or during the six-month period beginning with the first day of the first month in which an individual is both 65 years of age or older and is enrolled for benefits under Medicare Part B. Each Medicare supplement contract currently available from an issuer shall be made available to all applicants who qualify under this subdivision without regard to age. (b) (1) If an applicant qualifies under subdivision (a) and submits an application during the time period referenced in subdivision (a) and, as of the date of application, has had a continuous period of creditable coverage of at least six months, the issuer shall not exclude benefits based on a preexisting condition. (2) If the applicant qualifies under subdivision (a) and submits an application during the time period referenced in subdivision (a) and, as of the date of application, has had a continuous period of creditable coverage that is less than six months, the issuer shall reduce the period of any preexisting condition exclusion by the aggregate of the period of creditable coverage applicable to the applicant as of the enrollment date. The manner of the reduction under this subdivision shall be as specified by the director. (c) Except as provided in subdivision (b) and Section 1358.23, subdivision (a) shall not be construed as preventing the exclusion of benefits under a contract, during the first six months, based on a preexisting condition for which the enrollee received treatment or was otherwise diagnosed during the six months before the coverage became effective. (d) An individual enrolled in Medicare Part B by reason of disability shall be entitled to open enrollment described in this section for six months after he or she reaches age 65. Sales during the open enrollment period shall not be discouraged by any means, including the altering of the commission structure. (e) An individual who is 65 years of age or older and enrolled in Medicare Part B is entitled to open enrollment described in this section for six months following: (1) Receipt of a notice of termination or, if no notice is received, the effective date of termination, from any employer-sponsored health plan including an employer-sponsored retiree health plan. For purposes of this section, "employer-sponsored retiree health plan" includes any coverage for medical expenses that is directly or indirectly sponsored or established by an employer for employees or retirees, their spouses, dependents, or other included covered persons. (2) Termination of health care services for a military retiree or the retiree's Medicare eligible spouse or dependent as a result of a military base closure. (f) An individual who is 65 years of age or older and enrolled in Medicare Part B is entitled to open enrollment described in this section if the individual was covered under a policy, certificate, or contract providing Medicare supplement coverage but that coverage terminated because the individual established residence at a location not served by the issuer. (g) (1) An individual who was previously enrolled in, but whose coverage was terminated between September 1, 1998, and December 31, 1998, by a Medicare managed care plan shall be entitled to a new 60-day open enrollment period in addition to any open enrollment authorized by federal law or regulations, for any and all Medicare supplement coverage available on a guaranteed basis under state and federal law or regulation for persons terminated by their Medicare managed care plan. (2) The new open enrollment period specified in paragraph (1) shall commence 90 days after January 1, 2000. Within 30 days of January 1, 2000, health plans shall notify their former Medicare enrollees who were terminated during the period specified in paragraph (1) of the new open enrollment period. Health plan notices shall inform the terminated enrollees of the opportunity to secure advice and assistance from the Health Insurance Counseling and Advocacy Program (HICAP) in their area, along with the toll-free telephone number for HICAP. (3) An individual who was previously enrolled in but whose coverage was terminated after January 1, 1999, by a Medicare managed care plan shall be entitled to an additional 60-day open enrollment period to be added on to and run consecutively after any open enrollment period authorized by federal law or regulations, for any and all Medicare supplement coverage available on a guaranteed basis under state and federal law or regulations for persons terminated by their Medicare managed care plan. (4) Health plans that terminate Medicare enrollees shall notify those enrollees in the termination notice of the additional open enrollment period authorized by this subdivision. Health plan notices shall inform enrollees of the opportunity to secure advice and assistance from the Health Insurance Counseling Advocacy Program (HICAP) in their area, along with the toll-free telephone number for HICAP. (h) An individual shall be entitled to an annual open enrollment period lasting 30 days or more, commencing with the individual's birthday, during which time that person may purchase any Medicare supplement coverage, with the exception of a Medicare Select contract, that offers benefits equal to or lesser than those provided by the previous coverage. During this open enrollment period, no issuer that falls under this provision shall deny or condition the issuance or effectiveness of Medicare supplement coverage, nor discriminate in the pricing of coverage, because of health status, claims experience, receipt of health care, or medical condition of the individual if, at the time of the open enrollment period, the individual is covered under another Medicare supplement policy, certificate, or contract. An issuer that offers Medicare supplement contracts shall notify an enrollee of his or her rights under this subdivision at least 30 and no more than 60 days before the beginning of the open enrollment period. 1358.12. (a) (1) With respect to the guaranteed issue of a Medicare supplement contract, eligible persons are those individuals described in subdivision (b) who apply to enroll under the contract not later than 63 days after the date of the termination of enrollment described in subdivision (b), and who submit evidence of the date of termination or disenrollment with the application for a Medicare supplement contract. (2) With respect to eligible persons, an issuer shall not deny or condition the issuance or effectiveness of a Medicare supplement contract described in subdivision (c) that is offered and is available for issuance to new enrollees by the issuer, shall not discriminate in the pricing of the Medicare supplement contract because of health status, claims experience, receipt of health care, or medical condition, and shall not impose an exclusion of benefits based on a preexisting condition under the Medicare supplement contract. (b) An eligible person is an individual described in any of the following paragraphs: (1) The individual is enrolled under an employee welfare benefit plan that provides health benefits that supplement the benefits under Medicare, and the plan terminates, or the plan ceases to provide all of those supplemental health benefits to the individual. (2) The individual is enrolled with a Medicare+Choice organization under a Medicare+Choice plan under Medicare Part C, and any of the following apply: (A) The organization's or plan's certification, under this part, has been terminated or the organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides. (B) The individual is no longer eligible to elect the plan because of a change in the individual's place of residence or other change in circumstances specified by the secretary, but not including termination of the individual's enrollment on the basis described in Section 1851(g)(3)(B) of the federal Social Security Act, where the individual has not paid premiums on a timely basis or has engaged in disruptive behavior as specified in standards under Section 1856 of that act, or the plan is terminated for all individuals within a residence area. (C) The individual demonstrates, in accordance with guidelines established by the director, either of the following: (i) The organization offering the plan substantially violated a material provision of the organization's contract under this article in relation to the individual, including the failure to provide an enrollee on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide the covered care in accordance with applicable quality standards. (ii) The organization, or agent or other entity acting on the organization's behalf, materially misrepresented the plan's provisions in marketing the plan to the individual. (D) The individual meets other exceptional conditions as the director may provide. (3) The individual meets both of the following conditions: (A) The individual is enrolled with any of the following: (i) An eligible organization under a contract under Section 1876 of the federal Social Security Act (Medicare risk or cost). (ii) A similar organization operating under demonstration project authority, effective for periods before April 1, 1999. (iii) An organization under an agreement under Section 1833(a)(1) (A) of the federal Social Security Act (health care prepayment plan). (iv) An organization under a Medicare Select policy. (B) The individual's enrollment ceases under the same circumstances that would permit discontinuance of an individual's election of coverage under the first sentence of Section 1851(e)(4) of the federal Social Security Act as delineated in paragraph (2) of subdivision (b). (4) The individual is enrolled under a Medicare supplement contract and the enrollment ceases because of the following: the insolvency of the issuer or bankruptcy of the nonissuer organization; the involuntary termination of coverage or enrollment under the contract; the issuer of the contract substantially violated a material provision of the contract; or the issuer, or an agent or other entity acting on the issuer's behalf, materially misrepresented the contract's provisions in marketing the contract to the individual. (5) The individual meets both of the following conditions: (A) The individual was enrolled under a Medicare supplement contract and terminates enrollment and subsequently enrolls, for the first time, with any Medicare+Choice organization under a Medicare+Choice plan under Medicare Part C, any eligible organization under a contract under Section 1876 of the federal Social Security Act (Medicare risk or cost), any similar organization operating under demonstration project authority, an organization under an agreement under Section 1833(a)(1)(A) of the federal Social Security Act (health care prepayment plan), or a Medicare Select contract. (B) The subsequent enrollment under subparagraph (A) is terminated by the enrollee during any period within the first 12 months of the subsequent enrollment (during which the enrollee is permitted to terminate the subsequent enrollment under Section 1851(e) of the federal Social Security Act). (6) The individual, upon first becoming eligible for benefits under Medicare Part A at age 65 years, enrolls in a Medicare+Choice plan under Medicare Part C, and disenrolls from the plan by not later than 12 months after the effective date of enrollment. (c) (1) Under paragraphs (1), (2), (3), and (4) of subdivision (b), eligible persons are entitled to a Medicare supplement contract that has a benefit package classified as plan A, B, C, or F offered by any issuer. (2) Under paragraph (5) of subdivision (b), eligible persons are entitled to the same Medicare supplement contract in which they were most recently previously enrolled, if available from the same issuer, or, if not so available, a contract described in paragraph (1) of subdivision (c). (3) Under paragraph (6) of subdivision (b), eligible persons are entitled to any Medicare supplement contract offered by any issuer. (d) (1) At the time of an event described in subdivision (b) because of which an individual loses coverage or benefits due to the termination of a contract or agreement, policy, or plan, the organization that terminates the contract or agreement, the issuer terminating the contract, or the administrator of the plan being terminated, respectively, shall notify the individual of his or her rights under this section, and of the obligations of issuers of Medicare supplement contracts under subdivision (a). That notice shall be communicated contemporaneously with the notification of termination. (2) At the time of an event described in subdivision (b) because of which an individual ceases enrollment under a contract or agreement, policy, or plan, the organization that offers the contract or agreement, regardless of the basis for the cessation of enrollment, the issuer offering the contract, or the administrator of the plan, respectively, shall notify the individual of his or her rights under this section, and of the obligations of issuers of Medicare supplement contracts under subdivision (a). That notice shall be communicated within ten working days of the issuer receiving notification of disenrollment. 1358.13. (a) An issuer shall comply with Section 1882(c)(3) of the federal Social Security Act (as enacted by Section 4081(b)(2)(C) of the federal Omnibus Budget Reconciliation Act of 1987 (OBRA), Public Law 100-203) by doing all of the following: (1) Accepting a notice from a Medicare carrier on dually assigned claims submitted by participating physicians and suppliers as a claim for benefits in place of any other claim form otherwise required and making a payment determination on the basis of the information contained in that notice. (2) Notifying the participating physician or supplier and the beneficiary of the payment determination. (3) Paying the participating physician or supplier directly. (4) Furnishing, at the time of enrollment, each enrollee with a card listing the contract name, number, and a central mailing address to which notices respecting coverage from a Medicare carrier may be sent. (5) Paying user fees established under Section 1395u(h)(3)(B) of Title 42 of the United States Code, for claim notices that are transmitted electronically or otherwise. (6) Providing to the secretary, at least annually, a central mailing address to which all claims may be sent by Medicare carriers. (b) Compliance with the requirements set forth in subdivision (a) shall be certified on the Medicare supplement insurance experience reporting form provided by the director. 1358.14. (a) (1) (A) With respect to loss ratio standards, a Medicare supplement contract shall not be advertised, solicited, or issued for delivery unless the contract can be expected, as estimated for the entire period for which prepaid or periodic charges are computed to provide coverage, to return to subscribers and enrollees in the form of aggregate benefits under the contract, not including anticipated refunds or credits provided under the contract, at least 75 percent of the aggregate amount of charges earned in the case of group contracts, or at least 65 percent of the aggregate amount of charges earned in the case of individual contracts, on the basis of incurred claims or costs of health care services experience and earned prepaid or periodic charges for that period and in accordance with accepted actuarial principles and practices. (B) Loss ratio standards shall be calculated on the basis of incurred health care expenses where coverage is provided by a health care service plan on a service rather than reimbursement basis, and earned prepaid or periodic charges shall be calculated for the period and in accordance with accepted actuarial principles and practices. (2) All filings of rates and rating schedules shall demonstrate that expected claims in relation to prepaid or periodic charges comply with the requirements of this section when combined with actual experience to date. Filings of rate revisions shall also demonstrate that the anticipated loss ratio over the entire future period for which the revised rates are computed to provide coverage can be expected to meet the appropriate loss ratio standards. (3) For purposes of applying paragraph (1) of subdivision (a) and paragraph (3) of subdivision (c) of Section 1358.15 only, contracts issued as a result of solicitations of individuals through the mail or by mass media advertising, including both print and broadcast advertising, shall be deemed to be individual contracts. (b) (1) With respect to refund or credit calculations, an issuer shall collect and file with the director by May 31 of each year the data contained in the applicable reporting form required by the director (NAIC Appendix A) for each type of coverage in a standard Medicare supplement benefit plan. (2) If on the basis of the experience as reported the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation shall be done on a statewide basis for each type of contract offered by the issuer. For purposes of the refund or credit calculation, experience on contracts issued within the reporting year shall be excluded. (3) For the purposes of this section, with respect to contracts advertised, solicited, or issued for delivery prior to January 1, 2001, the issuer shall make the refund or credit calculation separately for all individual contracts, including all group contracts subject to an individual loss ratio standard when issued, combined and all other group contracts combined for experience after January 1, 2001. The first report pursuant to paragraph (1) shall be due by May 31, 2003. (4) A refund or credit shall be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds ten dollars ($10). The refund shall include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the secretary, but in no event shall it be less than the average rate of interest for 13-week Treasury notes. A refund or credit against prepaid or periodic charges due shall be made by September 30 following the experience year upon which the refund or credit is based. (c) An issuer of Medicare supplement contracts shall file annually its prepaid or periodic charges and supporting documentation including ratios of incurred losses to earned prepaid or periodic charges by contract duration for approval by the director in accordance with the filing requirements and procedures prescribed by the director. The supporting documentation shall also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which charges are computed. The demonstration shall exclude active life reserves. An expected third-year loss ratio that is greater than or equal to the applicable percentage shall be demonstrated for contracts in force less than three years. As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement contracts shall file with the director, in accordance with applicable filing procedures, all of the following: (1) (A) Appropriate prepaid or periodic charge adjustments necessary to produce loss ratios as anticipated for the current charge for the applicable contracts. The supporting documents necessary to justify the adjustment shall accompany the filing. (B) An issuer shall make prepaid or periodic charge adjustments necessary to produce an expected loss ratio under the contract to conform to minimum loss ratio standards for Medicare supplement contracts and that are expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current charges by the issuer for the Medicare supplement contracts. No charge adjustment that would modify the loss ratio experience under the contract other than the adjustments described in this section shall be made with respect to a contract at any time other than upon its renewal date or anniversary date. (C) If an issuer fails to make prepaid or periodic charge adjustments acceptable to the director, the director may order charge adjustments, refunds, or credits deemed necessary to achieve the loss ratio required by this section. (2) Any appropriate contract amendments needed to accomplish the Medicare supplement contract modifications necessary to eliminate benefit duplications with Medicare. The contract amendments shall provide a clear description of the Medicare supplement benefits provided by the contract. (d) (1) The director may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a contract form issued before or after the effective date of January 1, 2001, if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the director. (2) The director may conduct a public hearing to gather information if the experience of the form filed under paragraph (1) of subdivision (b) for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the director. 