Medicare Program; Recognition of NAIC Model Standards for Regulation of Medicare Supplemental Insurance
Federal RegisterDec 4, 1998
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[HCFA-2025-N]
RIN 0938-AJ07
Medicare Program; Recognition of NAIC Model Standards for
Regulation of Medicare Supplemental Insurance
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Notice.
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SUMMARY: This notice describes changes made by the Balanced Budget Act
of 1997 to section 1882 of the Social Security Act, which governs
Medicare supplemental insurance. It also recognizes that the Model
Regulation adopted by the National Association of Insurance
Commissioners (NAIC) on April 29, 1998, as corrected and clarified by
HCFA, is considered to be the applicable NAIC Model Regulation for
purposes of section 1882 of the Social Security Act. The changes made
by HCFA (1) correct a drafting error in section 12.B(2) of the Model
that is inconsistent with Federal law, and (2) add a clarification that
copayments for hospital outpatient department services under Part B of
Medicare must be covered under the ``core benefits'' of a Medicare
supplemental insurance policy in the same manner as coinsurance for
those services. Finally, this notice prints as an addendum the full
text of the NAIC Model Regulation, as corrected and clarified by HCFA.
DATES: Medicare supplemental insurance policies issued in any State
must conform to the requirements of section 1882(s)(3) of the Social
Security Act as of July 1, 1998, and to the standards contained in the
revised NAIC Model Regulation as of the date the State adopts the
revised standards, which generally must be no later than April 29,
1999.
FOR FURTHER INFORMATION CONTACT: Terese Klitenic (410) 786-1565.
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I. Background
A. The Medicare Program
The Medicare program was established by Congress in 1965 with the
enactment of title XVIII of the Social Security Act (the Act). The
program provides payment for certain medical services for persons 65
years of age or older, disabled beneficiaries, and persons with end-
stage renal disease. The Medicare program consists of two separate but
complementary insurance programs, a hospital insurance program (Part
A), which covers services furnished by hospitals, skilled nursing
facilities, home health agencies and hospices; and a supplementary
medical insurance program (Part B), which covers a wide range of
medical services and supplies, including physicians' services,
outpatient hospital services, outpatient physical and occupational
therapy services, and home health services. Part B also covers certain
drugs and biologicals that cannot be self-administered, diagnostic x-
ray and laboratory tests, purchase or rental of durable medical
equipment, ambulance services, prosthetic devices, and certain medical
supplies.
While the Medicare program provides extensive hospital insurance
benefits and supplementary medical insurance, it was not designed to
cover the total cost of medical care for Medicare beneficiaries.
Amounts payable under both Parts A and B are reduced by certain
deductible and coinsurance amounts for which the beneficiary is
responsible.
In 1998, the Part A inpatient hospital deductible is $764 ($768 for
1999) for each ``benefit period'' (the period beginning on the first
day of hospitalization and extending until the beneficiary is no longer
an inpatient of a hospital or skilled nursing facility for 60
consecutive days).
The Part B deductible is $100 for calendar years 1998 and 1999.
Beneficiaries are also responsible for paying certain coinsurance
amounts for covered items and services. For example, the coinsurance
applicable to physicians' services under Part B is generally 20 percent
of the Medicare-approved amount for the service. When beneficiaries
receive covered services from physicians who do not accept assignment
of their Medicare claims, the beneficiaries may also be required to pay
amounts in excess of the Medicare approved amount (``excess charges''),
up to a limit established under the Act.
There are a number of items and services that are not covered under
either Part A or Part B; for example, custodial nursing home care, most
dental care, eyeglasses, and most prescription drugs are not covered.
Beneficiaries must pay the full cost of these items and services out-
of-pocket or may purchase additional private insurance to help pay the
costs.
Because Medicare does not cover the total cost of providing medical
care, a
[[Page 67079]]
substantial number of Medicare beneficiaries have some type of private
health coverage. This coverage may include Medicare supplemental
insurance, employer group health plans, hospital indemnity insurance,
nursing home or long term care insurance, and specified disease
insurance.
B. Medicare Supplemental Insurance
Medicare supplemental insurance policies, also known as ``Medigap''
policies, are designed to fill specific gaps in the original Medicare
``fee-for-service'' benefit structure. (They are not needed, and would
not be usable, if Medicare benefits are obtained through an HMO or
other type of managed care arrangement.) Medigap policies typically
provide coverage for some or all of the deductible and coinsurance
amounts applicable to Medicare-covered services, and sometimes cover
items or services that are not covered by Medicare.
Section 1882 of the Act prohibits the sale of Medigap policies that
do not conform to Federal statutory requirements. The statute also
incorporates by reference, as part of the statutory requirements,
certain minimum standards established by the National Association of
Insurance Commissioners (NAIC). These minimum standards, known as the
``NAIC Model Standards,'' are found in the ``NAIC Model Regulation to
Implement the Individual Accident and Sickness Insurance Minimum
Standards Act,'' initially adopted by the NAIC on June 6, 1979. See
section 1882(g)(2)(A) of the Act. In particular, the Model Standards,
as revised in 1992 under the Omnibus Budget Reconciliation Act of 1990,
prescribed 10 benefit packages. Under section 1882, Medigap policies
generally may not be sold unless they conform to one of the 10 benefit
packages, which are designated as plans ``A'' through ``J.''
Section 1882(b)(1) of the Act also provided that Medigap policies
issued in a State would be deemed to meet the Federal requirements if
the State's program regulating Medicare supplemental policies provided
for the application of standards at least as stringent as those
contained in the NAIC Model Regulation, and requirements equal to or
more stringent than those set forth in section 1882 of the Act.
