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The pullout of health care plans from the Medicare risk HMO market is accelerating.

In the biggest withdrawal yet, United HealthCare Corp. announced that next year it will shutter risk HMOs in 86 counties with 59,000 enrollees, or 13%, of its 440,000 Medicare beneficiaries.

In addition, Allina Health System said its Medica Health Plan unit is closing Medicare risk HMOs with 10,000 retirees in four Minnesota counties, while Blue Cross & Blue Shield of Minnesota is exiting the risk HMO market and will pull the plug on its Preferred Seniors plan covering 1,544 enrollees. Kaiser Permanente is closing two risk HMOs in upstate New York covering about 3,000 enrollees. Kaiser still has 680,000 enrollees in its Medicare risk HMOs.

Previously, Aetna U.S. Healthcare, Foundation Health Systems Inc., Humana Inc., PacifiCare Health Systems Inc. and Prudential Insurance Co. of America announced they were curtailing Medicare risk HMO operations (BI, Sept. 28).

Withdrawals to date affect more than 250,000 retirees, according to the American Assn. of Health Plans in Washington, a managed care trade group. It isn't known how many of the affected beneficiaries live in areas where other risk HMOs will remain. Currently, risk HMOs provide coverage to nearly 6 million retirees.

AAHP President Karen Ignagni warned that the latest batch of withdrawals will be only the tip of the iceberg unless Congress makes "midcourse corrections" in the Medicare risk HMO program.

Wilson signs Y2K immunity bill

SACRAMENTO, Calif. -- Gov. Pete Wilson signed legislation last week that provides limited liability immunity to companies that voluntarily share information to resolve Year 2000 computer problems.

S.B. 1173 is the only Year 2000 bill to emerge from this year's legislative session, which ended Aug. 31. Other proposals that would have provided broader immunity failed to muster enough votes to pass.

Other legislation signed last week included measures that require:

* Insurers to cover the cost of prostate cancer exams.

* Doctors and their HMOs to reveal financial incentives involving the way patients are treated or referred to specialists.

* HMOs to set up anti-fraud units and report their progress annually to the Legislature.

At a ceremony in Sacramento, Calif., held just before the start of Yom Kippur, Gov. Wilson signed two bills designed to aid victims of the Holocaust but vetoed a third. One bill signed by the governor allows a gross income tax exemption for amounts received by Holocaust survivors or the heirs of Holocaust victims. Another bill provides funding for the Insurance Department to investigate the files of several European insurers that have resisted honoring the claims of Holocaust survivors. It also will make it easier for state regulators to suspend the licenses of insurers that fail to honor valid claims by Holocaust survivors and the heirs of victims. The bill that was vetoed would have compelled insurers to reveal the names of policyholders who were likely Holocaust victims.

Earlier, the governor vetoed two bills that, together, would have created an HMO regulatory board; and a third measure that would have required health plans and disability insurers to provide a second outside opinion to members who are denied treatment. He also vetoed legislation that would have required insurers to provide the same coverage for severe, biologically based mental illnesses as for other organic diseases.

The American Insurance Assn. is commending the decision to veto legislation that the group said would have impeded the resolution of environmental claims. A.B. 2157 was intended to promote good-faith settlements of policyholders' claims by attempting to establish a simplified process to resolve complex environmental litigation problems.

Bay State eyes exclusion bids

BOSTON -- Massachusetts insurance regulators will be keeping a close eye on insurers' requests for exclusionary endorsements for Year 2000 computer problems, according to a bulletin they issued last week.

However, regulators there last week followed the overwhelming national trend of approving all of the Insurance Services Office Inc.'s Year 2000 filings for commercial lines policyholders, an ISO spokesman said.

But insurers must follow detailed steps if they want to legally exclude coverage for policyholders of most commercial lines coverages:

* An insurer's filings must specify the lines of coverage affected by the exclusion, the specific types of policyholders the insurer is targeting for exclusion and the specific reason the exclusions are needed.

* An insurer seeking to renew a policy with a Year 2000 exclusionary endorsement, modify coverage or increase the deductible must notify policyholders in writing, clearly explain its action, send an exact copy of the notice to the policyholder's broker and keep proof of mailings.

* An insurer wishing to non-renew a policy must comply with state notification requirements.

Failure to comply with such requirements may result in the insurer having to renew the policy, regulators said in the three-page bulletin.

In addition, Massachusetts regulators also prohibit insurers from applying any exclusionary endorsements to new or renewal personal lines coverages. They also prohibit insurers from making blanket filings, which include more than one line of coverage.

ISO filed its endorsements in all U.S. jurisdictions, plus Puerto Rico. As of last week, all jurisdictions had approved the general liability endorsement except Alaska, which is considering the filing. Also, all jurisdictions had approved the commercial property endorsement, except Maine and Texas, which are considering the filing.

High court to hear comp case

WASHINGTON -- The U.S. Supreme Court will decide whether workers compensation beneficiaries in Pennsylvania have a constitutional right to be notified before their benefits can be suspended as part of a utilization review.

The case, American Manufacturers Mutual Insurance Co. vs. Sullivan, stems from the 3rd U.S. Circuit Court of Appeals decision striking down part of Pennsylvania's 1993 workers comp reform law. The reform allowed insurers to withhold benefits during utilization review without specifying that beneficiaries had to be notified of the suspension or had any right to testify during the claims review. A group of beneficiaries sued, claiming the provision violated the due process provision of the Constitution.