1358.145. (a) The calculation of actual or expected loss ratios shall be pursuant to the formula in subdivision (a) of Section 1358.14, and pursuant to definitions, procedures, and other provisions as may be deemed by the director, with due consideration of the circumstances of the particular issuer, to be fair, reasonable, and consistent with the objectives of this chapter. (b) Each issuer shall submit to the department a copy of the calculations for the actual or expected loss ratio as required by Section 1358.14. The calculations shall include the following data: the actual loss ratio for the entire period in which the contract has been in force, as well as for the immediate past three years and for each year in which the contract has been in force, the scale of prepaid or periodic charges for the loss ratio calculation period, a description of all assumptions, the formula used to calculate gross prepaid or periodic charges, the expected level of earned prepaid or periodic charges in the loss ratio calculation period, and the expected level of incurred claims for reimbursement, including paid claims and incurred but not paid claims, in the loss ratio calculation period. The calculations shall be accompanied by an actuarial certification, consisting of a signed declaration of an actuary who is a member in good standing of the American Academy of Actuaries in which the actuary states that the assumptions used in calculating the expected loss ratio are appropriate and reasonable, taking into account that the calculations are in accordance with the provisions of subdivision (a) and the provisions referred to therein. In addition, the director may require the issuer to submit actuarial certification, as described above, by one or more unaffiliated actuaries acceptable to the director. (c) Notwithstanding the calculations required by subdivision (b), contracts shall be deemed to comply with the loss ratio standards if, and shall be deemed not to comply with the loss standards unless: (1) for the most recent year, the ratio of the incurred losses to earned prepaid charges for contracts that have been in force for three years or more is greater than or equal to the applicable percentages contained in this section; and (2) the expected losses in relation to charges over the entire period for which the contract is rated comply with the requirements of this section. An expected third-year loss ratio that is greater than or equal to the applicable percentage shall be demonstrated for contracts in force less than three years. 1358.146. The following format shall be used for reporting loss ratio experience: MEDICARE SUPPLEMENT HEALTH CARE SERVICE PLAN CONTRACT EXPERIENCE EXHIBIT For the year ended December 31, 20__. For the State of California. Of the ____ health care service plan. Address (City, State, and Zip Code) ____ Person Completing this Exhibit ____ To be filed by June 30th following the filing under Section 1358.14 of the Health and Safety Code. Costs for Health Care Services ______________________________ Prepaid or Percentage Periodic of Prepaid Charges or Periodic Classification Earned Amount Charges Earned ---------------------------------------------------------------------- - Experience on Individual Plan Contracts 1. Contracts issued through 20__ Reporting State ___________________________________________________ Nationwide ________________________________________________________ 2. Contracts issued after 20__ Reporting State ___________________________________________________ Nationwide ________________________________________________________ Experience on Group Plan Contracts 1. Contracts Issued through 20__ Reporting State ___________________________________________________ Nationwide ________________________________________________________ 2. Contracts Issued after 20__ Reporting State ___________________________________________________ Nationwide ________________________________________________________ The undersigned officer hereby certifies that the company named above has complied with the requirements contained in the federal Omnibus Budget Reconciliation Act of 1987, Section 4081. Signature _________________________________________________________ Title and name (please type) ______________________________________ INSTRUCTIONS FOR COMPLETING MEDICARE SUPPLEMENT HEALTH CARE SERVICE PLAN CONTRACT EXPERIENCE EXHIBIT 1. Experience on plan contracts issued more than three years prior to the reporting year should be shown separately as indicated on the form. For example, for the reporting year ended 12/31/88 (filed on June 30, 1989), experience on plan contracts issued in 1985 and prior should be shown separately from that of plan contracts issued in 1986 and later. For group coverage, the year of issue should be based on when the contract was issued if available; otherwise use the master plan contract year of issue. 2. Allocation of reserves on a state-by-state basis should be on sound actuarial principles and be consistent from year to year. 3. Membership or plan contract fees, if any, constitute, and should be included with, prepaid or periodic charges earned. Earned prepaid or periodic charges may be shown on an annual basis net of loadings for nonannual modes. 4. Mass marketing group coverage subject to individual loss ratio standards should be included with individual plan contracts. 5. Any dividends paid to subscribers should be included with costs for health care. 6. Neither costs for health care services nor earned prepaid or periodic charges should be adjusted for changes in plan contract (additional) reserves. DEFINITIONS For purposes of this form: 1. "Costs for health care services" means payment for health care services plus the increase in claim reserves. Claim reserves include only those unpaid liabilities for claims that have already been incurred. Costs for health care services in this exhibit do not include plan contract additional reserves. 1358.15. (a) An issuer shall not advertise, solicit, or issue for delivery a Medicare supplement contract to a resident of this state unless the contract has been filed with and approved by the director in accordance with filing requirements and procedures prescribed by the director. Until January 1, 2001, or 90 days after approval of Medicare supplement contracts submitted for approval pursuant to this section, whichever is later, issuers may continue to offer and market previously approved Medicare supplement contracts. (b) An issuer shall not use or change prepaid or periodic charges for a Medicare supplement contract unless the charges and supporting documentation have been filed with and approved by the director in accordance with the filing requirements and procedures prescribed by the director. (c) (1) Except as provided in paragraph (2), an issuer shall not file for approval more than one contract of each type for each standard Medicare supplement benefit plan. (2) An issuer may offer, with the approval of the director, up to four additional contracts of the same type for the same standard Medicare supplement benefit plan, one for each of the following cases: (A) The inclusion of new or innovative benefits. (B) The addition of either direct response or agent marketing methods. (C) The addition of either guaranteed issue or underwritten coverage. (D) The offering of coverage to individuals eligible for Medicare by reason of disability. (3) For the purposes of this section, a "type" means an individual contract, a group contract, an individual Medicare Select contract, or a group Medicare Select contract. (d) (1) Except as provided in subdivision (a), an issuer shall continue to make available for purchase any contract issued after January 1, 2001, that has been approved by the director. A contract shall not be considered to be available for purchase unless the issuer has actively offered it for sale in the previous 12 months. (A) An issuer may discontinue the availability of a contract if the issuer provides to the director in writing its decision at least 30 days prior to discontinuing the availability of the form of the contract. After receipt of the notice by the director, the issuer shall no longer offer for sale the contract in this state. (B) An issuer that discontinues the availability of a contract pursuant to subparagraph (A) shall not file for approval a new contract of the same type for the same standard Medicare supplement benefit plan as the discontinued contract for a period of five years after the issuer provides notice to the director of the discontinuance. The period of discontinuance may be reduced if the director determines that a shorter period is appropriate. (2) The sale or other transfer of Medicare supplement business to another issuer shall be considered a discontinuance for the purposes of this section. (3) A change in the rating structure or methodology shall be considered a discontinuance under paragraph (1) unless the issuer complies with the following requirements: (A) The issuer provides an actuarial memorandum, in a form and manner prescribed by the director, describing the manner in which the revised rating methodology and resultant rates differ from the existing rating methodology and existing rates. (B) The issuer does not subsequently put into effect a change of rates or rating factors that would cause the percentage differential between the discontinued and subsequent rates as described in the actuarial memorandum to change. The director may approve a change to the differential which is in the public interest. (e) (1) Except as provided in paragraph (2), the experience of all contracts of the same type in a standard Medicare supplement benefit plan shall be combined for purposes of the refund or credit calculation prescribed in Section 1358.13. (2) Contracts assumed under an assumption reinsurance agreement shall not be combined with the experience of other contracts for purposes of the refund or credit calculation. (f) A Medicare supplement contract shall be deemed not to be fair, just, or consistent with the objectives of the this chapter at all times, and shall not be advertised, solicited, or issued for delivery at any time, except during that period of time, if any, beginning with the date of receipt by the plan of notification by the director that the provisions of the contract are deemed to be fair, just, and consistent with the objectives of this chapter, and ending with the earlier to occur of the events indicated in subdivision (g). (g) The period of time indicated in subdivision (f) shall terminate at the earlier to occur of (1) receipt by the plan of written revocation by the director of the immediate past notification referred to in subdivision (f) specifying the basis for the revocation, (2) the last day of the prepaid or periodic charge calculation period, that in no event may exceed one year, or (3) June 30, of the next succeeding calendar year. (h) An issuer shall secure the director's review of a contract subject to this article by submitting, not less than 30 days prior to any proposed advertising or other use of the contract not already protected by a currently effective notice under subdivision (f), the following for the director's review: (1) A copy of the contract. (2) A copy of the disclosure form. (3) A representation that the contract complies with the provisions of this chapter and the rules adopted thereunder. (4) A completed copy of the "Medicare Supplement Health Care Service Plan Contract Experience Exhibit" set forth in Section 1358.145. (5) A copy of the calculations for the actual or expected loss ratio. (6) Supporting data used in calculating the actual or expected loss ratio as indicated in Section 1358.14. (7) An actuarial certification, as specified in Section 1358.14, of the loss ratio computations. (8) If required by the director, actuarial certification, as specified in Section 1358.14, of the loss ratio computations by one or more unaffiliated actuaries acceptable to the director. (9) An undertaking by the issuer to notify the subscribers in writing within 60 days of decertification, if the contract is identified as a certified contract at the time of sale and later decertified. (10) A signed statement of the president of the issuer or other officer of the issuer designated by that person attesting that the information submitted for review is accurate and complete and does not misrepresent any material fact. (i) An issuer that submits information pursuant to subdivision (h) shall provide any additional information as may be requested by the director to enable the director to conclude that the contract complies with the provisions of this chapter and rules adopted thereunder. (j) For the purposes of this section, the term "decertified," as applied to a contract, means that the director by written notice has found that the contract no longer complies with the provisions of this chapter and the rules adopted thereunder and has revoked the prior authorization to display on the contract the emblem indicating certification. (k) Benefits designed to cover cost-sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible amount and copayment percentage factors and the amount of prepaid charges may be modified, as indicated in paragraph (6) of subdivision (a) of Section 1300.67.4 of the California Code of Regulations, to correspond with those changes. 1358.16. (a) An issuer or other entity may provide commission or other compensation to a solicitor or other representative for the sale of a Medicare supplement contract only if the first year commission or other first year compensation is no more than 200 percent of the commission or other compensation paid for selling or servicing the contract in the second year or period. (b) The commission or other compensation provided in subsequent renewal years shall be the same as that provided in the second year or period and shall be provided for no fewer than five renewal years. (c) If coverage is replaced, no issuer shall provide compensation to a solicitor or solicitor firm, and no solicitor or solicitor firm shall receive compensation, in a greater amount than the renewal compensation for the replaced coverage. (d) For purposes of this section, "commission" or "compensation" includes pecuniary or nonpecuniary remuneration of any kind relating to the sale or renewal of the contract, including, but not limited to, bonuses, gifts, prizes, awards, and finders' fees. 1358.17. (a) (1) Medicare supplement contracts shall include a renewal or continuation provision. The language or specifications of the provision shall be consistent with subdivision (a) of Section 1365 and the rules adopted thereunder. The provision shall be appropriately captioned and shall appear on the first page of the contract, and shall include any reservation by the issuer of the right to change prepaid or periodic charges and any automatic renewal increases based on the enrollee's age. (2) The contract shall contain the provisions required to be set forth by Section 1300.67.4 of the California Code of Regulations. (b) (1) Except for contract amendments by which the issuer effectuates a request made in writing by the enrollee, exercises a specifically reserved right under a Medicare supplement contract, or is required to reduce or eliminate benefits to avoid duplication of Medicare benefits, all amendments to a Medicare supplement contract after the date of issue or upon reinstatement or renewal that reduce or eliminate benefits or coverage in the contract shall require a signed acceptance by the subscriber. After the date of contract issue, any amendment that increases benefits or coverage with a concomitant increase in prepaid or periodic charges during the contract term shall be agreed to in writing signed by the subscriber, unless the benefits are required by the minimum standards for Medicare supplement contracts, or if the increased benefits or coverage is required by law. Where a separate additional charge is made for benefits provided in connection with contract amendments, the charge shall be set forth in the contract. (2) An issuer shall not in any way reduce or eliminate any benefit or coverage under a Medicare supplement contract at any time after the date of entering the contract, including dates of reinstatement or renewal, unless and until the change is voluntarily agreed to in writing signed by the subscriber or enrollee, or is required to reduce or eliminate benefits to avoid duplication of Medicare benefits. The issuer shall not increase benefits or coverage with a concomitant increase in prepaid or periodic charges during the term of the contract unless and until the change is voluntarily agreed to in writing signed by the subscriber or enrollee or unless the increased benefits or coverage is required by law or regulation. (c) Medicare supplement contracts shall not provide for the payment of benefits based on standards described as "usual and customary," "reasonable and customary," or words of similar import. (d) If a Medicare supplement contract contains any limitations with respect to preexisting conditions, those limitations shall appear as a separate paragraph of the contract and be labeled as "Preexisting Condition Limitations." (e) (1) Medicare supplement contracts shall have a notice prominently printed in no less than 10-point uppercase type, on the cover page of the contract or attached thereto stating that the applicant shall have the right to return the contract within 30 days of its receipt via regular mail, and to have any charges refunded in a timely manner if, after examination of the contract, the covered person is not satisfied for any reason. The return shall void the contract from the beginning, and the parties shall be in the same position as if no contract had been issued. (2) For purposes of this section, a timely manner shall be no later than 30 days after the issuer receives the returned contract. (3) If the issuer fails to refund all prepaid or periodic charges paid in a timely manner, then the applicant shall receive interest on the paid charges at the legal rate of interest on judgments as provided in Section 685.010 of the Code of Civil Procedure. The interest shall be paid from the date the issuer received the returned contract. (f) (1) Issuers of health care service plan contracts that provide hospital or medical expense coverage on an expense incurred or indemnity basis to persons eligible for Medicare shall provide to those applicants a guide to health insurance for people with Medicare in the form developed jointly by the National Association of Insurance Commissioners and the Health Care Financing Administration and in a type size no smaller than 12-point type. Delivery of the guide shall be made whether or not the contracts are advertised, solicited, or issued for delivery as Medicare supplement contracts as defined in this article. Except in the case of direct response issuers, delivery of the guide shall be made to the applicant at the time of application, and acknowledgment of receipt of the guide shall be obtained by the issuer. Direct response issuers shall deliver the guide to the applicant upon request, but not later than at the time the contract is delivered. (2) For the purposes of this section, "form" means the language, format, type size, type proportional spacing, bold character, and line spacing. (g) As soon as practicable, but no later than 30 days prior to the annual effective date of any Medicare benefit changes, an issuer shall notify its enrollees and subscribers of modifications it has made to Medicare supplement contracts in a format acceptable to the director. The notice shall include both of the following: (1) A description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement contract. (2) Inform each enrollee as to when any adjustment in prepaid or periodic charges is to be made due to changes in Medicare. (h) The notice of benefit modifications and any adjustments of prepaid or periodic charges shall be in outline form and in clear and simple terms so as to facilitate comprehension. (i) The notices shall not contain or be accompanied by any solicitation. (j) (1) Issuers shall provide an outline of coverage to all applicants at the time application is presented to the prospective applicant and, except for direct response policies, shall obtain an acknowledgment of receipt of the outline from the applicant. If an outline of coverage is provided at the time of application and the Medicare supplement contract is issued on a basis which would require revision of the outline, a substitute outline of coverage properly describing the contract shall accompany the contract when it is delivered and contain the following statement, in no less than 12-point type, immediately above the company name: "NOTICE: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued." (2) The outline of coverage provided to applicants pursuant to this section consists of four parts: a cover page, information about prepaid or periodic charges, disclosure pages, and charts displaying the features of each benefit plan offered by the issuer. The outline of coverage shall be in the language and format prescribed below in no less than 12-point type. All benefit plans A-J shall be shown on the cover page, and the plans that are offered by the issuer shall be prominently identified. Information about prepaid or periodic charges for plans that are offered shall be shown on the cover page or immediately following the cover page and shall be prominently displayed. The charge and mode shall be stated for all plans that are offered to the prospective applicant. All possible charges for the prospective applicant shall be illustrated. (3) The disclosure pages shall be in the language and format described below in no less than 12-point type. INFORMATION ABOUT PREPAID OR PERIODIC CHARGES (Insert plan's name) can only raise your charges if it raises the charge for all contracts like yours in this state. (If the charge is based on the increasing age of the enrollee, include information specifying when charges will change.) DISCLOSURES Use this outline to compare benefits and charges among policies. READ YOUR POLICY VERY CAREFULLY This is only an outline describing the most important features of your Medicare supplement plan contract. This is not the plan contract and only the actual contract provisions will control. You must read the