States must amend their regulatory programs to implement all of the
new Federal statutory requirements, and applicable changes to the Model
standards. However, States maintain the authority to enact provisions
that are more stringent than those that are incorporated in the NAIC
Model Regulation or in the statutory requirements. See section
1882(b)(1)(A) of the Act. States that have received a waiver under
section 1882(p)(6) may continue to authorize the sale of policies that
contain different benefits than the 10 standardized benefit packages.
Massachusetts, Minnesota, and Wisconsin have received waivers; however,
the three waiver States must still make the Balanced Budget Act of 1997
(BBA) conforming amendments. In particular, these States are subject to
the statutory guaranteed issue requirements with respect to all
Medicare beneficiaries who meet the criteria in section 1882(s)(3) for
guaranteed issue. The only difference in the waiver States is that
section 1882(3)(C)(iv) specifies that the statutory references to
benefit packages (that is, in most cases, benefit packages designated
``A'', ``B'', ``C'' or ``F'') are deemed to be references to comparable
benefit packages offered in the State with the waiver.
As provided in section 1882(p)(4)(B) of the Act, any State may
continue to approve the addition of new or innovative benefits to an
otherwise approved standardized plan.
Under section 1882(p)(5) of the Act, while a State must approve the
core Plan ``A'' for sale in the State, it does not have to permit any
or all of the other nine plans to be sold in the State. Therefore, the
State need not permit the sale of each type of standardized plan, so
long as the core plan is offered. Moreover, a State need not approve
the sale of high deductible Plans ``F'' and ``J'' simply because it
also permits sale of the standard deductible versions of either of
these two plans.
In addition, section 1882(d) makes it unlawful in some
circumstances for Medigap and certain other health insurance policies
to be sold to a Medicare beneficiary if the sale results in duplicate
coverage.
Section 1882(g)(1) of the Act defines Medicare supplemental
policies. This definition excludes policies offered by an employer to
employees or former employees and policies or plans offered by a labor
organization to members or former members. HMOs, and other managed care
plans that contract with Medicare under section 1876 of the Act or
under a demonstration authority, as well as Medicare+Choice plans
offered by organizations that contract under Part C of Medicare (see
following discussion) are also excluded from the definition of a
Medicare supplemental policy.
II. Legislative Changes
BBA created a new Part C of Medicare, commonly known as
Medicare+Choice. This allows Medicare eligible individuals to avail
themselves of a wide range of managed care options. Under the new
Medicare+Choice program, every individual entitled to Medicare Part A
and enrolled under Part B, except for individuals with end-stage renal
disease, may elect to receive benefits through either the existing
Medicare fee-for-service program or a Part C Medicare+Choice plan.
However, individuals choosing Medicare+Choice will not require the
protections afforded under Medigap policies because their needs will be
met under the Medicare+Choice program. Regulations for the new Part C
Medicare+Choice program were published in a separate document on June
26, 1998 (63 FR 52610).
Section 4003(a)(1) of the BBA amended section 1882(d)(3)(A)(i) of
the Act to provide that it is unlawful for a Medigap policy to be sold
or issued to an individual who has elected to be enrolled in a
Medicare+Choice plan when the seller has knowledge that the policy
duplicates health benefits to which the individual is already entitled
under Medicare+Choice or under another Medigap policy.
Section 4003(a)(3) of BBA also states that a Medicare+Choice plan
is excluded from the definition of a Medicare supplemental policy.
Section 4031 of the BBA amended section 1882(s) of the Act, which
governs guaranteed issue of Medigap policies. When an individual seeks
to enroll in a specified Medigap policy within 63 days of the events
described below, the issuer may not (1) deny or condition the issuance
of a Medigap policy that is offered or available; (2) discriminate in
the pricing of such a policy because of health status, claims
experience, receipt of health care, or medical condition; or (3) impose
a preexisting condition exclusion.
Involuntary Terminations of Coverage
For the following four classes of individuals, the specific
policies subject to the guaranteed issue requirements are Medigap plans
``A'', ``B'', ``C'', or ``F'':
(a) Individuals enrolled under an employee welfare benefit plan
that provides health benefits that supplement Medicare, if the plan
terminates or ceases to provide all those benefits.
(b) Persons enrolled with a Medicare+Choice organization under a
Medicare+Choice plan whose enrollment is discontinued under the
following circumstances: (1) the organization's or plan's certification
is terminated, or the organization has
[[Page 67080]]
discontinued providing the plan in the area where the person resides;
(2) the individual is no longer eligible to remain in the plan because
of a change in circumstances, including a move outside of the entity's
service area, but not including nonpayment of premiums or disruptive
behavior; or (3) the individual demonstrates that the organization
substantially violated a material contract provision or materially
misrepresented the plan's provisions in marketing the plan to the
individual.
(c) Persons enrolled with an HMO or other organization that has a
risk or cost contract under section 1876 of the Act; with a health care
prepayment plan under section 1833 of the Act; with a similar
organization operating under a demonstration project authority; or
under a Medicare SELECT policy (a type of Medigap policy in which an
individual's choice of providers is restricted in return for a lower
Medigap insurance premium). However, this only applies if enrollment
ceases for the reasons set forth in (b) above and, in the case of a
SELECT policy, there is no applicable provision under State law for
continuation of the coverage.
(d) Individuals enrolled under a Medigap policy if enrollment
ceases because of: (1) Bankruptcy or insolvency of the issuer or
because of other involuntary termination of coverage and there is no
provision under applicable State law for the continuation of the
coverage; (2) the issuer of the policy substantially violated a
material provision of the policy; or (3) the issue materially
misrepresented the policy's provisions in marketing the policy to the
individual. See section 4031(a)(3) of BBA.