The workers argue that because workers comp is a state-guaranteed benefit administered by state officials, workers comp insurers act as so-called state actors subject to constitutional provisions. The insurers counter that they are private entities not bound constitutionally the same way government bodies are. No date has been set for oral argument.

The Supreme Court also agreed to hear Davis vs. Monroe County, a case revolving around whether school districts are liable under Title IX of the Civil Rights Act for the sexual harassment of an elementary school student by other students.

Chartwell buys LIMIT (No. 8)

LONDON -- Chartwell Reinsurance Co., the U.K. subsidiary of U.S. reinsurer Chartwell Reinsurance Corp., has boosted its Lloyd's capacity by buying corporate investment vehicle LIMIT (No. 8) Ltd.

The acquisition, which still requires approval from Lloyd's, will give Chartwell Re Co. more control over the capacity on its own syndicates.

At the beginning of the 1998 year of account, LIMIT (No. 8) provided L41.7 million ($70 million) of capacity to syndicates managed by Archer Managing Agents Ltd., recently renamed Chartwell Managing Agents Ltd. in a move aimed at reinforcing Chartwell's growing involvement with its managed syndicates. Chartwell Re provided 21% of its syndicates' total capacity of L352 million ($591 million) in 1998, compared with 7% for the previous year of account.

Chartwell paid LIMIT P.L.C. L3.3 million ($5.6 million) for LIMIT (No. 8), which has tangible assets estimated at L3.9 million ($6.7 million). The sale excluded LIMIT (No. 8)'s participations on non-Chartwell syndicates, which were moved to another LIMIT vehicle before the sale.

The purchase does mean, however, that Chartwell has taken on LIMIT (No. 8)'s liabilities, including exposures on syndicate 657, a U.K. liability syndicate that faces losses of 57.9% to 98.9% of capacity for the 1994 year of account and lower projected losses for 1995 (BI, March 23). Syndicate 657 had capacity of L43 million ($63.6 million) in 1994 and L42 million ($65.7 million) in 1995. Profits from other syndicates may offset those losses, however.

Syndicate 657, which ceased writing new business in 1996, is seeking reinsurance to close the open years, which under Lloyd's three-year accounting system would have closed in 1997 and 1998, respectively.

Steven Bensinger, chairman and chief executive officer of Chartwell Managing Agents Ltd., said in a statement that the acquisition is part of Chartwell's plan to increase capacity participation on its own syndicates.

Chartwell estimates that on a pro forma basis it would be supplying about 32% of its syndicates' capacity for the 1998 underwriting year.

Protection for mandate sought

WASHINGTON -- Medicare risk HMOs providing coverage to retirees in Massachusetts would have to continue to comply with a state prescription drug benefit mandate under legislation introduced last week by three Democratic Massachusetts congressmen.

The measure, H.R. 4648, introduced by Reps. Barney Frank, James McGovern and Richard Neal, would exclude from federal pre-emption a 1994 Massachusetts law and regulation that requires HMOs to provide unlimited or no prescription drug benefits to Medicare-eligible retirees.

The new legislation is the latest salvo in an ongoing war between Medicare risk HMOs operating in the state and the Division of Insurance.

To keep coverage affordable, the HMOs have proposed scaling back prescription drug coverage. They say they have the right to do so under a 1997 federal budget law, which they say pre-empts the Massachusetts prescription drug mandate.

The Division of Insurance disagrees with that interpretation and has sued one HMO, Harvard Pilgrim Health Care. Harvard Pilgrim plans to impose an annual $800 cap on prescription drugs.

In turn, a state HMO trade group has filed suit in U.S. District Court and has asked the court to declare that the 1997 federal law pre-empts the state's prescription drug mandate (BI, Sept. 28).

A spokeswoman for Rep. Neal said the congressmen were looking for a "must pass" legislative vehicle, such as an appropriations bill, to which to attach the measure.

Briefly noted

The Senate last week approved an amended version of the Year 2000 Information and Readiness Act, which grants businesses some limited liability relief and antitrust relief when sharing information about dealing with the Year 2000 computer problem (BI, Sept. 21). The House could take up the bill, which has White House support, this week. . . .The Internal Revenue Service projects that just over 50,000 tax-favored medical savings accounts will be established this year, well under the statutory limit of 750,000 accounts. . . .EXEL Ltd. has created a unit to handle all of its financial insurance and reinsurance products, XL Financial Products & Services. K. Bruce Connell will be president of the unit. Mr. Connell previously headed EXEL's reinsurance operations prior to its purchase of Mid Ocean Ltd. . . .Markel Corp. has amended its $121 million offer for Gryphon Holdings to all cash. Previously, Markel had offered cash and notes for the New York-based property and casualty insurer. In a letter to Gryphon's directors expressing displeasure at Gryphon's failure to accept the earlier offer, Markel said the cash offer would expire today. . . . John Pasqualetto has joined Long Grove, Ill.-based Kemper Insurance Cos. to head workers compensation business for middle-market and small accounts. Before joining Kemper, Mr. Pasqualetto was president of the Specialty Workers Compensation Division of American Home Assurance Co., an American International Group Inc. unit. . . .Aetna U.S. Healthcare has received Kansas and Missouri state insurance officials' approvals to sell its HMO product in 13 counties in the Kansas City, Mo., area. . . .Missouri Insurance Director Jay Angoff plans to resign effective Oct. 31