contract itself to understand all of the rights and duties of both you and (insert the health care service plan's name). RIGHT TO RETURN POLICY If you find that you are not satisfied with your contract, you may return it to (insert plan's address). If you send the contract back to us within 30 days after you receive it, we will treat the contract as if it had never been issued and return all of your payments. POLICY REPLACEMENT If you are replacing other health coverage, do NOT cancel it until you have actually received your new contract and are sure you want to keep it. NOTICE This contract may not fully cover all of your medical costs. Neither (insert the health care service plan's name) nor its agents are connected with Medicare. This outline of coverage does not give all the details of Medicare coverage. Contact your local social security office or consult "The Medicare Handbook" for further details and limitations applicable to Medicare. COMPLETE ANSWERS ARE VERY IMPORTANT When you fill out the application for the new contract, be sure to answer truthfully and completely all questions about your medical and health history. The company may cancel your contract and refuse to pay any claims if you leave out or falsify important medical information. (If the contract is guaranteed issue, this paragraph need not appear.) Review the application carefully before you sign it. Be certain that all information has been properly recorded. (The charts displaying the features of each benefit plan offered by the issuer shall use the uniform format and language shown in the charts set forth in Section 17 of the Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act, as most recently adopted by the National Association of Insurance Commissioners. No more than four benefit plans may be shown on one chart. For purposes of illustration, charts for each benefit plan are set forth below. An issuer may use additional benefit plan designations on these charts.) (Include an explanation of any innovative benefits on the cover page and in the chart, in a manner approved by the director.) (k) Notwithstanding Section 1300.63.2 of Title 10 of the California Code of Regulations, no issuer shall combine the evidence of coverage and disclosure form into a single document relating to a contract that supplements Medicare, or is advertised or represented as a supplement to Medicare, with hospital or medical coverage. (l) The director may adopt regulations to implement this article, including, but not limited to, regulations that specify the required information to be contained in the outline of coverage provided to applicants pursuant to this section, including the format of tables, charts, and other information. (m) (1) Any health care service plan contract, other than a Medicare supplement contract, a contract issued pursuant to a contract under Section 1876 of the federal Social Security Act (42 U.S.C.A. Sec. 1395 et seq.), a disability income policy, or any other contract identified in subdivision (b) of Section 1358.3, issued for delivery in this state to persons eligible for Medicare, shall notify enrollees under the contract that the contract is not a Medicare supplement contract. The notice shall either be printed or attached to the first page of the outline of coverage delivered to enrollees under the contract, or if no outline of coverage is delivered, to the first page of the contract delivered to enrollees. The notice shall be in no less than 12-point type and shall contain the following language: "THIS CONTRACT IS NOT A MEDICARE SUPPLEMENT. If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare available from the company." (2) Applications provided to persons eligible for Medicare for the health insurance contracts described in paragraph (1) shall disclose the extent to which the contract duplicates Medicare in a manner required by the director. The disclosure statement shall be provided as a part of, or together with, the application for the contract. (n) A Medicare supplement contract that does not cover custodial care shall, on the cover page of the outline of coverages, contain the following statement in uppercase type: "THIS POLICY DOES NOT COVER CUSTODIAL CARE IN A SKILLED NURSING CARE FACILITY." 1358.18. In the interest of full and fair disclosure, and to assure the availability of necessary consumer information to potential subscribers or enrollees not possessing a special knowledge of Medicare, health care service plans, or Medicare supplement contracts, an issuer shall comply with the following provisions: (a) Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another Medicare supplement or other health insurance policy or certificate or plan contract in force or whether a Medicare supplement contract is intended to replace any other disability policy or certificate, or plan contract, presently in force. A supplementary application or other form to be signed by the applicant and solicitor containing those questions and statements may be used. "(Statements) (1) You do not need more than one Medicare supplement policy or contract. (2) If you purchase this contract, you may want to evaluate your existing health coverage and decide if you need multiple coverages. (3) You may be eligible for benefits under Medi-Cal or medicaid and may not need a Medicare supplement contract. (4) The benefits and premiums under your Medicare supplement contract can be suspended, if requested, during your entitlement to benefits under Medi-Cal or medicaid for 24 months. You must request this suspension within 90 days of becoming eligible for Medi-Cal or medicaid. If you are no longer entitled to Medi-Cal or medicaid, your contract will be reinstituted if requested within 90 days of losing Medi-Cal or medicaid eligibility. (5) Counseling services are available in your state to provide advice concerning your purchase of Medicare supplement coverage and concerning medical assistance through the Medi-Cal or medicaid program, including benefits as a qualified Medicare beneficiary (QMB) and a specified low-income Medicare beneficiary (SLMB). Information regarding counseling services may be obtained from the California Department of Aging. (Questions) To the best of your knowledge, (1) Do you have another Medicare supplement policy or certificate, or contract, in force? (a) If so, with which company? (b) If so, do you intend to replace your current Medicare supplement policy or contract with this contract? (2) Do you have any other health insurance coverage that provides benefits similar to this Medicare supplement contract? (a) If so, with which company? (b) What kind of coverage? (3) Are you covered for medical assistance through the Medi-Cal or medicaid program: (a) As a specified low-income Medicare beneficiary (SLMB)? (b) As a qualified Medicare beneficiary (QMB)? (c) For other Medi-Cal or medicaid medical benefits?" (b) Solicitors shall list any other health insurance policies or plan contracts they have sold to the applicant as follows: (1) List policies and contracts sold that are still in force. (2) List policies and contracts sold in the past five years that are no longer in force. (c) An issuer issuing Medicare supplement contracts without a solicitor or solicitor firm (a direct response issuer) shall return to the applicant, upon delivery of the contract, a copy of the application or supplemental forms, signed by the applicant and acknowledged by the issuer. (d) Upon determining that a sale will involve replacement of Medicare supplement coverage, any issuer, other than a direct response issuer, or its agent, shall furnish the applicant, prior to issuance for delivery of the Medicare supplement contract, a notice regarding replacement of Medicare supplement coverage. One copy of the notice signed by the applicant and the agent, except where the coverage is sold without an agent, shall be provided to the applicant and an additional signed copy shall be retained by the issuer. A direct response issuer shall deliver to the applicant at the time of the issuance of the contract the notice regarding replacement of Medicare supplement coverage. (e) The notice required by subdivision (d) for an issuer shall be provided in substantially the following form in no less than 10-point type: NOTICE TO APPLICANT REGARDING REPLACEMENT OF MEDICARE SUPPLEMENT COVERAGE (Company name and address) SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE According to (your application) (information you have furnished), you intend to lapse or otherwise terminate an existing Medicare supplement policy or contract and replace it with a contract to be issued by (Plan Name). Your contract to be issued by (Plan Name) will provide 30 days within which you may decide without cost whether you desire to keep the contract. You should review this new coverage carefully. Compare it with all accident and sickness coverage you now have. Terminate your present policy or contract only if, after due consideration, you find that purchase of this Medicare supplement coverage is a wise decision. STATEMENT TO APPLICANT BY PLAN, SOLICITOR, SOLICITOR FIRM, OR OTHER REPRESENTATIVE: (1) I have reviewed your current medical or health coverage. The replacement of coverage involved in this transaction does not duplicate coverage, to the best of my knowledge. The replacement contract is being purchased for the following reason (check one): __Additional benefits. __No change in benefits, but lower premiums or charges. __Fewer benefits and lower premiums or charges. __Other. (please specify) ________ (2) You may not be immediately eligible for full coverage under the new contract. This could result in denial or delay of a claim for benefits under the new contract, whereas a similar claim might have been payable under your present policy or contract. (3) State law provides that your replacement Medicare supplement contract may not contain new preexisting conditions, waiting periods, elimination periods, or probationary periods. The plan will waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, or probationary periods in the new coverage for similar benefits to the extent that time was spent (depleted) under the original contract. (4) If you still wish to terminate your present policy or contract and replace it with new coverage, be certain to truthfully and completely answer any and all questions on the application concerning your medical and health history. Failure to include all material medical information on an application requesting that information may provide a basis for the plan to deny any future claims and to refund your prepaid or periodic payment as though your contract had never been in force. After the application has been completed and before you sign it, review it carefully to be certain that all information has been properly recorded. (5) Do not cancel your present Medicare supplement coverage until you have received your new contract and are sure you want to keep it. _____________________________________________________________________ (Signature of Solicitor, Solicitor Firm, or Other Representative) (Typed Name and Address of Plan, Solicitor, or Solicitor Firm) _____________________________________________________________________ (Applicant's Signature) _____________________________________________________________________ (Date) (f) The application form or other consumer information for persons eligible for Medicare and used by an issuer shall contain as an attachment a Medicare supplement buyer's guide in the form approved by the director. The application or other consumer information, containing as an attachment the buyer's guide, shall be mailed or delivered to each applicant applying for that coverage at or before the time of application and, to establish compliance with this subdivision, the issuer shall obtain an acknowledgment of receipt of the attached buyer's guide from each applicant. No issuer shall make use of or otherwise disseminate any buyer's guide that does not accurately outline current Medicare supplement benefits. No issuer shall be required to provide more than one copy of the buyer's guide to any applicant. (g) An issuer may comply with the requirement of this section in the case of group contracts by causing the subscriber (1) to disseminate copies of the disclosure form containing as an attachment the buyer's guide to all persons eligible under the group contract at the time those persons are offered the Medicare supplement plan, and (2) collecting and forwarding to the issuer an acknowledgment of receipt of the disclosure form containing as an attachment the buyer' s guide from each enrollee. 1358.19. An issuer shall provide a copy of any Medicare supplement advertisement intended for use in this state whether through written, radio, or television medium to the director for review or approval. 1358.20. (a) An issuer, directly or through solicitors or other representatives, shall do each of the following: (1) Establish marketing procedures to ensure that any comparison of Medicare supplement coverage by its solicitors or other representatives will be fair and accurate. (2) Establish marketing procedures to ensure that excessive coverage is not sold or issued. (3) Display prominently by type, stamp, or other appropriate means, on the first page of the outline of coverage and contract, the following: "Notice to buyer: This Medicare supplement contract may not cover all of your medical expenses." (4) Inquire and otherwise make every reasonable effort to identify whether a prospective applicant for a Medicare supplement contract already has health care coverage and the types and amounts of that coverage. (5) Establish auditable procedures for verifying compliance with this subdivision. (b) In addition to the practices prohibited by this code or any other law, the following acts and practices are prohibited: (1) Twisting, which means knowingly making any misleading representation or incomplete or fraudulent comparison of any coverages or issuers for the purpose of inducing or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any coverage or to take out coverage with another plan or insurer. (2) High pressure tactics, which means employing any method of marketing having the effect of or tending to induce the purchase of coverage through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of coverage. (3) Cold lead advertising, which means making use directly or indirectly of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is the solicitation of coverage and that contact will be made by a health care service plan or its representative. (c) The terms "Medicare supplement," "Medicare Wrap-Around" and words of similar import shall not be used unless the contract is issued in compliance with this article. The term "Medigap" shall not be used. 1358.21. (a) In recommending the purchase or replacement of any Medicare supplement coverage, an issuer or its representative shall make reasonable efforts to determine the appropriateness of a recommended purchase or replacement. (b) Any sale of a Medicare supplement contract that will provide an individual more than one Medicare supplement policy or certificate, or contract, is prohibited. 1358.22. (a) On or before March 1 of each year, an issuer shall report the following information for every individual resident of this state for which the issuer has in force more than one Medicare supplement contract: (1) Contract number. (2) Date of issuance. (b) The items set forth above shall be grouped by enrollee. 1358.225. (a) Every issuer shall, by June 30 of each year, file with the director a list of its Medicare supplement contracts offered or issued or outstanding in this state as of the end of the previous calendar year. (b) The list shall identify the filing issuer by name and address, shall identify each type of contract it offers by name and form number, if one is used, and shall differentiate between contracts filed with and approved by the director in years prior to the previous calendar year, and those filed and approved in the previous calendar year. (c) The list shall specifically identify all of the following: (1) Contracts that are issued and outstanding in this state but are no longer offered for sale. (2) Contracts that, for any reason, were not filed and approved by the director. (3) Contracts for which the director's approval was withdrawn within the previous calendar year. (d) The director shall, on or before the first day of September of each year provide the secretary with a list identifying each contract by name and address and the information required to be submitted by this section. 1358.23. (a) If a Medicare supplement contract replaces another Medicare supplement policy or certificate, or contract, the replacing issuer shall waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, and probationary periods in the new Medicare supplement contract for similar benefits to the extent that time was spent under the original policy or certificate, or contract. (b) If a Medicare supplement contract replaces another Medicare supplement policy or certificate, or contract, that has been in effect for at least six months, the replacing contract shall not provide any time period applicable to preexisting conditions, waiting periods, elimination periods and probationary periods for benefits similar to those contained in the original policy or certificate, or contract. SEC. 3. Article 6 (commencing with Section 10192.05) of Chapter 1 of Part 2 of Division 2 of the Insurance Code is repealed. SEC. 4. Article 6 (commencing with Section 10192.1) is added to Chapter 1 of Part 2 of Division 2 of the Insurance Code, to read: Article 6. Medicare Supplement Policies 10192.1. All Medicare supplement policies and certificates shall comply with the provisions of subdivision (b) of Section 10291.5 and Chapter 7 (commencing with Section 10600) of Part 2 of Division 2, regardless of the situs of the contract. 10192.2. The purpose of this article is to provide for the reasonable standardization of coverage and simplification of terms and benefits of Medicare supplement policies, to facilitate public understanding and comparison of those policies, to eliminate provisions contained in those policies that may be misleading or confusing in connection with the purchase of the policies or with the settlement of claims, and to provide for full disclosures in the sale of Medicare supplement insurance policies to persons eligible for Medicare. 10192.3. (a) Except as otherwise provided in this section or in Sections 10192.7, 10192.12, 10192.13, 10192.16, and 10192.21, this article shall apply to all Medicare supplement policies advertised, solicited, or issued for delivery in this state on or after January 1, 2001, and to all certificates delivered in this state under a group Medicare supplement master policy agreement that have been advertised, solicited, or issued for delivery in this state on or after that date. (b) This article shall not apply to a policy or contract of one or more employers or labor organizations, or of the trustees of a fund established by one or more employers or labor organizations, or combination thereof, for employees or former employees, or a combination thereof, or for members or former members, or a combination thereof, of the labor organizations. (c) This article shall not apply to Medicare supplement policies subject to Article 3.5 (commencing with Section 1358.1) of Chapter 2.2 of Division 2 of the Health and Safety Code. (d) The commissioner may, from time to time, promulgate regulations to implement this article. 