Free Look at Managed Care
For the following class of individuals, the specific policies
subject to the guaranteed issue requirements are the Medicare
supplemental policy under which the individual was most recently
enrolled if it is still available, or if this policy is not available
from the previous issuer, Medigap plans ``A,'' ``B,'' ``C,'' or ``F.''
The following criteria must be met for the individual to qualify for
guaranteed issue under this category: The individual (1) was covered
under a Medigap policy; (2) subsequently terminated the policy and
enrolled with a Medicare+Choice organization, with an HMO or other
organization that has a contract under section 1876 of the Act, with a
similar organization operating under a demonstration project authority,
or purchased a Medicare SELECT policy; and (3) terminates enrollment in
the Medicare+Choice or other organization, or the Medicare SELECT
policy, described in (2) within 12 months after enrolling. However,
this provision applies only if the individual had never previously been
enrolled with any organization or policy mentioned in (2) above.
For the five classes of Medicare beneficiaries described above, the
guaranteed issue requirements protect ``individuals'' whose previous
coverage has been terminated. Before the enactment of the BBA,
beneficiaries had only one opportunity to purchase a Medigap policy on
a ``guaranteed issue'' basis. This opportunity was only available to
beneficiaries who were age 65 or over, and was available during the 6-
month period following the date that they were both age 65 or over and
enrolled in Medicare Part B. There was no guaranteed open enrollment
provision for individuals under age 65. However, in contrast to both
the general open enrollment provision of section 1882(s)(2)(A) and the
new guaranteed issue provision in section 1882(s)(3)(B)(vi) (discussed
below), which specifically state that the protected ``individual'' must
be at least age 65, the guaranteed issue provisions in section
1882(s)(3)(B) (i) through (v) do not contain an age restriction.
Therefore, the latter provisions apply by their terms both to
individuals eligible for Medicare based on age, and those whose
eligibility is based on disability or ESRD. All of these individuals
who meet the requirements set forth in the BBA qualify for its
guaranteed issue protections with respect to policies that are offered
and available to new enrollees. (In some situations policies may not be
available to beneficiaries under 65. In other situations, a policy
designated ``B'', ``C,'' or ``F'' may not be available in a particular
State.)
There is one additional class of beneficiaries who are entitled by
the BBA amendments to a guaranteed issue Medigap policy. An individual
who upon first becoming eligible for Medicare at age 65 enrolls in a
Medicare+Choice plan, and later disenrolls from the plan within 12
months of the effective date of that enrollment, is entitled to
guaranteed issue of any Medigap plan ``A'' through ``J'' under the same
conditions described above (including that the individual must apply
for the Medigap policy within 63 days of dropping the Medicare+Choice
coverage, and may not be subject to a preexisting condition exclusion,
or be subject to price discrimination based on health status).
Preexisting Condition Exclusion
Section 4031(b) of the BBA also limits the application of a
preexisting condition exclusion for Medigap policies during the initial
6-month open-enrollment period for aged beneficiaries. Such an
exclusion cannot be imposed on an individual who, on the date of
application, had a continuous period of at least 6 months of health
coverage defined as ``creditable coverage'' under title XXVII of the
Public Health Service (PHS) Act, as added by title I of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA). If the
individual has less than 6 months coverage, the issuer must reduce the
period of any preexisting condition exclusion by the aggregate of
periods of ``creditable coverage'' applicable to the individual as of
the enrollment date. The rules used to determine the reduction are
based on rules used under section 2701 of the PHS Act.
The following information is provided for the convenience of the
reader. A complete description of requirements under title XXVII of the
PHS Act can be found at 45 CFR parts 144, 146, and 148. Under section
2701, a policy can only exclude coverage for a preexisting condition if
medical advice, diagnosis, care, or treatment was recommended or
received for the condition within the six months before the effective
date of the Medigap policy.
HIPAA also added section 2701(c) of title XXVII of the PHS Act to
define creditable coverage as coverage of the individual under any of
the following: group health plan; health insurance coverage; Part A or
B of Medicare; Medicaid; a medical care program of the Indian Health
Service or a tribal organization; a State health benefits risk pool; a
public health plan; the health care program for active military
personnel; the Federal employees health benefit plan; and a health
benefit plan under the Peace Corps Act. However, creditable coverage
does not include policies consisting solely of coverage of excepted
benefits, as described below. Creditable coverage must be continuous.
This means the individual must have no breaks in coverage of greater
than 63 days. If the break is greater than 63 days, a new period begins
after the individual reacquires creditable coverage. See section
2701(c)(2) of the PHS Act.
An individual may demonstrate creditable coverage in several ways.
First, group health plans, health insurance issuers, and certain other
entities must furnish a certificate of creditable coverage after the
coverage terminates. In some cases this will be when employment ends;
in other cases it will be after exhaustion of ``continuation coverage''
under the Consolidated Omnibus Budget
[[Page 67081]]
Reconciliation Act of 1985 (Public Law 99-272) or under a similar State
program. A certificate may also be obtained upon request by the
individual. See section 2701(c) of the PHS Act. Creditable coverage can
also be demonstrated if the individual attests to the existence of
creditable coverage, and presents corroborating evidence (such as pay
stubs with insurance deduction or explanation of benefits, or
verification by a physician or former health care provider that the
individual had health care coverage). The individual must cooperate in
verifying the information.
