Section 8AA. (a) A contract between a subscriber and the corporation under an individual or group hospital service plan which provides hospital expense and surgical expense insurance, except contracts providing supplemental coverage to Medicare or other governmental programs, delivered, issued or renewed by agreement between the insurer and the policyholder, within or without the commonwealth, shall provide benefits to all individual subscribers and members within the commonwealth and to all group members having a principal place of employment within the commonwealth for coverage for prosthetic devices and repairs. If prosthetic devices are covered as a durable medical equipment benefit, coverage shall be provided under the same terms and conditions that apply to other durable medical equipment covered under the contract, except as otherwise provided in this section. If prosthetic devices are covered as a stand-alone benefit, coverage shall be consistent with the terms and conditions as described in this section.

(b) In this section, ''prosthetic device'' shall mean an artificial limb device to replace, in whole or in part, an arm or leg.

(c) No such contract shall impose any annual or lifetime dollar maximum on coverage for prosthetic devices other than an annual or lifetime dollar maximum that applies in the aggregate to all items and services covered under the contract.

(d) No such contract shall apply amounts paid for prosthetic devices to any annual or lifetime dollar maximum applicable to other durable medical equipment covered under the policy other than an annual or lifetime dollar maximum that applies in the aggregate to all items and services covered under the contract.

(e) Any such contract may include a reasonable coinsurance requirement for prosthetic devices and repairs, not to exceed 20 per cent of the allowable cost of the prosthetic device or repair, unless all covered benefits applying coinsurance under the plan do so at a higher amount. If the contract provides coverage for services from nonparticipating providers, the contract may include a reasonable coinsurance requirement for prosthetic devices and repairs, not to exceed 40 per cent of the allowable cost of the prosthetic device or repair when obtained from a nonparticipating provider, unless all covered benefits applying coinsurance under the plan do so at a higher amount.

(f) Any such contract may require prior authorization as a condition of coverage for prosthetic devices.

(g) Any such contract shall only be required to provide coverage for the most appropriate medically necessary model that adequately meets the medical needs of the policyholder.