10192.4. For the purposes of this article, the following terms have the following meanings: (a) "Applicant" means: (1) The person who seeks to contract for insurance benefits, in the case of an individual Medicare supplement policy. (2) The proposed certificate holder, in the case of a group Medicare supplement policy. (b) "Bankruptcy" means that situation in which a Medicare+Choice organization that is not an issuer has filed, or has had filed against it, a petition for declaration of bankruptcy and has ceased doing business in the state. (c) "Certificate" means a certificate issued for delivery in this state under a group Medicare supplement policy. (d) "Certificate form" means the form on which the certificate is issued for delivery by the issuer. (e) "Continuous period of creditable coverage" means the period during which an individual was covered by creditable coverage, if during the period of the coverage the individual had no breaks in coverage greater than 63 days. (f) (1) "Creditable coverage" means, with respect to an individual, coverage of the individual provided under any of the following: (A) Any individual or group contract, policy, certificate, or program that is written or administered by a health care service plan, disability insurer, fraternal benefits society, self-insured employer plan, or any other entity, in this state or elsewhere, and that arranges or provides medical, hospital, and surgical coverage not designed to supplement other private or governmental plans. The term includes continuation or conversion coverage. (B) Part A or B of Title XVIII of the federal Social Security Act (Medicare). (C) Title XIX of the federal Social Security Act (medicaid), other than coverage consisting solely of benefits under Section 1928 of that act. (D) Chapter 55 of Title 10 of the United States Code (CHAMPUS). (E) A medical care program of the Indian Health Service or of a tribal organization. (F) A state health benefits risk pool. (G) A health plan offered under Chapter 89 of Title 5 of the United States Code (Federal Employees Health Benefits Program). (H) A public health plan as defined in federal regulations authorized by Section 2701(c)(1)(I) of the federal Public Health Service Act, as amended by Public Law 104-191, the federal Health Insurance Portability and Accountability Act of 1996. (I) A health benefit plan under Section 5(e) of the federal Peace Corps Act (Section 2504(e) of Title 22 of the United States Code). (J) Any other publicly sponsored program, provided in this state or elsewhere, of medical, hospital, and surgical care. (K) Any other creditable coverage as defined by subsection (c) of Section 2701 of Title XXVII of the federal Public Health Services Act (42 U.S.C. Sec. 300gg(c)). (2) "Creditable coverage" shall not include one or more, or any combination of, the following: (A) Coverage only for accident or disability income insurance, or any combination thereof. (B) Coverage issued as a supplement to liability insurance. (C) Liability insurance, including general liability insurance and automobile liability insurance. (D) Workers' compensation or similar insurance. (E) Automobile medical payment insurance. (F) Credit-only insurance. (G) Coverage for onsite medical clinics. (H) Other similar insurance coverage, specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits. (3) "Creditable coverage" shall not include the following benefits if they are provided under a separate policy, certificate, or contract of insurance or are otherwise not an integral part of the plan: (A) Limited scope dental or vision benefits. (B) Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof. (C) Other similar, limited benefits as are specified in federal regulations. (4) "Creditable coverage" shall not include the following benefits if offered as independent, noncoordinated benefits: (A) Coverage only for a specified disease or illness. (B) Hospital indemnity or other fixed indemnity insurance. (5) "Creditable coverage" shall not include the following if offered as a separate policy, certificate, or contract of insurance: (A) Medicare supplemental health insurance as defined under Section 1882(g)(1) of the federal Social Security Act. (B) Coverage supplemental to the coverage provided under Chapter 55 of Title 10 of the United States Code. (C) Similar supplemental coverage provided to coverage under a group health plan. (g) "Employee welfare benefit plan" means a plan, fund, or program of employee benefits as defined in Section 1002 of Title 29 of the United States Code (Employee Retirement Income Security Act). (h) "Insolvency" means when an issuer, licensed to transact the business of insurance in this state, has had a final order of liquidation entered against it with a finding of insolvency by a court of competent jurisdiction in the issuer's state of domicile. (i) "Issuer" includes insurance companies, fraternal benefit societies, and any other entity delivering, or issuing for delivery, Medicare supplement policies or certificates in this state, except entities subject to Article 3.5 (commencing with Section 1358) of Chapter 2.2 of Division 2 of the Health and Safety Code. (j) "Medicare" means the Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965, as amended. (k) "Medicare+Choice Plan" means a plan of coverage for health benefits under Medicare Part C and includes: (1) Coordinated care plans that provide health care services, including, but not limited to, health care service plans (with or without a point-of-service option), plans offered by provider-sponsored organizations, and preferred provider organizations plans. (2) Medical savings account plans coupled with a contribution into a Medicare+Choice medical savings account. (3) Medicare+Choice private fee-for-service plans. (l) "Medicare supplement policy" means a group or individual policy of disability insurance, other than a policy issued pursuant to a contract under Section 1876 of the federal Social Security Act (42 U.S.C.A. Section 1395mm) or an issued policy under a demonstration project specified in Section 1395ss(g)(1) of Title 42 of the United States Code, which is advertised, marketed, or designed primarily as a supplement to reimbursements under Medicare for the hospital, medical, or surgical expenses of persons eligible for Medicare. (m) "Policy form" means the form on which the policy is issued for delivery by the issuer. (n) "Secretary" means the Secretary of the United States Department of Health and Human Services. 10192.5. A policy or certificate shall not be advertised, solicited, or issued for delivery as a Medicare supplement policy or certificate unless the policy or certificate contains definitions or terms that conform to the requirements of this section. (a) (1) "Accident," "accidental injury," or "accidental means" shall be defined to employ "result" language and shall not include words that establish an accidental means test or use words such as "external, violent, visible wounds" or other similar words of description or characterization. (2) The definition shall not be more restrictive than the following: "injury or injuries for which benefits are provided means accidental bodily injury sustained by the insured person that is the direct result of an accident, independent of disease or bodily infirmity or any other cause, and occurs while insurance coverage is in force." (3) The definition may provide that injuries shall not include injuries for which benefits are provided or available under any workers' compensation, employer's liability, or similar law, unless prohibited by law. (b) "Benefit period" or "Medicare benefit period" shall not be defined more restrictively than as defined in the Medicare program. (c) "Convalescent nursing home," "extended care facility," or "skilled nursing facility" shall not be defined more restrictively than as defined in the Medicare program. (d) (1) "Health care expenses" means expenses of health maintenance organizations associated with the delivery of health care services, which expenses are analogous to incurred losses of insurers. (2) "Health care expenses" shall not include any of the following: (A) Home office and overhead costs. (B) Advertising costs. (C) Commissions and other acquisition costs. (D) Taxes. (E) Capital costs. (F) Administrative costs. (G) Claims processing costs. (e) "Hospital" may be defined in relation to its status, facilities, and available services or to reflect its accreditation by the Joint Commission on Accreditation of Hospitals, but not more restrictively than as defined in the Medicare program. (f) "Medicare" shall be defined in the policy and certificate. "Medicare" may be substantially defined as "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965, as amended," or "Title I, Part I of Public Law 89-97, as enacted by the 89th Congress and popularly known as the Health Insurance for the Aged Act, as amended," or words of similar import. (g) "Medicare eligible expenses" shall mean expenses of the kinds covered by Medicare, to the extent recognized as reasonable and medically necessary by Medicare. (h) "Physician" shall not be defined more restrictively than as defined in the Medicare program. (i) (1) "Sickness" shall not be defined more restrictively than as follows: "sickness means illness or disease of an insured person that first manifests itself after the effective date of insurance and while the insurance is in force." (2) The definition may be further modified to exclude sicknesses or diseases for which benefits are provided under any workers' compensation, occupational disease, employer's liability, or similar law. 10192.55. (a) With regard to Medicare supplement policies, all insurers, brokers, agents, and others engaged in the business of insurance owe a policyholder a duty of honesty, and a duty of good faith and fair dealing. (b) Conduct of an insurer, broker, or agent during the offer and sale of a Medicare supplement policy previous to the purchase is relevant to any action alleging a breach of the duty of honesty, and a duty of good faith and fair dealing set forth in subdivision (a). 10192.6. (a) Except for permitted preexisting condition clauses as described in Sections 10192.7 and 10192.8, a policy or certificate shall not be advertised, solicited, or issued for delivery as a Medicare supplement policy if the policy or certificate contains limitations or exclusions on coverage that are more restrictive than those of Medicare. (b) A Medicare supplement policy or certificate shall not use waivers to exclude, limit, or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions. (c) A Medicare supplement policy or certificate in force shall not contain benefits that duplicate benefits provided by Medicare. 10192.7. A policy or certificate shall not be advertised, solicited, or issued for delivery as a Medicare supplement policy or certificate prior to January 1, 2001, unless it meets or exceeds requirements applicable pursuant to this code that were in effect prior to that date. 10192.8. The following standards are applicable to all Medicare supplement policies or certificates advertised, solicited, or issued for delivery on or after January 1, 2001. A policy or certificate shall not be advertised, solicited, or issued for delivery as a Medicare supplement policy or certificate unless it complies with these benefit standards. (a) The following general standards apply to Medicare supplement policies and certificates and are in addition to all other requirements of this article: (1) A Medicare supplement policy or certificate shall not exclude or limit benefits for losses incurred more than six months from the effective date of coverage because it involved a preexisting condition. The policy or certificate shall 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 six months before the effective date of coverage. (2) A Medicare supplement policy or certificate shall not indemnify against losses resulting from sickness on a different basis than losses resulting from accidents. (3) A Medicare supplement policy or certificate shall provide that benefits designed to cover cost-sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible amount and copayment percentage factors. Premiums may be modified to correspond with those changes. (4) A Medicare supplement policy or certificate shall not provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium. (5) Each Medicare supplement policy shall be guaranteed renewable or noncancelable. (A) The issuer shall not cancel or nonrenew the policy solely on the ground of health status of the individual. (B) The issuer shall not cancel or nonrenew the policy for any reason other than nonpayment of premium or misrepresentation which is shown by the issuer to be material to the acceptance for coverage. The contestability period for Medicare supplement insurance shall be two years. (C) If the Medicare supplement policy is terminated by the master policyholder and is not replaced as provided under subparagraph (E), the issuer shall offer certificate holders an individual Medicare supplement policy that, at the option of the certificate holder, either provides for continuation of the benefits contained in the group policy or provides for benefits that otherwise meet the requirements of one of the standardized policies defined in this article. (D) If an individual is a certificate holder in a group Medicare supplement policy and membership in the group is terminated, the issuer shall either offer the certificate holder the conversion opportunity described in subparagraph (C) or, at the option of the group policyholder, shall offer the certificate holder continuation of coverage under the group policy. (E) (i) If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the issuer of the replacement policy shall offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new policy shall not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced. (ii) If a Medicare supplement policy or certificate replaces another Medicare supplement policy or certificate that has been in force for six months or more, the replacing issuer shall not impose an exclusion or limitation based on a preexisting condition. If the original coverage has been in force for less than six months, the replacing issuer shall waive any time period applicable to preexisting conditions, waiting periods, elimination periods, or probationary periods in the new policy or certificate to the extent the time was spent under the original coverage. (6) Termination of a Medicare supplement policy or certificate shall be without prejudice to any continuous loss that commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be predicated upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or to payment of the maximum benefits. (7) (A) A Medicare supplement policy or certificate shall provide that benefits and premiums under the policy or certificate shall be suspended at the request of the policyholder or certificate holder for the period, not to exceed 24 months, in which the policyholder or certificate holder has applied for and is determined to be entitled to Medi-Cal or medicaid under Title XIX of the federal Social Security Act, but only if the policyholder or certificate holder notifies the issuer of the policy or certificate within 90 days after the date the individual becomes entitled to assistance. Upon receipt of timely notice, the insurer shall return directly to the insured that portion of the premium attributable to the period of Medi-Cal or medicaid eligibility, subject to adjustment for paid claims. (B) If suspension occurs and if the policyholder or certificate holder loses entitlement to Medi-Cal or medicaid, the policy or certificate shall be automatically reinstituted, effective as of the date of termination of entitlement, as of the termination of entitlement if the policyholder or certificate holder provides notice of loss of entitlement within 90 days after the date of loss and pays the premium attributable to the period, effective as of the date of termination of entitlement, or equivalent coverage shall be provided if the prior form is no longer available. (C) Reinstitution of coverages: (i) Shall not provide for any waiting period with respect to treatment of preexisting conditions. (ii) Shall provide for coverage which is substantially equivalent to coverage in effect before the date of suspension. (iii) Shall provide for classification of premiums on terms at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage not been suspended. (8) No Medicare supplement policy may limit coverage exclusively to a single disease or affliction. (b) With respect to the standards for basic (core) benefits common to all benefit plans, every issuer shall make available a policy or certificate including only the following basic "core" package of benefits to each prospective insured. An issuer may make available to prospective insureds any of the other Medicare supplement insurance benefit plans in addition to the basic core package, but not in lieu of it. However, the benefits described in paragraphs (6) and (7) shall not be offered so long as California is required to disallow these benefits for Medicare beneficiaries by the Health Care Financing Administration or other agent of the federal government under Section 1395ss of Title 42 of the United States Code. (1) Coverage of Part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the 61st day to the 90th day, inclusive, in any Medicare benefit period. (2) Coverage of Part A Medicare eligible expenses incurred for hospitalization to the extent not covered by Medicare for each Medicare lifetime inpatient reserve day used. (3) Upon exhaustion of the Medicare hospital inpatient coverage including the lifetime reserve days, coverage of the Medicare Part A eligible expenses for hospitalization paid at the Medicare diagnostic related group (DRG) day outlier per diem or other appropriate standard of payment, subject to a lifetime maximum benefit of an additional 365 days. The provider shall accept the issuer's payment as payment in full and may not bill the insured for any balance. (4) Coverage under Medicare Parts A and B for the reasonable cost of the first three pints of blood, or equivalent quantities of packed red blood cells, as defined under federal regulations, unless replaced in accordance with federal regulations. (5) Coverage for the coinsurance amount, or in the case of hospital outpatient department services, the copayment amount, of Medicare eligible expenses under Part B regardless of hospital confinement, subject to the Medicare Part B deductible. (6) Coverage of the actual cost, up to the legally billed amount, of an annual mammogram as provided in Section 10123.81, to the extent not paid by Medicare. (7) Coverage of the actual cost, up to the legally billed amount, of an annual cervical cancer screening test as provided in Section 10123.18, to the extent not paid by Medicare. (c) The following additional benefits shall be included in Medicare supplement benefit plans B to J, inclusive, only as provided by Section 10192.9. (1) With respect to the Medicare Part A deductible, coverage for all of the Medicare Part A inpatient hospital deductible amount per benefit period. (2) With respect to skilled nursing facility care, coverage for the actual billed charges up to the coinsurance amount from the 21st day to the 100th day, inclusive, in a Medicare benefit period for posthospital skilled nursing facility care eligible under Medicare Part A. (3) With respect to the Medicare Part B deductible, coverage for all of the Medicare Part B deductible amount per calendar year regardless of hospital confinement. (4) With respect to 80 percent of the Medicare Part B excess charges, coverage for 80 percent of the difference between the actual Medicare Part B charge as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved Part B charge. If the insurer limits payment to a limiting charge, the insurer has the burden to establish that amount as the legal limit. (5) With respect to 100 percent of the Medicare Part B excess charges, coverage for all of the difference between the actual Medicare Part B charge as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved Part B charge. If the insurer limits payment to a limiting charge, the insurer has the burden to establish that amount as the legal limit. (6) With respect to the basic outpatient prescription drug benefit, coverage for 50 percent of outpatient prescription drug charges, after a two hundred fifty dollar ($250) calendar year deductible, to a maximum of one thousand two hundred fifty dollars ($1,250) in benefits received by the insured per calendar year, to the extent not covered by Medicare. (7) With respect to the extended outpatient prescription drug benefit, coverage for 50 percent of outpatient prescription drug charges, after a two hundred fifty dollar ($250) calendar year deductible, to a maximum of three thousand dollars ($3,000) in benefits received by the insured per calendar year, to the extent not covered by Medicare. (8) With respect to medically necessary emergency care in a foreign country, coverage to the extent not covered by Medicare for 80 percent of the billed charges for Medicare-eligible expenses for medically necessary emergency hospital, physician, and medical care received in a foreign country, which care would have been covered by Medicare if provided in the United States and which care began during the first 60 consecutive days of each trip outside the United States, subject to a calendar year deductible of two hundred fifty dollars ($250), and a lifetime maximum benefit of fifty thousand dollars ($50,000). For purposes of this benefit, "emergency care" shall mean care needed immediately because of an injury or an illness of sudden and unexpected onset. (9) With respect to the following, reimbursement shall be for the actual charges up to 100 percent of the Medicare-approved amount for each service, as if Medicare were to cover the service as identified in American Medical Association Current Procedural Terminology (AMA CPT) codes, up to a maximum of one hundred twenty dollars ($120) annually under this benefit, however, this benefit shall not include payment for any procedure covered by Medicare: (A) An annual clinical preventive medical history and physical examination that may include tests and services from subparagraph (B) and patient education to address preventive health care measures. (B) Any one or a combination of the following preventive screening tests or preventive services, the frequency of which is considered medically appropriate: (i) Fecal occult blood test or digital rectal examination, or both. (ii) Mammogram. (iii) Dipstick urinalysis for hematuria, bacteriuria, and proteinuria. (iv) Pure tone, air only, hearing screening test, administered or ordered by a physician. (v) Serum cholesterol screening every five years. (vi) Thyroid function test. (vii) Diabetes screening. (C) Influenza vaccine administered at any appropriate time during the year and tetanus and diphtheria booster every 10 years. (D) Any other tests or preventive measures determined appropriate by the attending physician. (10) With respect to the at-home recovery benefit, coverage for the actual charges up to forty dollars ($40) per visit and an annual maximum of one thousand six hundred dollars ($1,600) per year to provide short-term, at-home assistance with activities of daily