Excepted benefits as defined in section 2791(c) of the PHS Act
means benefits under one or more of the following: accident or
disability income insurance; a supplement to liability insurance;
workers' compensation insurance; liability insurance such as automobile
medical payment insurance or general liability insurance; credit-only
insurance; on-site medical clinics and other similar insurance
coverage, under which benefits for medical care are secondary or
incidental to other insurance benefits.
Other excepted benefits, if offered separately, include: Limited
scope dental or vision benefits, long-term care, nursing home care,
home health care, community-based care, or any combination of these.
Other excepted benefits, if offered as independent, noncoordinated
benefits, include specified disease or illness coverage and hospital
indemnity, or other fixed indemnity insurance. Medicare supplemental
insurance is also classified as an excepted benefit.
Long Term Care Insurance Policies
Section 4031(c) of the BBA also clarifies, through a technical
amendment, that certain disclosure requirements apply only to long-term
care insurance policies that do not coordinate with Medicare and
Medicaid.
High Deductible Medigap Standard Policies
Section 4032 of the BBA adds two additional high deductible Medigap
standard policies with benefit packages that are the same as Plans
``F'' and ``J.'' The high deductible amount is $1,500 in 1998 and 1999.
Out-of-pocket expenses, in this instance, are expenses that would
ordinarily be paid by a Medigap policy. These expenses include the
Medicare deductibles for Parts ``A'' and ``B'' but do not include, in
Plan ``J'', the plan's separate prescription drug deductible of $250
or, in Plans ``F'' and ``J,'' the plans'' separate foreign travel
emergency deductible of $250.
For subsequent years, the high deductible amount will be increased
by the percentage increase in the Consumer Price Index for all urban
consumers (all items; U.S. city average) for the 12-month period ending
with August of the preceding year, rounded to the nearest multiple of
$10. The beneficiary is responsible for payment of all expenses up to
this amount.
Treatment of Hospital Outpatient Department Copayment
Section 4031(f) of the BBA also specifies that ``copayment''
amounts provided for under section 1833(t)(5) of the Act with respect
to hospital outpatient department services shall be treated under
Medigap policies ``in the same manner as coinsurance with respect to
such services.'' We have therefore clarified the Model by including a
reference to coverage for copayments for hospital outpatient department
services in section 8.B(5) of the Model, and in the cover page of the
outline of coverage that immediately follows section 17.C(4) of the
Model. For purposes of complying with Federal law, States must use this
revised language.
III. Dates
The provisions added by section 4031 of the BBA have a number of
different effective dates, as established in section 4031(d). There has
also been confusion about the effective date of the guaranteed issue
provisions related to Medicare+Choice plans.
Guaranteed Issue Provisions
Section 4031(a) of the BBA expanded the number of opportunities in
which an individual can enroll in a Medigap policy on a ``guaranteed
issue'' basis. It added section 1882(s)(3)(B), clauses (i) through
(vi), to the Act to require that certain Medigap policies be offered to
six categories of beneficiaries in specific circumstances. Section
4031(d)(1) of the BBA makes these provisions effective July 1, 1998.
Clause (ii) assures that individuals enrolled in Medicare+Choice
plans are entitled to guaranteed issue of Medigap policies ``A,''
``B,'' ``C,'' and ``F'' if ``there are circumstances permitting
discontinuance of the individual's election of the [Medicare+Choice]
plan under the first sentence of section 1851(e)(4).'' This language
caused confusion because of its cross-reference to the Medicare+Choice
provisions in section 1851(e)(4). The latter provision is a
Medicare+Choice provision, not a Medigap provision. Under the
Medicare+Choice rules, starting in the year 2002, beneficiaries who
elect to enroll in a Medicare+Choice plan will be subject to a ``lock-
in'' provision. This means that they will only be able to change their
Medicare+Choice election under certain circumstances. With certain
exceptions, other than during an annual open enrollment period,
individuals will not be able to change to other Medicare+Choice plans,
or return to original, fee-for-service Medicare, except as described in
section 1851(e)(4). Therefore, a beneficiary will not need a Medigap
policy unless he or she is permitted to return to original Medicare. It
is our understanding that the NAIC drafting note following section
12.B(2) of the Model was simply trying to explain to a ``Medigap
audience'' why the Medigap requirement in clause (ii) cross-references
a Medicare+Choice provision that will not itself be effective until
2002.
However, as a matter of Federal law, the guaranteed issue provision
of clause (ii) takes effect July 1, 1998; continues in effect through
and beyond 2002, and applies to any individual whose Medicare+Choice
election terminates under the ``circumstances'' specified in
subparagraphs (A) through (D) of section 1851(e)(4).
Clause (ii) of section 1882(s)(3)(B) conditions the right to a
guaranteed issue Medigap policy on the ``circumstances'' that would
(beginning in 2002) permit a beneficiary to change a Medicare+Choice
election. These circumstances are contained in subparagraphs (A)
through (D) of the first sentence of paragraph (e)(4). The clearest
indication that this refers to the ``circumstances'' described in
subparagraphs (A) through (D) of section 1851(e)(4), without
incorporating the date that appears in the introductory clause of
section 1851(e)(4), is that clause (iii) contains a virtually identical
reference to ``the circumstances that would permit discontinuance of an
individual's election of coverage under the first sentence of section
1851(e)(4).'' Clause (iii) applies to termination of Medicare managed
care contracts under section 1876 of the Act. These contracts include
``risk'' contracts under section 1876, which cease to exist as of
December 31, 1998, because they will be replaced by Medicare+Choice
contracts. Therefore, clause (iii) only makes sense if it is
interpreted to refer to the ``circumstances'' described in
subparagraphs (A) through (D) of section 1851(e)(4), without the
incorporation of the 2002 date.
