INSURANCE

NEW JERSEY INDIVIDUAL HEALTH COVERAGE PROGRAM BOARD

Individual Health Coverage Program

Proposed Amendments: N.J.A.C. 11:20-3.1 and Appendix Exhibit G.

Authorized By: New Jersey Individual Health Coverage Program Board, Wardell Sanders, Executive Director.

Authority: N.J.S.A. 17B:27A-2 et seq.

Calendar Reference: See Summary below for explanation of exception to calendar requirement.

Proposal Number: PRN 2002-

Interested persons may testify with respect to proposed changes to a standard individual health benefits plan policy form, Exhibit U at a public hearing to be held at 10:00 A.M. on June 11 , 2002 at the New Jersey Department of Banking and Insurance, Room 218, 20 West State Street, Trenton, New Jersey.

Submit written comments by July 22, 2002 to:

Ellen DeRosa

Deputy Executive Director

New Jersey Individual Health Coverage Program

20 West State Street, 10th Floor

PO Box 325

Trenton, New Jersey 08625

Fax: (609) 633-2030

The agency proposal follows:

The amendments proposed in this proposal are similar to those proposed in Proposed Rule No. PRN2001-453 as it appeared in the New Jersey Register dated December 3, 2001 33 NJR 4057(a) and were adopted and published in the New Jersey Register dated March 18, 2002, at 34 NJR 3(2). The current proposal differs from the adopted amendments in that this proposal makes the offering of the $5,000 and $10,000 deductible options with Plan A/50 discretionary for carriers rather than mandatory. A couple of carriers contacted the IHC Board regarding the mandatory nature of the deductible and indicated that the offering of such high deductibles would be inconsistent with their marketing strategy. The IHC Board understands that some non-HMO carriers are very interested in developing the marketing of the $5,000 and $10,000 deductible options. The IHC Board expects that the voluntary interest of carriers in marketing these deductible options will prove to be more effective than a forced marketing of deductibles by carriers that have expressed no interest in such a plan design.

Pursuant to N.J.S.A. 17B:27A-7 and 17B:27A-11d, the New Jersey Individual Health Coverage ("IHC") Program Board has the responsibility to establish the standard health benefits plans used in the individual market and the authority to modify the plans consistent with the requirements of the Board’s enabling statute. As required by N.J.S.A. 17B:27A-16.1c, the Board has scheduled a public hearing to receive oral testimony regarding the proposed modifications to options available in connection with the standard health benefits plan called Plan A/50, at the time and place noted above. The Board also proposes an amendment to the standard application, set forth as Appendix Exhibit G, to reference the proposed change to make the $5,000 and $10,000 deductibles optional for carriers. As permitted by N.J.S.A. 52:14B-3(4)(e), as amended by P.L. 2001, c.5, and N.J.A.C. 1:30-3.3, the New Jersey Individual Health Coverage Program Board ("IHC") Program Board has chosen to provide a 60-day comment period rather than provide notice of this proposed rule in a published, quarterly calendar of anticipated rulemaking

The Board anticipates that the changes will be effective for plans issued or renewed on or after August 19, 2002.

The IHC Act permits the Board to modify the deductibles and coinsurance levels of the plans. The IHC Board proposes to amend N.J.A.C. 11:20-3.1(b)4 which lists deductible options for Plan A/50 to state that the $5,000 and $10,000 deductible options may be offered at the options of the carrier and are not mandatory.

The IHC Board proposes amendments to the standard application, Exhibit G, to specifically include variable brackets around the $5,000 and $10,000 deductibles for Plan A/50.

As the Board has provided a 60-day comment period for this proposal, the proposal is excepted from the rulemaking calendar requirements pursuant to N.J.A.C. 1:30-3.3(a)5.

The amendments proposed herein will affect the 11 non-HMO carriers offering coverage in the individual health benefits market to the extent they elect to offer the new optional deductibles. A couple of these carriers contacted the IHC Board regarding the mandatory nature of the deductible and indicated that the offering of such high deductibles would be inconsistent with their marketing strategy. If the proposed amendments are adopted, those carriers offering non-HMO coverage will have the option to offer $5,000 and $10,000 deductible options with Plan A/50 in addition to the existing $1,000 and $2,500 deductible options. As a result of these changes, carriers making the $5,000 and $10,000 deductible options available will be responsible for educating their employees and agents of the changes to the individual health benefits plans and for assisting insured persons. The IHC Board understands that some non-HMO carriers are very interested in developing the marketing of the $5,000 and $10,000 deductible options. The IHC Board expects that the voluntary interest of carriers in marketing these deductible options will prove to be more effective than a forced marketing of deductibles by carriers that have expressed no interest in such a plan design.