living for those recovering from an illness, injury, or surgery. (A) For purposes of this benefit, the following definitions shall apply: (i) "Activities of daily living" include, but are not limited to, bathing, dressing, personal hygiene, transferring, eating, ambulating, assistance with drugs that are normally self-administered, and changing bandages or other dressings. (ii) "Care provider" means a duly qualified or licensed home health aide or homemaker, or a personal care aide or nurse provided through a licensed home health care agency or referred by a licensed referral agency or licensed nurses registry. (iii) "Home" shall mean any place used by the insured as a place of residence, provided that the place would qualify as a residence for home health care services covered by Medicare. A hospital or skilled nursing facility shall not be considered the insured's place of residence. (iv) "At-home recovery visit" means the period of a visit required to provide at-home recovery care, without any limit on the duration of the visit, except that each consecutive four hours in a 24-hour period of services provided by a care provider is one visit. (B) With respect to coverage requirements and limitations, the following shall apply: (i) At-home recovery services provided shall be primarily services that assist in activities of daily living. (ii) The insured's attending physician shall certify that the specific type and frequency of at-home recovery services are necessary because of a condition for which a home care plan of treatment was approved by Medicare. (iii) Coverage is limited to the following: (I) No more than the number and type of at-home recovery visits certified as necessary by the insured's attending physician. The total number of at-home recovery visits shall not exceed the number of Medicare-approved home health care visits under a Medicare-approved home care plan of treatment. (II) The actual charges for each visit up to a maximum reimbursement of forty dollars ($40) per visit. (III) One thousand six hundred dollars ($1,600) per calendar year. (IV) Seven visits in any one week. (V) Care furnished on a visiting basis in the insured's home. (VI) Services provided by a care provider as defined in subparagraph (A). (VII) At-home recovery visits while the insured is covered under the policy or certificate and not otherwise excluded. (VIII) At-home recovery visits received during the period the insured is receiving Medicare-approved home care services or no more than eight weeks after the service date of the last Medicare-approved home health care visit. (C) Coverage is excluded for the following: (i) Home care visits paid for by Medicare or other government programs. (ii) Care provided by family members, unpaid volunteers, or providers who are not care providers. (11) With respect to new or innovative benefits, an issuer may, with the prior approval of the commissioner, offer policies or certificates with new or innovative benefits in addition to the benefits provided in a policy or certificate that otherwise complies with the applicable standards. The new or innovative benefits may include benefits that are appropriate to Medicare supplement policies, new or innovative, not otherwise available, cost-effective, and offered in a manner which is consistent with the goal of simplification of Medicare supplement policies. 10192.9. (a) An issuer shall make available to each prospective policyholder and certificate holder a policy form or certificate form containing only the basic (core) benefits, as defined in subdivision (b) of Section 10192.8. (b) No groups, packages, or combinations of Medicare supplement benefits other than those listed in this section shall be offered for sale in this state, except as may be permitted by paragraph (11) of subdivision (c) of Section 10192.8 and by Section 10192.10. (c) Benefit plans shall be uniform in structure, language, designation and format to the standard benefit plans A to J, inclusive, listed in subdivision (e), and shall conform to the definitions in Section 10192.4. Each benefit shall be structured in accordance with the format provided in subdivisions (b) and (c) of Section 10192.8 and list the benefits in the order listed in subdivision (e). For purposes of this section, "structure, language, and format" means style, arrangement, and overall content of a benefit. (d) An issuer may use, in addition to the benefit plan designations required in subdivision (c), other designations to the extent permitted by law. (e) With respect to the makeup of benefit plans, the following shall apply: (1) Standardized Medicare supplement benefit plan A shall be limited to the basic (core) benefit common to all benefit plans, as defined in subdivision (b) of Section 10192.8. (2) Standardized Medicare supplement benefit plan B shall include only the following: the core benefit, plus the Medicare Part A deductible as defined in paragraph (1) of subdivision (c) of Section 10192.8. (3) Standardized Medicare supplement benefit plan C shall include only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, and medically necessary emergency care in a foreign country as defined in paragraphs (1), (2), (3), and (8) of subdivision (c) of Section 10192.8, respectively. (4) Standardized Medicare supplement benefit plan D shall include only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country, and the at-home recovery benefit as defined in paragraphs (1), (2), (8), and (10) of subdivision (c) of Section 10192.8, respectively. (5) Standardized Medicare supplement benefit plan E shall include only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country, and preventive medical care as defined in paragraphs (1), (2), (8), and (9) of subdivision (c) of Section 10192.8, respectively. (6) Standardized Medicare supplement benefit plan F shall include only the following: the core benefit, plus the Medicare Part A deductible, the skilled nursing facility care, the Medicare Part B deductible, 100 percent of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in paragraphs (1), (2), (3), (5), and (8) of subdivision (c) of Section 10192.8, respectively. (7) Standardized Medicare supplement benefit high deductible plan F shall include only the following: 100 percent of covered expenses following the payment of the annual high deductible plan F deductible. The covered expenses include the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, the Medicare Part B deductible, 100 percent of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in paragraphs (1), (2), (3), (5), and (8) of subdivision (c) of Section 10192.8, respectively. The annual high deductible plan F deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan F policy, and shall be in addition to any other specific benefit deductibles. The annual high deductible Plan F deductible shall be one thousand five hundred dollars ($1,500) for 1998 and 1999, and shall be based on the calendar year, as adjusted annually thereafter by the secretary to reflect the change in the Consumer Price Index for all urban consumers for the 12-month period ending with August of the preceding year, and rounded to the nearest multiple of ten dollars ($10). (8) Standardized Medicare supplement benefit plan G shall include only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, 80 percent of the Medicare Part B excess charges, medically necessary emergency care in a foreign country, and the at-home recovery benefit as defined in paragraphs (1), (2), (4), (8), and (10) of Section 10192.8, respectively. (9) Standardized Medicare supplement benefit plan H shall consist of only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, basic outpatient prescription drug benefit, and medically necessary emergency care in a foreign country as defined in paragraphs (1), (2), (6), and (8) of Section 10192.8, respectively. (10) Standardized Medicare supplement benefit plan I shall consist of only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, 100 percent of the Medicare Part B excess charges, basic outpatient prescription drug benefit, medically necessary emergency care in a foreign country, and at-home recovery benefit as defined in paragraphs (1), (2), (5), (6), (8), and (10) of subdivision (c) of Section 10192.8, respectively. (11) Standardized Medicare supplement benefit plan J shall consist of only the following: the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, 100 percent of the Medicare Part B excess charges, extended outpatient prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care, and at-home recovery benefit as defined in paragraphs (1), (2), (3), (5), (7), (8), (9), and (10) of subdivision (c) of Section 10192.8, respectively. (12) Standardized Medicare supplement benefit high deductible plan J shall consist of only the following: 100 percent of covered expenses following the payment of the annual high deductible plan J deductible. The covered expenses include the core benefit, plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, 100 percent of the Medicare Part B excess charges, extended outpatient prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care benefit, and at-home recovery benefit as defined in paragraphs (1), (2), (3), (5), (7), (8), (9), and (10) of subdivision (c) of Section 10192.8, respectively. The annual high deductible plan J deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan J policy, and shall be in addition to any other specific benefit deductibles. The annual deductible shall be one thousand five hundred dollars ($1,500) for 1998 and 1999, and shall be based on a calendar year, as adjusted annually thereafter by the secretary to reflect the change in the Consumer Price Index for all urban consumers for the 12-month period ending with August of the preceding year, and rounded to the nearest multiple of ten dollars ($10). 10192.10. (a) (1) This section shall apply to Medicare Select policies and certificates, as defined in this section. (2) A policy or certificate shall not be advertised as a Medicare Select policy or certificate unless it meets the requirements of this section. (b) For the purposes of this section: (1) "Appeal" means dissatisfaction expressed in writing by an individual insured under a Medicare Select policy or certificate with the administration, claims practices, or provision of services concerning a Medicare Select issuer or its network providers. (2) "Complaint" means any dissatisfaction expressed by an individual concerning a Medicare Select issuer or its network providers. (3) "Medicare Select issuer" means an issuer offering, seeking to offer, advertising, marketing, soliciting, or issuing a Medicare Select policy or certificate. (4) "Medicare Select policy" or "Medicare Select certificate" mean respectively a Medicare supplement policy or certificate that contains restricted network provisions. (5) "Network provider" means a provider of health care, or a group of providers of health care, which has entered into a written agreement with the issuer or other entity to provide benefits insured under a Medicare Select policy. (6) "Restricted network provision" means any provision which conditions the payment of benefits, in whole or in part, on the use of network providers. (7) "Service area" means the geographic area approved by the commissioner within which an issuer is authorized to offer a Medicare Select policy. (8) "Grievance" means a written complaint registered by an individual for resolution under the formal grievance procedure, which may involve, but is not limited to, the administration, claims practices or provision of services by the issuer or its network providers. (9) "Medicare Select coverage" means Medicare supplement coverage through a preferred provider organization or any other type of restricted network, which coverage has been approved by the commissioner under this section. (10) "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 the insureds certain advantages for selecting the member providers, or (C) withholds from the insureds certain advantages if they choose providers other than the member providers. Organizations regulated as Medicare Select include, but are not limited to, provider groups, hospital marketing plans, and organizations that are formed or operated by insurers or third-party administrators. (c) The commissioner may authorize an issuer to offer a Medicare Select policy or certificate pursuant to this section if the commissioner finds that the issuer has satisfied all of the requirements of this section. (d) A Medicare Select issuer shall not issue a Medicare Select policy or certificate in this state until its plan of operation has been approved by the commissioner. (e) A Medicare Select issuer shall file a proposed plan of operation with the commissioner in a format prescribed by the commissioner. The plan of operation shall contain at least the following information: (1) Evidence that all covered services that are subject to restricted network provisions are available and accessible through network providers, including a demonstration of all of the following: (A) That services can be provided by network providers with reasonable promptness with respect to geographic location, hours of operation, and afterhour care. The hours of operation and availability of afterhour care shall reflect usual practice in the local area. Geographic availability shall reflect the usual travel times within the community. (B) That the number of network providers in the service area is sufficient, with respect to current and expected policyholders, as to either of the following: (i) To deliver adequately all services that are subject to a restricted network provision. (ii) To make appropriate referrals. (C) There are written agreements with network providers describing specific responsibilities. (D) Emergency care is available 24 hours per day and seven days per week. (E) In the case of covered services that are subject to a restricted network provision and are provided on a prepaid basis, that there are written agreements with network providers prohibiting the providers from billing or otherwise seeking reimbursement from or recourse against any individual insured under a Medicare Select policy or certificate. This subparagraph shall not apply to supplemental charges or coinsurance amounts as stated in the Medicare Select policy or certificate. (2) A statement or map providing a clear description of the service area. (3) A description of the appeal or grievance procedure to be utilized. (4) A description of the quality assurance program, including all of the following: (A) The formal organizational structure. (B) The written criteria for selection, retention, and removal of network providers. (C) The procedures for evaluating quality of care provided by network providers, and the process to initiate corrective action when warranted. (5) A list and description, by specialty, of the network providers. (6) Copies of the written information proposed to be used by the issuer to comply with subdivision (i). (7) Any other information requested by the commissioner. (f) (1) A Medicare Select issuer shall file any proposed changes to the plan of operation, except for changes to the list of network providers, with the commissioner prior to implementing the changes. Changes shall be considered approved by the commissioner after 30 days unless specifically disapproved. (2) An updated list of network providers shall be filed at the commissioner's request, but at least quarterly. (g) A Medicare Select policy or certificate shall not restrict payment for covered services provided by nonnetwork providers if: (1) The services are for symptoms requiring emergency care or are immediately required for an unforeseen illness, injury, or condition. (2) It is not reasonable to obtain services through a network provider. (h) A Medicare Select policy or certificate shall provide payment for full coverage under the policy for covered services that are not available through network providers. (i) A Medicare Select issuer shall make full and fair disclosure in writing of the provisions, restrictions, and limitations of the Medicare Select policy or certificate to each applicant. This disclosure shall include at least the following: (1) An outline of coverage sufficient to permit the applicant to compare the coverage and premiums of the Medicare Select policy or certificate with both of the following: (A) Other Medicare supplement policies or certificates offered by the issuer. (B) Other Medicare Select policies or certificates. (2) A description, including address, telephone number, and hours of operation, of the network providers, including primary care physicians, specialty physicians, hospitals, and other providers. (3) A description of the restricted network provisions, including payments for coinsurance and deductibles when providers other than network providers are utilized. (4) A description of coverage for emergency and urgently needed care and other out-of-service area coverage. (5) A description of limitations on referrals to restricted network providers and to other providers. (6) A description of the policyholder's or certificate holder's rights to purchase any other Medicare supplement policy or certificate otherwise offered by the issuer. (7) A description of the Medicare Select issuer's quality assurance, grievance, and appeal procedure. (j) Prior to the sale of a Medicare Select policy or certificate, a Medicare Select issuer shall obtain from the applicant a signed and dated form stating that the applicant has received the information provided pursuant to subdivision (i) and that the applicant understands the restrictions of the Medicare Select policy or certificate. Acknowledgments shall be maintained by the insurer for at least five years in accordance with Section 10508. (k) A Medicare Select issuer shall have and use procedures for hearing complaints and resolving written appeals and grievances from the insureds. The procedures shall be aimed at mutual agreement for settlement and may include arbitration procedures. (1) The appeal and grievance procedure shall be described in the policy and certificates and in the outline of coverage. (2) At the time the policy or certificate is issued, the issuer shall provide detailed information to the policyholder or certificate holder describing how an appeal or grievance may be registered with the issuer. (3) Appeals or grievances shall be considered in a timely manner and shall be transmitted to appropriate fiduciaries who have authority to fully investigate the issue and take corrective action. (4) If an appeal or grievance is found to be valid, corrective action shall be taken promptly. (5) All concerned parties shall be notified about the results of an appeal or grievance. (6) The issuer shall report no later than each March 31st to the commissioner regarding its appeal or grievance procedure. The report shall be in a format prescribed by the commissioner and shall contain the number of appeals or grievances filed in the past year and a summary of the subject, nature, and resolution of those appeals or grievances. (7) Detailed information describing in writing how to register an appeal or grievance shall be provided to the insured prior to, or simultaneously with, the issuance of the policy or certificate. (8) The issuer shall maintain records of each appeal or grievance for at least five years. (l) At the time of initial purchase, a Medicare Select issuer shall make available to each applicant for a Medicare Select policy or certificate the opportunity to purchase any Medicare supplement policy or certificate otherwise offered by the issuer. (m) (1) At the request of an individual insured under a Medicare Select policy or certificate, a Medicare Select issuer shall make available to the individual insured the opportunity to purchase a Medicare supplement policy or certificate offered by the issuer that has comparable or lesser benefits and that does not contain a restricted network provision. The issuer shall make the policies or certificates available without requiring evidence of insurability after the Medicare Select policy or certificate has been in force for six months, unless the replacement policy or certificate includes prescription drug coverage or at-home recovery benefits that were not included in the Medicare Select coverage. (2) For the purposes of this subdivision, a Medicare supplement policy or certificate will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare Select policy or certificate being replaced. For the purposes of this paragraph, a significant benefit means coverage for the Medicare Part A deductible, coverage for prescription drugs, coverage for at-home recovery services, or coverage for Medicare Part B excess charges. (n) Medicare Select policies and certificates shall provide for continuation of coverage in the event the commissioner determines that Medicare Select policies and certificates issued pursuant to this section should be discontinued due to either the failure of the Medicare Select program to be reauthorized under law or its substantial amendment. (1) Each Medicare Select issuer shall make available to each individual insured under a Medicare Select policy or certificate the opportunity to purchase any Medicare supplement policy or certificate offered by the issuer which has comparable or lesser benefits and which does not contain a restricted network provision. The issuer shall make the policies and certificates available without requiring evidence of insurability. (2) For the purposes of this subdivision, a Medicare supplement policy or certificate will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare Select policy or certificate being replaced. For the purposes of this paragraph, a significant benefit means coverage for the Medicare Part A deductible, coverage for prescription drugs, coverage for at-home recovery services, or coverage for Medicare Part B excess charges. (o) A Medicare Select issuer shall comply with reasonable requests for data made by state or federal agencies, including the United States Department of Health and Human Services for the purpose of evaluating the Medicare Select program. (p) The commissioner may grant special Medicare Select status to plans of guaranteed renewable Medicare supplement coverage provided through a preferred provider organization, which plans were offered to the public or in force before the effective date of this section, if the commissioner determines that the applicants will receive benefits and consumer protections that are substantially equivalent to those in other Medicare Select plans identified in this section, and if the issuer satisfies the following requirements: (1) The issuer shall apply within one year of the effective date of this section by submitting to the commissioner the following items: (A) The current plan of operation as defined in subdivision (e). (B) If the written disclosures of subdivision (i) have not been delivered to each applicant as required, the issuer's plan to accomplish full disclosure to every insured and to achieve substantial compliance with subdivision (j). (C) The issuer's statement of intent to comply with subdivision (f). (D) If the plan of operation does not comply with the standards of subdivision (g), (h), (k), (l), or (m), the issuer's plan for achieving substantial compliance with these subdivisions for every insured. (2) The issuer shall alter the plan as requested by the commissioner in order to bring the plan into substantial compliance with Medicare Select standards. (3) The issuer shall issue disclosures or other notices to its insureds regarding its status as Medicare Select as ordered by the commissioner. (4) The issuer shall provide data as provided in subdivision (o). 