On October 16, 1998, the NAIC's Medicare Supplement Working Group
issued a Memorandum to all NAIC
[[Page 67082]]
members stating that it had recognized an inconsistency in the Model
Regulation. The drafting note that follows subsection 12B(2), as
adopted on April 29, 1998, stated that the guaranteed issue provisions
do not become effective until January 1, 2002, for a person in a
Medicare+Choice organization whose contract terminates. As discussed
above, HCFA has determined, subsequent to the adoption of the Model
Regulation by the NAIC, that this was a drafting inconsistency in the
Model and that the provision became effective on July 1, 1998 along
with the rest of the provisions. The NAIC has begun the process of
amending the Model Regulation to eliminate the drafting error.
Therefore, the Model Regulation, as set forth below, contains the
corrected language as it has been proposed by the NAIC. For purposes of
complying with Federal law, States must use this corrected language.
Other Provisions
Preexisting Condition Exclusions
The limit on preexisting condition exclusions added by section
4031(b) applies to policies issued on or after July 1, 1998. See
section 4031(d) of the BBA.
Long-Term Care Provision
The long-term care policy disclosure provision (section 4031(c) of
the BBA) is effective July 1, 1997, as if included in HIPAA. See
section 4031(d)(3) of the BBA. For purposes of disclosure, policies
that coordinate with Medicare and other health insurance are not
considered to provide benefits that duplicate Medicare.
Changes to Conform to Medicare+Choice
The changes made by section 4003 of the BBA became effective on
August 8, 1997, the date of enactment of the BBA.
Dates Applicable to Action by the NAIC
Section 4031(e)(2) of the BBA specified that if, within 9 months of
enactment of the BBA, the NAIC modified its ``Model Regulation'' to
conform to the BBA amendments, then the revised regulation would apply
for purposes of section 1882. The NAIC adopted the revised standards on
April 29, 1998.
Dates Applicable to Actions by the States
Each State is required to change its statutes or regulations to
conform its regulatory program to the revised standards set forth in
the NAIC Model Regulation, in order for Medigap policies to continue to
be sold in that State. This action generally must be taken within 1
year after the date of adoption of the revised NAIC standards, that is,
by April 29, 1999. In general, a State will not be deemed out of
compliance solely due to failure to make changes before that date. See
section 4031(e)(1) of the BBA. The statute provides an exception for
States that we identify as requiring new legislation to implement the
standards but whose legislatures are not scheduled to meet in 1999 in a
session at which these matters may be considered. See section
4031(e)(4)(B) of the BBA.
For States that fall within this exception, section 4031(e)(4)(B)
of the BBA provides that a State will not be deemed out of compliance
until the first day of the first quarter following the end of the first
legislative session that begins on or after July 1, 1999. This section
also provides that, in the case of a State that has a 2-year
legislative session, each year of the session is deemed to be a
separate regular session of the State legislature.
Accordingly, the standards in the Model Regulation apply to
Medicare supplemental policies issued in a State on or after April 29,
1999, or an earlier date on which a State adopts the standards, unless
the State of issuance has a legislature that does not meet during that
timeframe.
Separate notification letters were sent to the States by HCFA
regional offices. States should notify the regional offices by letter
when the State law conforms to the NAIC model.
IV. Publication of List for Standardized Benefit Packages
We are publishing the list of standardized benefit packages,
including Plans ``F'' and ``J,'' which will now be available in
standard as well as high deductible forms. The following is a summary
of the coverages available. This list of standardized Medicare
supplemental benefit packages is contained in section 9.E of the
revised Model Regulation adopted by the NAIC on April 29, 1998, which
is reprinted at the end of this notice. Section 16 of the Model
Regulation includes a chart that outlines the benefits covered in each
of the 10 standardized Plans ``A'' through ``J.''
Because it is necessary to refer to more than one section of the
NAIC Model Regulation to determine the content of each standardized
benefit package, we are providing the following summary of the 10
packages.
Plan ``A'' (Core Benefit Plan) (NAIC Model Section 9.E.(1))
The Core Benefit Plan includes the following:
Coverage for the Part A coinsurance amount for day 61
through day 90 of hospitalization in each Medicare benefit period.
Coverage for the Part A coinsurance amount for each of
Medicare's 60 non-renewable lifetime hospital inpatient reserve days
used.
After all Medicare hospital benefits are exhausted,
coverage for 100 percent of the Medicare Part A eligible hospital
expenses. Coverage is limited to a maximum of 365 days of additional
inpatient hospital care during the policyholder's lifetime.
Coverage under Medicare Parts A and B for the reasonable
cost of the first three pints of blood per calendar year.
Coverage for the coinsurance amount for Part B services,
or, in the case of hospital outpatient department services, the
applicable copayment, (generally 20 percent of the approved amount)
after the $100 deductible is met. (Note that Plan A provides no
coverage for benefits described in paragraphs (1) through (11) of NAIC
Model Section 8.C.: the Part A inpatient hospital deductible (in 1998,
$764 for each Medicare benefit period; $768 in 1999); the Part B
deductible ($100 each year); Part A coinsurance for post-hospital
skilled nursing facility care; Part B charges in excess of Medicare-
approved amounts; non-Medicare-covered prescription drugs, preventive
services, at-home recovery services, or services received in a foreign
country; or new or innovative benefits approved by the State insurance
commissioner or by HCFA.)
Plan ``B'' (NAIC Model Section 9.E.(2))
The core benefits; and
The Part A inpatient hospital deductible.