The Board believes that Plan A/50 with a $5,000 or a $10,000 deductible as offered by carriers that are genuinely interested in marketing these catastrophic level deductibles will be available at a lower cost to consumers than any of the existing plans.

The proposed amendments also will have an economic impact on non-HMO carriers that elect to offer the new deductible options. The Board believes that the new plan options will attract more consumers to obtain coverage. Thus, carriers seeking an exemption from reimbursable loss assessments will have a better opportunity to enroll non-group persons that would count toward the carrier’s non-group enrollment target and will thus have a financial incentive to voluntarily market these deductible options.

Carriers making the new deductible options available will experience an economic impact as they will be required to print new policy forms. Carriers also will have to disseminate information regarding these changes to their employees.

Federal Standards Statement

The standard individual health benefits plans comply with the Federal Health Insurance Portability and Accountability Act of 1996, Pub. L. 104-191. The standard plans, and the rules describing the standard plans, do not expand upon the requirements set forth in the Federal law.

The proposed amendments are not expected to result in the generation or loss of jobs in the State if they were to take effect.

The proposed amendments have no impact on the agriculture industry.

The Board believes that all carriers subject to these rules have in excess of 100 employees or are located outside of the State of New Jersey. Therefore, a regulatory flexibility analysis is not required. However, to the extent that any carrier might be considered a small business under the terms of the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq., the following analysis would apply.

The proposed amendment to N.J.A.C. 11:20-3.1 and Exhibit G of the Appendix to N.J.A.C. 11:20 will require carriers that elect to make the $5,000 and $10,000 deductible options available to amend their standard policy forms, and to conform their operations (sales, administration, and claims handling) to the new changes in the plans. There will be capital costs involved in such compliance, in terms of printing, systems programming, staff and agent training, etc., but it is unlikely that any carrier would have to contract for outside professional services in order to comply. All of the required changes to a carrier’s business fall within the normal functions a carrier performs in complying with any state insurance law or regulations. An exemption from the policy form changes for certain carriers that are small businesses would be inappropriate because such an exemption would permit the sale of non-conforming forms in an otherwise completely standardized market.

The proposed new rules will have no impact on the achievement of smart growth and implementation of the State Plan.

Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):

(a) (No Change)

(b) In accordance with N.J.A.C. 11:20-1.3, members that offer individual health benefits plans in this State shall offer standard health benefits Plans A/50, B, C, and D as set forth in Exhibits U, and B through D, respectively, with variable text as specified on the Explanation of Brackets, Exhibit T, in the Appendix.

1. Members offering Plan D shall offer the following annual deductible options to the policyholder for each plan:

i. $500.00 per individual and $1,000 per family unit;

ii. $1,000 per individual and $2,000 per family unit;

2. Members offering Plans A/50, B and C shall offer the following annual deductible options to the policyholder for each plan:

i. $1,000 per individual and $2,000 per family unit; and

ii. $2,500 per individual and $5,000 per family unit.

3. Members offering Plans C and D may offer those plans, on a guaranteed issue basis, with either or both of the following annual deductible options to the policyholder in addition to those deductible options listed in (b)1 and 2 above:

i. $1,500 per individual or in the case of a family unit,

1. $2,250 per individual or in the case of a family unit

4. Members offering Plan A/50 may [shall] offer the following annual deductible options to the policyholder for each plan:

i. $5,000 per individual and $10,000 per family unit; and

ii. $10,000 per individual and $20,000 per family unit.

(c) -(e) (No change)

_____________________ _____ Date: ______________________

Wardell Sanders, Executive Director

NEW JERSEY

20 West State Street, 10th Floor

PO Box 325

Trenton, NJ 08625

Phone: 609-633-1882 ext. 50302

Fax: 609-633-2030

E-mail: ellen.derosa@dobi.state.nj.us

May 24, 2002

To: IHC Program Member Carriers and Interested Parties

From: Ellen DeRosa

Attached is a copy of the Rule Proposal that was published in the May 20, 2002 New Jersey Register. The IHC Board previously amended Plan A/50 to include $5,000 and $10,000 deductible options. The current proposal makes the use of these deductible amounts optional for carriers.

Comments on this proposal will be accepted until July 22, 2002.

NEW JERSEY

20 West State Street, 10th Floor

PO Box 325

Trenton, NJ 08625

Phone: 609-633-1882 ext. 50302

Fax: 609-633-2030

E-mail: ellen.derosa@dobi.state.nj.us

May 24, 2002

To: Karen Garfing

From: Ellen DeRosa

We just received a copy of the rule proposal that appeared in the May 20, 2002 New Jersey Register. I am mailing copies to IHC Program member carriers and our interested parties mailing list.

Attached is a copy of the rule proposal for distribution to the press in accordance with the APA.