10192.11. (a) An issuer shall not deny or condition the issuance or effectiveness of any Medicare supplement policy or certificate available for sale in this state, nor discriminate in the pricing of a policy or certificate because of the health status, claims experience, receipt of health care, or medical condition of an applicant in the case of an application for a policy or certificate that is submitted prior to or during the six-month period beginning with the first day of the first month in which an individual is both 65 years of age or older and is enrolled for benefits under Medicare Part B. Each Medicare supplement policy and certificate currently available from an issuer shall be made available to all applicants who qualify under this subdivision without regard to age. This section shall not be construed as preventing the exclusion of benefits for preexisting conditions as defined in paragraph (1) of subdivision (a) of Section 10192.8. (b) (1) If an applicant qualifies under subdivision (a) and submits an application during the time period referenced in subdivision (a) and, as of the date of application, has had a continuous period of creditable coverage of at least six months, the issuer shall not exclude benefits based on a preexisting condition. (2) If the applicant qualifies under subdivision (a) and submits an application during the time period referenced in subdivision (a) and, as of the date of application, has had a continuous period of creditable coverage that is less than six months, the issuer shall reduce the period of any preexisting condition exclusion by the aggregate of the period of creditable coverage applicable to the applicant as of the enrollment date. The manner of the reduction under this subdivision shall be as specified by the commissioner. (c) Except as provided in subdivision (b) and Section 10192.23, subdivision (a) shall not be construed as preventing the exclusion of benefits under a policy, during the first six months, based on a preexisting condition for which the policyholder or certificate holder received treatment or was otherwise diagnosed during the six months before the coverage became effective. (d) An individual enrolled in Medicare Part B by reason of disability will be entitled to open enrollment described in this section for six months after he or she reaches age 65. Every issuer shall make available to every applicant qualified for open enrollment all policies and certificates offered by that issuer at the time of application. Issuers shall not discourage sales during the open enrollment period by any means, including the altering of the commission structure. (e) An individual who is 65 years of age or older and enrolled in Medicare Part B is entitled to open enrollment described in this section for six months following: (1) Receipt of a notice of termination or, if no notice is received, the effective date of termination, from any employer-sponsored health plan including an employer-sponsored retiree health plan. For purposes of this section, "employer-sponsored retiree health plan" includes any coverage for medical expenses that is directly or indirectly sponsored or established by an employer for employees or retirees, their spouses, dependents, or other included insureds. (2) Termination of health care services for a military retiree or the retiree's Medicare eligible spouse or dependent as a result of a military base closure. (f) An individual who is 65 years of age or older and enrolled in Medicare Part B is entitled to open enrollment described in this section if the individual was covered under a policy, certificate, or contract providing Medicare supplement coverage but that coverage terminated because the individual established residence at a location not served by the plan. (g) (1) An individual who was previously enrolled in but whose coverage was terminated between September 1, 1998, and December 31, 1998, by a Medicare managed care plan shall be entitled to a new 60-day open enrollment period in addition to any open enrollment authorized by federal law or regulations, for any and all Medicare supplement coverage provided by Medicare supplement insurers and available on a guaranteed basis under state and federal law or regulations for persons terminated by their Medicare managed care plan. (2) The new open enrollment period specified in paragraph (1) shall commence 90 days after January 1, 2000. (3) An individual who was previously enrolled in but whose coverage was terminated after January 1, 1999, by a Medicare managed care plan shall be entitled to an additional 60-day open enrollment period to be added on to and run consecutively after any open enrollment period authorized by federal law or regulations, for any and all Medicare supplement coverage provided by Medicare supplement insurers and available on a guaranteed basis under state and federal law or regulations for persons terminated by their Medicare managed care plan. (h) An individual shall be entitled to an annual open enrollment period lasting 30 days or more, commencing with the individual's birthday, during which time that person may purchase any Medicare supplement policy, with the exception of a Medicare Select policy, that offers benefits equal to or lesser than those provided by the previous coverage. During this open enrollment period, no issuer that falls under this provision shall deny or condition the issuance or effectiveness of Medicare supplement coverage, nor discriminate in the pricing of coverage, because of health status, claims experience, receipt of health care, or medical condition of the individual if, at the time of the open enrollment period, the individual is covered under another Medicare supplement policy or contract. An issuer shall notify a policyholder of his or her rights under this subdivision at least 30 and no more than 60 days before the beginning of the open enrollment period. 10192.12. (a) (1) With respect to the guaranteed issue of a Medicare supplement policy, eligible persons are those individuals described in subdivision (b) who apply to enroll under the policy not later than 63 days after the date of the termination of enrollment described in subdivision (b), and who submit evidence of the date of termination or disenrollment with the application for a Medicare supplement policy. (2) With respect to eligible persons, an issuer shall not deny or condition the issuance or effectiveness of a Medicare supplement policy described in subdivision (c) that is offered and is available for issuance to new enrollees by the issuer, shall not discriminate in the pricing of such a Medicare supplement policy because of health status, claims experience, receipt of health care, or medical condition, and shall not impose an exclusion of benefits based on a preexisting condition under such a Medicare supplement policy. (b) An eligible person is an individual described in any of the following paragraphs: (1) The individual is enrolled under an employee welfare benefit plan that provides health benefits that supplement the benefits under Medicare, and the plan terminates, or the plan ceases to provide all of those supplemental health benefits to the individual. (2) The individual is enrolled with a Medicare+Choice organization under a Medicare+Choice plan Medicare Part C, and any of the following apply: (A) The organization's or plan's certification, under this part, has been terminated or the organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides. (B) The individual is no longer eligible to elect the plan because of a change in the individual's place of residence or other change in circumstances specified by the secretary, but not including termination of the individual's enrollment on the basis described in Section 1851(g)(3)(B) of the federal Social Security Act, where the individual has not paid premiums on a timely basis or has engaged in disruptive behavior as specified in standards under Section 1856 of that act, or the plan is terminated for all individuals within a residence area. (C) The individual demonstrates, in accordance with guidelines established by the commissioner, either of the following: (i) The organization offering the plan substantially violated a material provision of the organization's contract under this article in relation to the individual, including the failure to provide an enrollee on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide the covered care in accordance with applicable quality standards. (ii) The organization, or agent or other entity acting on the organization's behalf, materially misrepresented the plan's provisions in marketing the plan to the individual. (D) The individual meets other exceptional conditions as the commissioner may provide. (3) The individual meets both of the following conditions: (A) The individual is enrolled with any of the following: (i) An eligible organization under a contract under Section 1876 of the federal Social Security Act (Medicare risk or cost). (ii) A similar organization operating under demonstration project authority, effective for periods before April 1, 1999. (iii) An organization under an agreement under Section 1833(a)(1) (A) of the federal Social Security Act (health care prepayment plan). (iv) An organization under a Medicare Select policy. (B) The individual's enrollment ceases under the same circumstances that would permit discontinuance of an individual's election of coverage under the first sentence of Section 1851(e)(4) of the federal Social Security Act as delineated in paragraph (2) of subdivision (b). (4) The individual is enrolled under a Medicare supplement policy and the enrollment ceases because of the following: the insolvency of the issuer or bankruptcy of the nonissuer organization; the involuntary termination of coverage or enrollment under the policy; the issuer of the policy substantially violated a material provision of the policy; or the issuer, or an agent or other entity acting on the issuer's behalf, materially misrepresented the policy's provisions in marketing the policy to the individual. (5) The individual meets both of the following conditions: (A) The individual was enrolled under a Medicare supplement policy and terminates enrollment and subsequently enrolls, for the first time, with any Medicare+Choice organization under a Medicare+Choice plan under Medicare Part C, any eligible organization under a contract under Section 1876 of the federal Social Security Act (Medicare risk or cost), any similar organization operating under demonstration project authority, an organization under an agreement under Section 1833(a)(1)(A) of the federal Social Security Act (health care prepayment plan), or a Medicare Select policy. (B) The subsequent enrollment under subparagraph (A) is terminated by the enrollee during any period within the first 12 months of the subsequent enrollment (during which the enrollee is permitted to terminate the subsequent enrollment under Section 1851(e) of the federal Social Security Act). (6) The individual, upon first becoming eligible for benefits under Medicare Part A at age 65 years, enrolls in a Medicare+Choice plan under Medicare Part C, and disenrolls from the plan by not later than 12 months after the effective date of enrollment. (c) (1) Under paragraphs (1), (2), (3), and (4) of subdivision (b), eligible persons are entitled to a Medicare supplement policy that has a benefit package classified as plan A, B, C, or F offered by any issuer. (2) Under paragraph (5) of subdivision (b), eligible persons are entitled to the same Medicare supplement policy in which they were most recently previously enrolled, if available from the same issuer, or, if not so available, a policy described in paragraph (1) of subdivision (c). (3) Under paragraph (6) of subdivision (b), eligible persons are entitled to any Medicare supplement policy offered by any issuer. (d) (1) At the time of an event described in subdivision (b) because of which an individual loses coverage or benefits due to the termination of a contract or agreement, policy, or plan, the organization that terminates the contract or agreement, the issuer terminating the policy, or the administrator of the plan being terminated, respectively, shall notify the individual of his or her rights under this section, and of the obligations of issuers of Medicare supplement policies under subdivision (a). That notice shall be communicated contemporaneously with the notification of termination. (2) At the time of an event described in subdivision (b) because of which an individual ceases enrollment under a contract or agreement, policy, or plan, the organization that offers the contract or agreement, regardless of the basis for the cessation of enrollment, the issuer offering the policy, or the administrator of the plan, respectively, shall notify the individual of his or her rights under this section, and of the obligations of issuers of Medicare supplement policies under subdivision (a). That notice shall be communicated within ten working days of the issuer receiving notification of disenrollment. 10192.13. (a) An issuer shall comply with Section 1882(c)(3) of the federal Social Security Act (as enacted by Section 4081(b)(2)(C) of the federal Omnibus Budget Reconciliation Act of 1987 (OBRA), Public Law 100-203) by doing all of the following and by certifying compliance on the Medicare supplement insurance experience reporting form: (1) Accepting a notice from a Medicare carrier on dually assigned claims submitted by participating physicians and suppliers as a claim for benefits in place of any other claim form otherwise required and making a payment determination on the basis of the information contained in that notice. (2) Notifying the participating physician or supplier and the beneficiary of the payment determination. (3) Paying the participating physician or supplier directly. (4) Furnishing, at the time of enrollment, each enrollee with a card listing the policy name, number, and a central mailing address to which notices from a Medicare carrier may be sent. (5) Paying user fees for claim notices that are transmitted electronically or otherwise. (6) Providing to the secretary, at least annually, a central mailing address to which all claims may be sent by Medicare carriers. (7) File, by June 30 of each year, with the commissioner a list of its Medicare supplement policies and certificates offered or issued or in force in California as of the end of the previous year. (A) The list shall identify the issuer by name and address, shall identify each type of form it offers by name and form number, and shall differentiate between forms approved in the previous calendar year and those approved before the previous calendar year. (B) The list shall identify all of the following: (i) Forms issued and in force but no longer offered in California. (ii) Forms that, for any reason, were not filed and approved by the commissioner. (iii) Forms for which the commissioner's approval was withdrawn within the previous calendar year. (iv) The number of forms issued in California in the previous calendar year, and the number of forms in force in California on December 31 of the previous calendar year. (b) (1) Compliance with the requirements set forth in subdivision (a) shall be certified on the Medicare supplement insurance experience reporting form provided by the commissioner. (2) The commissioner shall, by September 1 of each year, provide the secretary with a list identifying each issuer by name and address and provide the information requested in this section. (c) No issuer that administers Medicare coverage and federal employee programs may require that more than one form be submitted per claim in order to receive payment or reimbursement under any or all of those policies or programs. 10192.14. (a) (1) (A) With respect to loss ratio standards, a Medicare supplement policy form or certificate form shall not be advertised, solicited, or issued for delivery unless the policy form or certificate form can be expected, as estimated for the entire period for which rates are computed to provide coverage, to return to policyholders and certificate holders in the form of aggregate benefits, not including anticipated refunds or credits, provided under the policy form or certificate form at least 75 percent of the aggregate amount of premiums earned in the case of group policies, or at least 65 percent of the aggregate amount of premiums earned in the case of individual policies. (B) Loss ratio standards shall be calculated on the basis of incurred claims experience, and earned premiums shall be calculated for the period and in accordance with accepted actuarial principles and practices. (2) All filings of rates and rating schedules shall demonstrate that expected claims in relation to premiums comply with the requirements of this section when combined with actual experience to date. Filings of rate revisions shall also demonstrate that the anticipated loss ratio over the entire future period for which the revised rates are computed to provide coverage can be expected to meet the appropriate loss ratio standards. (3) For purposes of applying paragraph (1) of subdivision (a) and paragraph (3) of subdivision (c) of Section 10192.15 only, policies issued as a result of solicitations of individuals through the mail or by mass media advertising, including both print and broadcast advertising, shall be deemed to be individual policies. (b) (1) With respect to refund or credit calculations, an issuer shall collect and file with the commissioner by May 31 of each year the data contained in the applicable reporting form required by the commissioner for each type of coverage in a standard Medicare supplement benefit plan. (2) If on the basis of the experience as reported the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation shall be done on a statewide basis for each type in a standard Medicare supplement benefit plan. For purposes of the refund or credit calculation, experience on policies issued within the reporting year shall be excluded. (3) For the purposes of this section, with respect to policies or certificates advertised, solicited, or issued for delivery prior to January 1, 2001, the issuer shall make the refund or credit calculation separately for all individual policies, including all group policies subject to an individual loss ratio standard when issued, combined and all other group policies combined for experience after January 1, 2001. The first report pursuant to paragraph (1) shall be due by May 31, 2003. (4) A refund or credit shall be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a de minimis level. The refund shall include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the secretary, but in no event shall it be less than the average rate of interest for 13-week Treasury notes. A refund or credit against premiums due shall be made by September 30 following the experience year upon which the refund or credit is based. (c) An issuer of Medicare supplement policies and certificates shall file annually its rates, rating schedule, and supporting documentation including ratios of incurred losses to earned premiums by policy duration for approval by the commissioner in accordance with the filing requirements and procedures prescribed by the commissioner and this code. The supporting documentation shall also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. The demonstration shall exclude active life reserves. An expected third-year loss ratio that is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than three years. As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement policies or certificates shall file with the commissioner, in accordance with applicable filing procedures, all of the following: (1) (A) Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. The supporting documents necessary to justify the adjustment shall accompany the filing. (B) An issuer shall make premium adjustments necessary to produce an expected loss ratio under the policy or certificate to conform to minimum loss ratio standards for Medicare supplement policies and that are expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premiums by the issuer for the Medicare supplement policies or certificates. No premium adjustment that would modify the loss ratio experience under the policy other than the adjustments described in this section shall be made with respect to a policy at any time other than upon its renewal date or anniversary date. (C) If an issuer fails to make premium adjustments acceptable to the commissioner, the commissioner may order premium adjustments, refunds, or premium credits deemed necessary to achieve the loss ratio required by this section. (2) Any appropriate riders, endorsements, or policy forms needed to accomplish the Medicare supplement policy or certificate modifications necessary to eliminate benefit duplications with Medicare. The riders, endorsements, or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or certificate. (d) The commissioner may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before or after the effective date of January 1, 2001, if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the commissioner. 