Plan ``C'' (NAIC Model Section 9.E.(3))
The core benefits;
The Part A inpatient hospital deductible;
The Part A coinsurance for post-hospital skilled nursing
facility care for days 21 through 100 in a Medicare benefit period;
The Part B annual deductible; and
Eighty percent of charges for emergency care received in a
foreign country during the first 60 days of a trip outside the U.S.,
subject to a $250 calendar year deductible and a lifetime maximum
benefit of $50,000.
Plan ``D'' (NAIC Model Section 9.E.(4))
The core benefits;
[[Page 67083]]
The Part A inpatient hospital deductible;
The Part A coinsurance for post-hospital skilled nursing
facility care for days 21 through 100 in a Medicare benefit period;
Eighty percent of charges for emergency care received in a
foreign country during the first 60 days of a trip outside the U.S.,
subject to a $250 calendar year deductible and a lifetime maximum
benefit of $50,000; and
Services that are not covered by Medicare to provide
short-term, at-home assistance with activities of daily living for
those recovering from an illness, injury or surgery, subject to
limitations described in the NAIC Model.
Plan ``E'' (NAIC Model Section 9.E.(5))
The core benefits;
The Part A inpatient hospital deductible;
The Part A coinsurance for post-hospital skilled nursing
facility care for days 21 through 100 in a Medicare benefit period;
Eighty percent of charges for emergency care received in a
foreign country during the first 60 days of a trip outside the U.S.,
subject to a $250 calendar year deductible and a lifetime maximum
benefit of $50,000; and
Preventive health services not covered by Medicare,
subject to a $120 maximum annual benefit.
Plan ``F'' (NAIC Model Section 9.E.(6))
The core benefits;
The Part A inpatient hospital deductible;
The Part A coinsurance for post-hospital skilled nursing
facility care for days 21 through 100 in a Medicare benefit period;
The Part B annual deductible;
One hundred percent of Part B excess charges (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); and
Eighty percent of charges for emergency care received in a
foreign country during the first 60 days of a trip outside the U.S.,
subject to a $250 calendar year deductible and a lifetime maximum
benefit of $50,000.
Plan ``F'' High Deductible (NAIC Model Section 9.E.(7))
The high deductible plan pays the same or offers the same benefits
as Plan ``F'' after the beneficiary has paid a calendar year deductible
($1,500 in 1998 and 1999). Benefits from the high deductible Plan ``F''
will not begin until out-of-pocket expenses are equal to the deductible
($1,500). Out-of-pocket expenses for this deductible are expenses that
would ordinarily be paid by the policy. This includes the Medicare
deductibles for Part A and Part B but does not include the plan's
separate foreign travel emergency deductible.
Plan ``G'' (NAIC Model Section 9.E.(8))
The core benefits;
The Part A inpatient hospital deductible;
The Part A coinsurance for post-hospital skilled nursing
facility care for days 21 through 100 in a Medicare benefit period;
Eighty percent of Part B excess charges (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);
Eighty percent of charges for emergency care received in a
foreign country during the first 60 days of a trip outside the U.S.,
subject to a $250 calendar year deductible and a lifetime maximum
benefit of $50,000; and
Services that are not covered by Medicare to provide
short-term, at-home assistance with activities of daily living for
those recovering from an illness, injury or surgery, subject to
limitations described in the NAIC Model Regulation.
Plan ``H'' (NAIC Model Section 9.E.(9))
The core benefits;
The Part A inpatient hospital deductible;
The Part A coinsurance for post-hospital skilled nursing
facility care for days 21 through 100 in a Medicare benefit period;
Eighty percent of charges for emergency care received in a
foreign country during the first 60 days of a trip outside the U.S.,
subject to a $250 calendar year deductible and a lifetime maximum
benefit of $50,000; and
Fifty percent of outpatient prescription drug charges not
covered by Medicare, subject to a $250 calendar year deductible and a
maximum $1,250 in benefits per calendar year.
Plan ``I'' (NAIC Model Section 9.E.(10))
The core benefits;
The Part A inpatient hospital deductible;
The Part A coinsurance for post-hospital skilled nursing
facility care for days 21 through 100 in a Medicare benefit period;
One hundred percent of Part B excess charges (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);
Eighty percent of charges for emergency care received in a
foreign country during the first 60 days of a trip outside the U.S.,
subject to a $250 calendar year deductible and a lifetime maximum
benefit of $50,000;
Services that are not covered by Medicare to provide
short-term, at-home assistance with activities of daily living for
those recovering from an illness, injury or surgery, subject to
limitations described in the NAIC Model Regulation; and
Fifty percent of outpatient prescription drug charges not
covered by Medicare, subject to a $250 calendar year deductible and a
maximum $1,250 in benefits per calendar year.
Plan ``J'' (NAIC Model Section 9.E.(11))
The core benefits;
The Part A inpatient hospital deductible;
The Part A coinsurance for post-hospital skilled nursing
facility care for days 21 through 100 in a Medicare benefit period;
The Part B annual deductible;
One hundred percent of Part B excess charges (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);
Eighty percent of charges for emergency care received in a
foreign country during the first 60 days of a trip outside the U.S.,
subject to a $250 calendar year deductible and a lifetime maximum of
$50,000;
Services that are not covered by Medicare to provide
short-term, at-home assistance with activities of daily living for
those recovering from an illness, injury or surgery, subject to
limitations described in the NAIC Model Regulation;
Fifty percent of outpatient prescription drug charges not
covered by Medicare, subject to a $250 calendar year deductible and a
maximum $3,000 in benefits per calendar year; and
Preventive health services not covered by Medicare,
subject to a $120 maximum annual benefit.
