Mandated substance abuse benefits in disability policies

Issued and entered October 12, 1981 by Nancy A. Baerwaldt, Commissioner of Insurance

INFORMATIONAL AND INTERPRETATIVE STATEMENT AND FORM WITH INSTRUCTIONS ISSUED PURSUANT TO ACT 306 OF THE PUBLIC ACTS OF 1969 AS AMENDED

I. INFORMATIONAL AND INTERPRETIVE STATEMENT

1. Public Act 429 of 1980, a copy of which is attached, requires insurers offering disability insurance policies in Michigan to provide coverage for intermediate and outpatient care for substance abuse in all group and individual hospital, medical, and surgical expense-incurred disability insurance policies. An exception is made for limited classification policies, which are defined in Section 3425(6)c of the act as accident only policies, limited accident policies, travel ccident policies, and specified disease policies. The additional coverage required by this act applies to policies issued or renewed after January 1, 1982.

2. Subsection 3425(2) states that if the cost of providing the additional substance abuse coverage exceeds a 3% increase in premiums, then the master policyholder in the case of group coverage shall have the option to decline coverage. In the case of individual health insurance policies, if the total premium for all individual policies of an insurer would be increased by 3% or more, the name insured each policy shall have the option to decline coverage. It is not anticipated that the cost of this additional coverage will exceed 3% in most cases, based upon information which was provided to the Michigan House of Representatives Public Health Committee when the bill was being considered. Blue Cross and Blue Shield of Michigan (BCBSM) submitted to the Committee a document entitled "Programatic Data on Substance Abuse Benefits" which contains information on the BCBSM substance abuse coverage provided to 1.9 million Michigan residents for the year ending December 31, 1979, and includes the cost to BCBSM for providing this coverage. Insurers wishing to review this document may request a copy from Kenneth Eaton, Administrator, Office of Substance Abuse Services, 3500 N. Logan, Lansing MI, 48909.

3. The word "charges" as used in Subsection 3425(3) refers to maximum allowable charges and not to premiums. The $1500 minimum benefit level is to be offered in addition to other coverages already included in the policy for non-substance abuse services.

4. Consistent with Subsection 3425(3), a pre-existing conditions exclusion in a disability policy may apply to the required substance abuse coverage provided that the exclusion is not less favorable than for other comparable services. A pre-existing conditions exclusion for substance abuse coverage shall apply only to a specific condition for which medical advice was sought or treatment was recommended before the effective date of coverage.

5. Subsection 3425(5) requires coverage, at a minimum, for up to $1,500 per individual per year. The minimum benefit level is effective beginning January 1, 1982, and is to be adjusted each year by March 31, beginning in 1982, in accordance with the annual average percentage increase or decrease in the U.S. Consumer Price Index (CPI) for the 12 month period ending the preceding December 31. The annual average change in the CPI is released each March 1 for the previous year by the United States Department of Labor, Bureau of Labor Statistics, and is entitled "Consumer Price Index for All Urban Consumers -- Revised." Insurers have asked whether they must notify their insureds each March 31 of any change in benefit level. If the policy language clearly states that the coverage amount shall be adjusted each March 31 in accordance with the average percentage increase or decrease in the CPI, it will not be necessary to notify insureds of the revised amount of coverage until the next premium billing. However, the adjusted amount becomes effective on March 31, and it is the responsibility of insurers to make this annual adjustment.

6. Section 3609, which became effective July 1, 1974, requires insurers to offer a policy provision that will provide coverage for inpatient and outpatient treatment of alcoholism and drug abuse as agreed upon by the insurer and the insured employer or other insured organization. Section 3609a(1), which becomes effective January 1, 1982, and replaces Section 3609, states that inpatient care for substance abuse may be agreed upon between the insured and the insurer. Inpatient care refers to hospital care or inpatient facilities other than those for which coverage is mandated by Section 3425.

II. FORM WITH INSTRUCTIONS

Attached is a certification form which covers disability insurance policies offered by your company, certifying that all policies are in compliance with Public Act 429 of 1980 and indicating whether individual policies will be required to include the substance abuse coverage. Each insurer offering disability insurance policies shall submit the attached certification with the signature of the president or authorized officer no later than January 11, 1982, to:

Substance Abuse Certification
Michigan Insurance Bureau
Department of Licensing and Regulation
P. O. Box 30220
Lansing MI 48909

Attention: Randy A. Watkins

If you have any questions regarding this bulletin please contact Randy A. Watkins at (517) 373-0435.