10192.15. (a) An issuer shall not advertise, solicit, or issue for delivery a policy or certificate to a resident of this state unless the policy form or certificate form has been filed with and approved by the commissioner in accordance with filing requirements and procedures prescribed by the commissioner. Master policies issued outside California shall be filed for informational purposes along with the certificates. Until January 1, 2001, or 90 days after approval of Medicare supplement policies or certificates submitted for approval pursuant to this section, whichever is later, issuers may continue to offer and market previously approved Medicare supplement policies or certificates. (b) (1) An issuer shall not use or change premium rates for a Medicare supplement policy or certificate unless the rates, rating schedule, and supporting documentation have been filed with and approved by the commissioner in accordance with the filing requirements and procedures prescribed by the commissioner. (2) Paragraph (1) of subdivision (b) of Section 10290 shall not apply to Medicare supplement insurance forms or rates. However, the commissioner may authorize in writing, for good cause only, the limited use of a form or rates after that form or the rates have been filed with the commissioner for 60 days and have not otherwise been acted upon. (c) (1) Except as provided in paragraph (2), an issuer shall not file for approval more than one form of a policy or certificate of each type for each standard Medicare supplement benefit plan. (2) An issuer may offer, with the approval of the commissioner, up to four additional policy forms or certificate forms of the same type for the same standard Medicare supplement benefit plan, one for each of the following cases: (A) The inclusion of new or innovative benefits. (B) The addition of either direct response or agent marketing methods. (C) The addition of either guaranteed issue or underwritten coverage. (D) The offering of coverage to individuals eligible for Medicare by reason of disability. (3) For the purposes of this section, a "type" means an individual policy, a group policy, an individual Medicare Select policy, or a group Medicare Select policy. (d) (1) Except as provided in subdivision (a), an issuer shall continue to make available for purchase any policy form or certificate form issued after January 1, 2001, that has been approved by the commissioner. A policy form or certificate form shall not be considered to be available for purchase unless the issuer has actively offered it for sale in the previous 12 months. (A) An issuer may discontinue the availability of a policy form or certificate form if the issuer provides to the commissioner in writing its decision at least 60 days prior to discontinuing the availability of the form of the policy or certificate. After receipt of the notice by the commissioner, the issuer shall no longer offer for sale the policy form or certificate form in this state. (B) An issuer that discontinues the availability of a policy form or certificate form pursuant to subparagraph (A) shall not file for approval a new policy form or certificate form of the same type for the same standard Medicare supplement benefit plan as the discontinued form for a period of five years after the issuer provides notice to the commissioner of the discontinuance. The period of discontinuance may be reduced if the commissioner determines that a shorter period is appropriate. (2) The sale or other transfer of Medicare supplement business to another issuer shall be considered a discontinuance for the purposes of this subdivision. (3) A change in the rating structure or methodology shall be considered a discontinuance under paragraph (1) unless the issuer complies with the following requirements: (A) The issuer provides an actuarial memorandum, in a form and manner prescribed by the commissioner, describing the manner in which the revised rating methodology and resultant rates differ from the existing rating methodology and existing rates. The commissioner may approve the change if it is in the public interest. (B) The issuer does not subsequently put into effect a change of rates or rating factors that would cause the percentage differential between the discontinued and subsequent rates as described in the actuarial memorandum to change. The commissioner may approve a change to the differential which is in the public interest. The commissioner may approve a change to the differential if it is in the public interest. (e) (1) Except as provided in paragraph (2), the experience of all policy forms or certificate forms of the same type in a standard Medicare supplement benefit plan shall be combined for purposes of the refund or credit calculation prescribed in Section 10192.13. (2) Forms assumed under an assumption reinsurance agreement shall not be combined with the experience of other forms for purposes of the refund or credit calculation. 10192.16. (a) An issuer or other entity may provide commission or other compensation to an agent or other representative for the sale of a Medicare supplement policy or certificate only if the first year commission or other first year compensation is no more than 200 percent of the commission or other compensation paid for selling or servicing the policy or certificate in the second year or period. Every insurer shall file with the commissioner its commission structure or an explanation of the insurer's plan to comply with this provision. (b) The commission or other compensation provided in subsequent renewal years must be the same as that provided in the second year or period and must be provided for no fewer than five renewal years. (c) No issuer or other entity shall provide compensation to its agents or other producers, and no agent or producer shall receive compensation, greater than the renewal compensation payable by the replacing issuer on renewal policies or certificates if an existing policy or certificate is replaced. (d) For purposes of this section, "commission" or "compensation" includes pecuniary or nonpecuniary remuneration of any kind relating to the sale or renewal of the policy or certificate, including, but not limited to, bonuses, gifts, prizes, awards, and finders' fees. 10192.165. (a) (1) As prescribed in this chapter, the commissioner shall have the administrative authority to assess penalties against issuers, brokers, agents, and other entities engaged in the business of insurance or any other person or entity for violations of this article. (2) Upon a showing of a violation of this article in any civil action, a court may also assess the penalties prescribed in this chapter. (3) Whenever the commissioner has reasonable cause to believe or determines after a public hearing that any issuer, agent, broker, or other person or entity engaged in the business of insurance, has violated this article he or she shall make and serve upon the issuer, broker, or other person or entity a notice of hearing. The notice shall state the commissioner's intent to assess the administrative penalties, the time and place of the hearing, and the conduct, condition, or ground upon which the commissioner is holding the hearing and assessing the penalties. The hearing shall occur within 30 days after the notice is served. Within 30 days after the hearing the commissioner shall issue an order specifying the amount of penalties to be paid. The penalties resulting from the hearing shall be paid to the Insurance Fund. (4) The powers vested in the commissioner by this section shall be additional to any and all powers and remedies vested in the commissioner by law. (b) (1) Any broker, agent, or other person or entity engaged in the business of insurance, other than an issuer, who violates this article is liable for administrative penalties of no less than two hundred fifty dollars ($250) for the first violation. (2) Any broker, agent, other person, or other entity engaged in the business of insurance, other than an issuer, who engages in practices prohibited by this chapter a second or subsequent time or who commits a knowing violation of this article, is liable for administrative penalties of no less than one thousand dollars ($1,000) and no more than twenty-five thousand dollars ($25,000) for each violation. (3) Any issuer who violates this article is liable for administrative penalties of no less than two thousand five hundred dollars ($2,500) for the first violation. (4) Any issuer who violates this article with a frequency as to indicate a general business practice or commits a knowing violation of this article, is liable for administrative penalties of no less than ten thousand dollars ($10,000) and no more than one hundred thousand dollars ($100,000) for each violation. (c) (1) Actions for injunctive relief, penalties in the amounts specified in subdivision (a), damages, restitution, and all other remedies provided for in law, may be brought in superior court by the Attorney General, district attorney, or city attorney on behalf of the people of the State of California. (2) The court shall award reasonable attorney's fees and costs to a prevailing plaintiff who establishes a violation of this article. (d) In addition to any other applicable penalties, the commissioner may require issuers, agents, brokers, or other persons or entities violating any provision of this article or regulations promulgated pursuant to this article, to cease marketing in this state any Medicare supplement policy or certificate or may require the issuer, agent, broker, or other person or entity to take such actions as are necessary to comply with the provisions of this article, or both. (e) Any person who knowingly or intentionally violates any provision of this article is guilty of a public offense punishable by imprisonment in a county jail not exceeding one year or by imprisonment in the state prison or by a fine not exceeding ten thousand dollars ($10,000), or by both that imprisonment and fine. (f) (1) The requirements and remedies provided by this article are in addition to any other remedies provided by law. (2) If any provision of this article or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of the article which can be given effect without the invalid provision or application, and to this end the provisions of this article are severable. 10192.17. (a) Medicare supplement policies and certificates shall include a renewal, continuation, or conversion provision. The language or specifications of the provision shall be consistent with the type of contract issued. The provision shall be appropriately captioned and shall appear on the first page of the policy, and shall include any reservation by the issuer of the right to change premiums and any automatic renewal premium increases based on the policyholder's age. (b) Except for riders or endorsements by which the issuer effectuates a request made in writing by the insured, exercises a specifically reserved right under a Medicare supplement policy, or is required to reduce or eliminate benefits to avoid duplication of Medicare benefits, all riders or endorsements added to a Medicare supplement policy after the date of issue or upon reinstatement or renewal that reduce or eliminate benefits or coverage in the policy shall require a signed acceptance by the insured. After the date of policy or certificate issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term shall be agreed to in writing signed by the insured, unless the benefits are required by the minimum standards for Medicare supplement policies, or if the increased benefits or coverage is required by law. Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, the premium charge shall be set forth in the policy. (c) Medicare supplement policies or certificates shall not provide for the payment of benefits based on standards described as "usual and customary," "reasonable and customary," or words of similar import. (d) If a Medicare supplement policy or certificate contains any limitations with respect to preexisting conditions, those limitations shall appear as a separate paragraph of the policy and be labeled as "Preexisting Condition Limitations." (e) Medicare supplement policies and certificates shall have a notice prominently printed on the first page of the policy or certificate, and of the outline of coverage, or attached thereto, in no less than 10-point uppercase type, stating in substance that the policyholder or certificate holder shall have the right to return the policy or certificate, via regular mail, within 30 days of receiving it, and to have the full premium refunded if, after examination of the policy or certificate, the insured person is not satisfied for any reason. The return shall void the contract from the beginning, and the parties shall be in the same position as if no contract had been issued. (2) For purposes of this section, a timely manner shall be no later than 30 days after the issuer receives the returned contract. (3) If the issuer fails to refund all prepaid or periodic charges paid in a timely manner, then the applicant shall receive interest on the paid charges at the legal rate of interest on judgments as provided in Section 685.010 of the Code of Civil Procedure. The interest shall be paid from the date the issuer received the returned contract. (f) (1) Issuers of disability insurance policies, certificates, or contracts that provide hospital or medical expense coverage on an expense incurred or indemnity basis, other than incidentally, to persons eligible for Medicare shall provide to those applicants a Guide to Health Insurance for People with Medicare in the form developed jointly by the National Association of Insurance Commissioners and the Health Care Financing Administration and in a type size no smaller than 12-point type. Delivery of the guide shall be made whether or not the policies or certificates are advertised, solicited, or issued for delivery as Medicare supplement policies or certificates as defined in this article. Except in the case of direct response issuers, delivery of the guide shall be made to the applicant at the time of application, and acknowledgment of receipt of the guide shall be obtained by the issuer. Direct response issuers shall deliver the guide to the applicant upon request, but not later than at the time the policy is delivered. (2) For the purposes of this section, "form" means the language, format, type size, type proportional spacing, bold character, and line spacing. (g) As soon as practicable, but no later than 30 days prior to the annual effective date of any Medicare benefit changes, an issuer shall notify its policyholders and certificate holders of modifications it has made to Medicare supplement policies or certificates in a format acceptable to the commissioner. The notice shall include both of the following: (1) A description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement policy or certificate. (2) Inform each policyholder or certificate holder as to when any premium adjustment is to be made due to changes in Medicare. (h) The notice of benefit modifications and any premium adjustments shall be in outline form and in clear and simple terms so as to facilitate comprehension. (i) The notices shall not contain or be accompanied by any solicitation. (j) (1) Issuers shall provide an outline of coverage to all applicants at the time application is presented to the prospective applicant and, except for direct response policies, shall obtain an acknowledgment of receipt of the outline from the applicant. If an outline of coverage is provided at the time of application and the Medicare supplement policy or certificate is issued on a basis which would require revision of the outline, a substitute outline of coverage properly describing the policy or certificate shall accompany the policy or certificate when it is delivered and contain the following statement, in no less than 12-point type, immediately above the company name: "NOTICE: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued." (2) The outline of coverage provided to applicants pursuant to this section consists of four parts: a cover page, premium information, disclosure pages, and charts displaying the features of each benefit plan offered by the issuer. The outline of coverage shall be in the language and format prescribed below in no less than 12-point type. All plans A-J shall be shown on the cover page, and the plans that are offered by the issuer shall be prominently identified. Premium information for plans that are offered shall be shown on the cover page or immediately following the cover page and shall be prominently displayed. The premium and mode shall be stated for all plans that are offered to the prospective applicant. All possible premiums for the prospective applicant shall be illustrated. (3) The commissioner may adopt regulations to implement this article, including, but not limited to, regulations that specify the required information to be contained in the outline of coverage provided to applicants pursuant to this section, including the format of tables, charts, and other information. (k) (1) Any disability insurance policy or certificate, a basic, catastrophic or major medical expense policy, or single premium nonrenewal policy or certificate issued to persons eligible for Medicare, other than a Medicare supplement policy, a policy issued pursuant to a contract under Section 1876 of the federal Social Security Act (42 U.S.C.A. Sec. 1395 et seq.), a disability income policy, or any other policy identified in subdivision (b) of Section 10192.3, advertised, solicited, or issued for delivery in this state to persons eligible for Medicare, shall notify insureds under the policy that the policy is not a Medicare supplement policy or certificate. The notice shall either be printed or attached to the first page of the outline of coverage delivered to insureds under the policy, or if no outline of coverage is delivered, to the first page of the policy or certificate delivered to insureds. The notice shall be in no less than 12-point type and shall contain the following language: "THIS (POLICY OR CERTIFICATE) IS NOT A MEDICARE SUPPLEMENT (POLICY OR CONTRACT). If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare available from the company." (2) Applications provided to persons eligible for Medicare for the disability insurance policies or certificates described in paragraph (1) shall disclose the extent to which the policy duplicates Medicare in a manner required by the commissioner. The disclosure statement shall be provided as a part of, or together with, the application for the policy or certificate. (l) (1) Insurers issuing Medicare supplement policies or certificates for delivery in California shall provide an outline of coverage to all applicants at the time of presentation for examination or sale as provided in Section 10605, and in no case later than at the time the application is made. Except for direct response policies, insurers shall obtain a written acknowledgment of receipt of the outline from the applicant. Any advertisement that is not a presentation for examination or sale as defined in subdivision (e) of Section 10601 shall contain a notice in no less than 10-point uppercase type that an outline of coverage is available upon request. The insurer or agent that receives any request for an outline of coverage shall provide an outline of coverage to the person making the request within 14 days