Plan ``J''-High Deductible (NAIC Model Section 9.E.(12)
The high deductible plan pays the same or offers the same benefits
as Plan ``J'' after a beneficiary has paid a calendar year deductible
($1,500 in 1998 and 1999). Benefits from the high deductible Plan ``J''
will not begin until
[[Page 67084]]
out-of-pocket expenses are equal to the deductible ($1,500). Out-of-
pocket expenses for this deductible are expenses that would ordinarily
be paid by the policy. This includes the Medicare deductibles for Part
A and Part B, but does not include the plan's separate prescription
drug deductible, or the plan's separate foreign travel emergency
deductible.
V. Regulatory Impact Statement
Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612), we prepare a regulatory flexibility analysis unless we
certify that a notice will not have a significant economic impact on a
substantial number of small entities. For purposes of the RFA, some
insurance companies are considered to be small entities. Small entities
are nonprofit organizations, local and municipal government entities,
and entities defined by the Small Business Administration as small
businesses (firms with fewer than 500 employees). Individuals and
States are not included in the definition of a small entity.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a notice may have a significant impact on
the operations of a substantial number of small rural hospitals. Such
an analysis must conform to the provisions of section 604 of the RFA.
For purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 50 beds.
Approximately 360 insurance companies offer Medigap policies. About
half of the 360 insurance companies might be considered small entities.
All 50 States and the 360 insurance companies are affected by the
revised standards described in this notice. Under these changes,
insurers will now have to accept people in poorer health that the
insurers could have rejected before. If there are delays before the
insurance companies can raise rates to accommodate this change, or if
the State does not let the insurance companies raise rates, there will
be a cost to those companies. However, of the beneficiaries in poor
health and meeting the criteria in the statute, we do not know how many
of those who could have been rejected before will apply for Medigap
insurance. As a result, we do not know the financial impact this may
have on insurance companies selling Medigap insurance.
The costs of implementing the new NAIC standards will include the
codifying of changes in State insurance law or regulation to comply
with the changes, and the modifying of insurance policies and notifying
of the insured of the additional protections included in the changes to
the NAIC Model Regulation. Any costs attributable to the NAIC
regulatory changes are essentially mandated by the States, the
Congress, and insurance companies.
There are benefits from the revised standards for Medicare
beneficiaries. The additional protections will afford them increased
access to Medigap insurance while providing separate opportunities to
take advantage of the new Medicare+Choice program. Additionally,
Medicare beneficiaries who enroll in the Medicare+Choice program but
wish to leave the program, in many instances, will have the opportunity
to reenroll in a Medigap policy if they choose to return to the
traditional Medicare fee-for-service program.
This notice itself does not impose any requirements or result in
costs or benefits. The purpose of the notice is to merely inform the
public of the revised standards.
For these reasons, we are not preparing analyses for either the RFA
or section 1102(b) of the Act because we have determined, and we
certify, that this notice and the standards will not have a significant
economic impact on a substantial number of small entities or a
significant impact on the operations of a substantial number of small
rural hospitals.
In addition, this notice and the standards have been reviewed in
accordance with the Unfunded Mandates Reform Act of 1995 (UMRA) (2
U.S.C. 1501 et seq.) and Executive Order 12875. We estimate that
implementation of the new NAIC standards will not require the
expenditure of more than $100 million by the private sector. Therefore,
we are not required to prepare a cost-benefit analysis of private
sector expenditures, since this notice is not a significant regulatory
action within the meaning of the UMRA.
In accordance with the provisions of Executive Order 12866, this
notice was reviewed by the Office of Management and Budget.
Authority: Section 1882 of the Social Security Act (42 U.S.C.
1395(ss)).
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: November 24, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
Model Regulation To Implement the NAIC Medicare Supplement
Insurance Minimum Standards Model Act
Table of Contents
Section 1. Purpose
Section 2. Authority
Section 3. Applicability and Scope
Section 4. Definitions
Section 5. Policy Definitions and Terms
Section 6. Policy Provisions
Section 7. Minimum Benefit Standards for Policies or Certificates
Issued for Delivery Prior to [insert effective date adopted by
state]
Section 8. Benefit Standards for Policies or Certificates Issued
for Delivery After [insert effective date adopted by state]
Section 9. Standard Medicare Supplement Benefit Plans
Section 10. Medicare Select Policies and Certificates
Section 11. Open Enrollment
Section 12. Guaranteed Issue for Eligible Persons
Section 13. Standards for Claims Payment
Section 14. Loss Ratio Standards and Refund or Credit of Premium
Section 15. Filing and Approval of Policies and Certificates and
Premium Rates
Section 16. Permitted Compensation Arrangements
Section 17. Required Disclosure Provisions
Section 18. Requirements for Application Forms and Replacement
Coverage
Section 19. Filing Requirements for Advertising
Section 20. Standards for Marketing
Section 21. Appropriateness of Recommended Purchase and Excessive
Insurance
Section 22. Reporting of Multiple Policies
Section 23. Prohibition Against Preexisting Conditions, Waiting
Periods, Elimination Periods and Probationary Periods in Replacement
Policies or Certificates
Section 24. Separability
Section 25. Effective Date
Appendix A Reporting Form for Calculation of Loss Ratios
Appendix B Form for Reporting Duplicate Policies
Appendix C Disclosure Statements
Section 1. Purpose
The purpose of this regulation 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 such policies; to eliminate provisions contained in such
policies which may be misleading or confusing in connection with the
purchase of such policies or with the settlement of claims; and to
provide for full disclosures in the sale of accident
[[Page 67085]]
and sickness insurance coverages to persons eligible for Medicare.