of receipt of the request. (2) If an outline of coverage is provided at or before the time of application and the Medicare supplement policy or certificate is issued on a basis that would require revision of the outline, a substitute outline of coverage properly describing the policy or certificate shall accompany the policy or certificate when it is delivered and contain the following statement, in no less than 12-point type, immediately above the name: "NOTICE: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued." (3) The outline of coverage shall be in the language and format prescribed in this subdivision in no less than 12-point type, and shall include the following items in the order prescribed below. Titles, as set forth below in paragraphs (B) to (H), inclusive, shall be capitalized, centered, and printed in boldface type. The outline of coverage shall include the items, and in the same order, specified in the chart set forth in paragraph (4) of subdivision (C) of Section 17 of the Model Regulation to implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act, as adopted by the National Association of Insurance Commissioners on July 30, 1991. (A) The cover page shall contain the 10-plan (A through J) chart. The plans offered by the insurer shall be clearly identified. Innovative benefits shall be explained in a manner approved by the commissioner. The text shall read: "Medicare supplement insurance can be sold in only 10 standard plans. This chart shows the benefits included in each plan. Every insurance company must offer Plan A. Some plans may not be available. The BASIC BENEFITS included in ALL plans are: Hospitalization: Medicare Part A coinsurance plus coverage for 365 additional days after Medicare benefits end. Medical expenses: Medicare Part B coinsurance (usually 20 percent of the Medicare-approved amount). Blood: First three pints of blood each year. Mammogram: One annual screening to the extent not covered by Medicare. Cervical cancer test: One annual screening." (Reference to the mammogram and cervical cancer test shall not be included so long as California is required to disallow them for Medicare beneficiaries by the Health Care Financing Administration or other agent of the federal government under 42 U.S.C. Sec. 1395ss.) (B) PREMIUM INFORMATION. Premium information for plans that are offered by the insurer shall be shown on, or immediately following, the cover page and shall be clearly and prominently displayed. The premium and mode shall be stated for all offered plans. All possible premiums for the prospective applicant shall be illustrated in writing. If the premium is based on the increasing age of the insured, information specifying when and how premiums will change shall be clearly illustrated in writing. The text shall state: "We (the insurer's name) can only raise your premium if we raise the premium for all policies like yours in California." (C) The text shall state: "Use this outline to compare benefits and premiums among policies." (D) READ YOUR POLICY VERY CAREFULLY. The text shall state: "This is only an outline describing your policy's most important features. The policy is your insurance contract. You must read the policy itself to understand all of the rights and duties of both you and your insurance company." (E) THIRTY-DAY RIGHT TO RETURN THIS POLICY. The text shall state: "If you find that you are not satisfied with your policy, you may return it to (insert the insurer's address). If you send the policy back to us within 30 days after you receive it, we will treat the policy as if it has never been issued and return all of your payments." (F) POLICY REPLACEMENT. The text shall read: "If you are replacing another health insurance policy, do NOT cancel it until you have actually received your new policy and are sure you want to keep it." (G) DISCLOSURES. The text shall read: "This policy may not fully cover all of your medical costs." "Neither this company nor any of its agents are connected with Medicare." "This outline of coverage does not give all the details of Medicare coverage. Contact your local social security office or consult "The Medicare Handbook" for more details." "For additional information concerning policy benefits, contact the Health Insurance Counseling and Advocacy Program (HICAP) or your agent. Call the HICAP toll-free telephone number, 1-800-434-0222, for a referral to your local HICAP office. HICAP is a service provided free of charge by the State of California." The disclosure required by this paragraph, as revised by amendments made during the 1996 portion of the 1995-96 Regular Session, shall be included in the required disclosure form no later than January 1, 1998. (H) (For policies that are not guaranteed issue) COMPLETE ANSWERS ARE IMPORTANT. The text shall read: "When you fill out the application for a new policy, be sure to answer truthfully and completely all questions about your medical and health history. The company may have the right to cancel your policy and refuse to pay any claims if you leave out or falsify important medical information. Review the application carefully before you sign it. Be certain that all information has been properly recorded." (I) An example showing a physician's charge, which is equal to or less than the allowable limiting charge for the current year, of two thousand dollars ($2,000), the amount that Medicare would approve, the amount that Medicare would pay, the amount that the policy or certificate would pay, and any amount that would be owed by the insured, assuming that the annual deductible has already been paid. The statement shall be prominently displayed and in type no smaller than other type on the page. (J) One chart for each benefit plan offered by the insurer showing the services, Medicare payments, payments under the policy and payments expected from the insured, using the same uniform format and language. No more than four plans may be shown on one page. Include an explanation of any innovative benefits in a manner approved by the commissioner. 10192.18. (a) Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another Medicare supplement or other health insurance policy or certificate in force or whether a Medicare supplement policy or certificate is intended to replace any other disability policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent containing those questions and statements may be used. "(Statements) (1) You do not need more than one Medicare supplement policy. (2) If you purchase this policy, you may want to evaluate your existing health coverage and decide if you need multiple coverages. (3) You may be eligible for benefits under Medi-Cal and may not need a Medicare supplement policy. (4) The benefits and premiums under your Medicare supplement policy can be suspended, if requested, during your entitlement to benefits under Medi-Cal for 24 months. You must request this suspension within 90 days of becoming eligible for Medi-Cal. If you are no longer entitled to Medi-Cal, your policy will be reinstituted if requested within 90 days of losing Medi-Cal eligibility. (5) Counseling services are available in your state to provide advice concerning your purchase of Medicare supplement insurance and concerning medical assistance through the Medi-Cal program, including benefits as a qualified Medicare beneficiary (QMB) and a specified low-income Medicare beneficiary (SLMB). If you want to discuss buying Medicare supplement insurance with a trained insurance counselor, call the California Department of Insurance's toll-free telephone number 1-800-927-HELP, and ask how to contact your local Health Insurance Counseling and Advocacy Program (HICAP) office. HICAP is a service provided free of charge by the State of California. (Questions) To the best of your knowledge, (1) Do you have another Medicare supplement policy or certificate in force, including an HMO contract? (a) If so, with which company? (b) If so, do you intend to replace your current Medicare supplement policy with this policy or certificate? (2) Do you have any other health insurance coverage that provides benefits similar to this Medicare supplement policy? (a) If so, with which company? (b) What kind of policy? (c) Would the benefits duplicate the benefits in this Medicare supplement policy? (3) Are you covered for medical assistance through the Medi-Cal program: (a) As a specified low-income Medicare beneficiary (SLMB)? (b) As a qualified Medicare beneficiary (QMB)? (c) For other Medi-Cal medical benefits?" (b) Agents shall list any other health insurance policies they have sold to the applicant as follows: (1) List policies sold that are still in force. (2) List policies sold in the past five years that are no longer in force. (c) In the case of a direct response issuer, a copy of the application or supplemental form, signed by the applicant, and acknowledged by the issuer, shall be returned to the applicant by the issuer upon delivery of the policy. (d) Upon determining that a sale will involve replacement of Medicare supplement coverage, any issuer, other than a direct response issuer, or its agent, shall furnish the applicant, prior to issuance for delivery of the Medicare supplement policy or certificate, a notice regarding replacement of Medicare supplement coverage. One copy of the notice signed by the applicant and the agent, except where the coverage is sold without an agent, shall be provided to the applicant and an additional signed copy shall be retained by the issuer as provided in Section 10508. A direct response issuer shall deliver to the applicant at the time of the issuance of the policy the notice regarding replacement of Medicare supplement coverage. (e) The notice required by subdivision (d) for an issuer shall be in the form specified by the commissioner, using, to the extent practicable, a model notice prepared by the National Association of Insurance Commissioners for this purpose. The replacement notice shall be printed in no less than 10-point type in substantially the following form: (Insurer's name and address) NOTICE TO APPLICANT PLANNING TO REPLACE MEDICARE SUPPLEMENT COVERAGE SAVE THIS NOTICE! IT MAY BE IMPORTANT IN THE FUTURE. If you intend to cancel or terminate existing Medicare supplement insurance and replace it with coverage issued by (company name), please review the new coverage carefully and replace the existing coverage ONLY if the new coverage materially improves your position. DO NOT CANCEL YOUR PRESENT COVERAGE UNTIL YOU HAVE RECEIVED YOUR NEW POLICY AND ARE SURE THAT YOU WANT TO KEEP IT. If you decide to purchase the new coverage, you will have 30 days after you receive the policy to return it to the insurer, for any reason, and receive a refund of your money. If you want to discuss buying Medicare supplement insurance with a trained insurance counselor, call the California Department of Insurance's toll-free telephone number 1-800-927-HELP, and ask how to contact your local Health Insurance Counseling and Advocacy Program (HICAP) office. HICAP is a service provided free of charge by the State of California. STATEMENT TO APPLICANT FROM THE INSURER AND AGENT: I have reviewed your current health insurance coverage. To the best of my knowledge, the replacement of insurance involved in this transaction does not duplicate coverage. In addition, the replacement coverage contains benefits that are clearly and substantially greater than your current benefits for the following reasons: __ Additional benefits that are: ______ __ No change in benefits, but lower premiums. __ Fewer benefits and lower premiums. __ Other reasons specified here: ______ DO NOT CANCEL YOUR PRESENT POLICY UNTIL YOU HAVE RECEIVED YOUR NEW POLICY AND ARE SURE THAT YOU WANT TO KEEP IT. _____________________________________________________________________ (Signature of Agent, Broker, or Other Representative) _____________________________________________________________________ (Signature of Applicant) _____________________________________________________________________ (Date) (f) No issuer, broker, agent, or other person shall cause an insured to replace a Medicare supplement insurance policy unnecessarily. In recommending replacement of any Medicare supplement insurance, an agent shall make reasonable efforts to determine the appropriateness to the potential insured. 10192.185. In addition to any other requirements of law, the following shall apply to a Medicare supplement policy: (a) The issuer shall not require an amount greater than one month' s premium to be submitted with an application for the policy of insurance if interim coverage is not provided. If interim coverage is provided, the issuer shall not require an amount greater than two months' premium for that purpose. No further premiums may be collected until the policy is delivered to the applicant. (b) The issuer shall notify the applicant within 60 days from the date the issuer or issuer's authorized representative or producer receives the application and the amount as to whether or not the applicant will be issued a policy of insurance. If the applicant is not so notified, the issuer or issuer's authorized representative or producer shall pay interest to the applicant on the funds that the applicant submitted with the application, at the legal rate of interest on judgments as provided in Section 685.010 of the Code of Civil Procedure, from the date the issuer or issuer's authorized representative or producer received those funds until they are refunded to the applicant or are applied toward the premium. 10192.19. (a) An issuer shall provide a copy of any Medicare supplement advertisement intended for use in this state whether through written, radio, or television medium to the commissioner for review at least 30 days before dissemination of the advertisement. The advertisement shall comply with all applicable laws of California. (b) A television, radio, mail, or newspaper advertisement which is designed to produce leads either by use of a coupon or a request to write or otherwise contact the issuer, a production agent, or other person or a subsequent advertisement prior to contact shall include information disclosing that an agent may contact the applicant if that is the fact. In addition, an agent who makes contact with a consumer, as a result of acquiring that consumer's name from a lead generating device shall disclose that fact in the initial contact with the consumer. (c) No issuer, agent, broker, solicitor, or other person or other entity shall solicit residents of this state for the purchase of a Medicare supplement policy through the use of a true or fictitious name which is deceptive or misleading with regard to the status, character, or proprietary or representative capacity of the entity or person or the true purpose of the advertisement. (d) For purposes of this section, an advertisement includes envelopes, stationery, business cards, or other materials designed to describe and encourage the purchase of a Medicare supplement policy. (e) Advertisements may not employ words, letters, initials, symbols, or other devices which are so similar to those used by governmental agencies, a nonprofit or charitable institution, senior organization, or other insurer that they could have the capacity or tendency to mislead the public. Examples of misleading materials, include, but are not limited to, those which imply any of the following: (1) The advertised coverages are somehow provided by or are endorsed by the governmental agencies or the other insurer. (2) The advertiser is the same as, is connected with, or is endorsed by, the governmental agencies, other entity, or other insurers. (3) That the advertised coverages are somehow provided by or are endorsed by the governmental agencies, other entity, or other insurers. (f) No advertisement shall use the name of a state or political subdivision thereof in a policy name or description. (g) No advertisement may use any name, service mark, slogan, symbol, or a device in any manner that implies that the issuer or the Medicare supplement policy advertised, or that any agency who may call upon the consumer in response to the advertisement is connected with a governmental agency, such as the Social Security Administration. (h) No advertisement shall be used that fails to prominently display the disclaimer to the effect of "Not Connected with or endorsed by the U.S. Government or the federal Medicare program." (i) No advertisement may imply that the reader may lose a right or privilege or benefit under federal, state, or local law if he or she fails to respond to the advertisement. (j) An issuer, agent, broker, or other entity may not use an address so as to mislead or deceive as to the true identity, location, or licensing status of the issuer, agent, broker, or other entity. (k) No issuer may use, in the trade name of its insurance policy, any terminology or words so similar to the name of a governmental agency or governmental program as to have the tendency to confuse, deceive, or mislead a prospective purchaser. (l) All advertisements used by agents, producers, brokers, solicitors, or other persons of an issuer must have prior written approval of the issuer before they may be used. (m) No issuer, agent, broker, or other entity may solicit a particular class by use of advertisements which state or imply that the occupational or other status as members of the class entitles them to reduced rates on a group or other basis when, in fact, the policy being advertised is sold only on an individual basis at regular rates. 10192.195. The commissioner may prescribe by regulation a standard form and the contents of an informational brochure for persons eligible for Medicare by reason of age which is intended to improve the buyer's ability to select the most appropriate coverage and improve the buyer's understanding of Medicare. Except in the case of direct response insurance policies, the commissioner may require by regulation that the information brochure be provided to any applicant eligible for Medicare concurrently with delivery of the outline of coverage. With respect to direct response insurance policies, the commissioner may require by regulation that the prescribed brochure be provided upon request to any applicant eligible for Medicare by reason of age, but in no event later than the time of policy delivery. 10192.20. (a) An issuer, directly or through its producers, shall do each of the following: (1) Establish marketing procedures to ensure that any comparison of policies by its agents or other producers will be fair and accurate. (2) Establish marketing procedures to ensure that excessive insurance is not sold or issued. (3) Display prominently by type, stamp, or other appropriate means, on the first page of the policy, the following: "Notice to buyer: This policy may not cover all of your medical expenses." (4) Inquire and otherwise make every reasonable effort to identify whether a prospective applicant for a Medicare supplement policy already has health insurance and the types and amounts of that insurance. (5) Establish auditable procedures for verifying compliance with this subdivision. (b) In addition to the practices prohibited by this code or any other law, the following acts and practices are prohibited: (1) Twisting, which means knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert an insurance policy or to take out a policy of insurance with another insurer. (2) High pressure tactics, which means employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance. (3) Cold lead advertising, which means making use directly or indirectly of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is the solicitation of insurance and that contact will be made by an insurance agent or insurance company. (c) The terms "Medicare supplement," "Medicare Wrap-Around" and words of similar import shall not be used unless the policy is issued in compliance with this article. The term "Medigap" shall not be used. 10192.21. (a) In recommending the purchase or replacement of any Medicare supplement policy or certificate an agent shall make reasonable efforts to determine the appropriateness of a recommended purchase or replacement. (b) Any sale of Medicare supplement coverage that will provide an individual more than one Medicare supplement policy or certificate is prohibited. 10192.22. (a) On or before March 1 of each year, an issuer shall report the following information for every individual resident of this state for which the issuer has in force more than one Medicare supplement policy or certificate: (1) Policy and certificate number. (2) Date of issuance. (b) The items set forth above must be grouped by individual policyholder. 10192.23. (a) If a Medicare supplement policy or certificate replaces another Medicare supplement policy or certificate, the replacing issuer shall waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, and probationary periods in the new Medicare supplement policy or certificate for similar benefits to the extent that time was spent under the original policy. (b) If a Medicare supplement policy or certificate replaces another Medicare supplement policy or certificate that has been in effect for at least six months, the replacing policy shall not provide any time period applicable to preexisting conditions, waiting periods, elimination periods and probationary periods for benefits similar to those contained in the original policy or certificate. SEC. 5. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.