Section 2. Authority
This regulation is issued pursuant to the authority vested in the
commissioner under [cite appropriate section of state law providing
authority for minimum benefit standards regulations or the NAIC
Medicare Supplement Insurance Minimum Standards Model Act].
Editor's Note: Wherever the term ``commissioner'' appears, the
title of the chief insurance regulatory official of the state should
be inserted.
Section 3. Applicability and Scope
A. Except as otherwise specifically provided in Sections 7, 12, 13,
16 and 21, this regulation shall apply to:
(1) All Medicare supplement policies delivered or issued for
delivery in this state on or after the effective date of this
regulation; and
(2) All certificates issued under group Medicare supplement
policies which certificates have been delivered or issued for delivery
in this state.
B. This regulation 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.
Section 4. Definitions
For purposes of this regulation:
A. Applicant means:
(1) In the case of an individual Medicare supplement policy, the
person who seeks to contract for insurance benefits, and
(2) In the case of a group Medicare supplement policy, the proposed
certificateholder.
B. Bankruptcy means when 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 any certificate delivered or issued for
delivery in this state under a group Medicare supplement policy.
D. Certificate form means the form on which the certificate is
delivered or 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 sixty-three (63) days.
F. (1) Creditable coverage means, with respect to an individual,
coverage of the individual provided under any of the following:
(a) A group health plan;
(b) Health insurance coverage;
(c) Part A or Part B of Title XVIII of the Social Security Act
(Medicare);
(d) Title XIX of the Social Security Act (Medicaid), other than
coverage consisting solely of benefits under section 1928;
(e) Chapter 55 of Title 10 United States Code (CHAMPUS);
(f) A medical care program of the Indian Health Service or of a
tribal organization;
(g) A State health benefits risk pool;
(h) A health plan offered under chapter 89 of Title 5 United States
Code (Federal Employees Health Benefits Program);
(i) A public health plan as defined in federal regulation; and
(j) A health benefit plan under Section 5(e) of the Peace Corps Act
(22 United States Code 2504(e)).
(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 on-site medical clinics; and
(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; and
(c) Such 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; and
(b) Hospital indemnity or other fixed indemnity insurance.
(5) Creditable coverage shall not include the following if it is
offered as a separate policy, certificate or contract of insurance:
(a) Medicare supplemental health insurance as defined under section
1882(g)(1) of the Social Security Act;
(b) Coverage supplemental to the coverage provided under chapter 55
of title 10, United States Code; and
(c) Similar supplemental coverage provided to coverage under a
group health plan.
Drafting Note: The Health Insurance Portability and
Accountability Act of 1996 (HIPAA) specifically addresses separate,
noncoordinated benefits in the group market at PHSA Sec. 2721(d)(2)
and the individual market at Sec. 2791(c)(3). HIPAA also references
excepted benefits at PHSA Secs. 2701(c)(1), 2721(d), 2763(b) and
2791(c). In addition, creditable coverage will be addressed in
regulations issued by the Secretary pursuant to HIPAA.
G. Employee welfare benefit plan means a plan, fund or program of
employee benefits as defined in 29 U.S.C. Section 1002 (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.
Drafting Note: If the state law definition of insolvency differs
from the above definition, please insert the state law definition.
I. Issuer includes insurance companies, fraternal benefit
societies, health care service plans, health maintenance organizations,
and any other entity delivering or issuing for delivery in this state
Medicare supplement policies or certificates.
J. Medicare means the ``Health Insurance for the Aged Act,'' Title
XVIII of the Social Security Amendments of 1965, as then constituted or
later amended.
K. Medicare+Choice plan means a plan of coverage for health
benefits under Medicare Part C as defined in [refer to definition of
Medicare+Choice plan in Section 1859 found in Title IV, Subtitle A,
Chapter 1 of P.L. 105-33], and includes:
(1) Coordinated care plans which provide health care services,
including but not limited to health maintenance organization plans
(with or without a point-of-service option), plans offered by provider-
sponsored organizations,
[[Page 67086]]
and preferred provider organization plans;
(2) Medical savings account plans coupled with a contribution into
a Medicare+Choice medical savings account; and
(3) Medicare+Choice private fee-for-service plans.
L. Medicare supplement policy means a group or individual policy of
[accident and sickness] insurance or a subscriber contract [of hospital
and medical service associations or health maintenance organizations],
other than a policy issued pursuant to a contract under Section 1876 of
the federal Social Security Act (42 U.S.C. Section 1395 et. seq.) or an
issued policy under a demonstration project specified in 42 U.S.C.
Sec. 1395ss(g)(1), 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.
Drafting Note: OBRA 1990 contained an exception from this
definition for policies issued pursuant to an agreement under
Section 1833 (42 U.S.C. 1395l) of the federal Social Security Act.
The Social Security Act Amendments of 1994 eliminated the exemption
for Section 1833 plans effective December 31, 1995. These plans,
commonly known as health care prepayment plans (HCPPs), arrange for
certain Part B services on a pre-paid basis. The federal law
continues to authorize HCPP agreements. However, since they are now
included in the federal definition of a Medicare supplement policy,
HCPPs are subject to the requirements of this model, unless they are
exempt under Section 3B. In states authorized for the Medicare
Select program, these plans may be able to comply with Medicare
supplement requirements.
M. Policy form means the form on which the policy is delivered or
issued for delivery by the issuer.
N. Secretary means the Secretary of the United States Department of
Health and Human Services.
Section 5. Policy Definitions and Terms
No policy or certificate may be advertised, solicited or issued for
delivery in this state as a Medicare supplement policy or certificate
unless the policy or certificate contains definitions or terms which
conform to the requirements of this section.
A. Accident, accidental injury, or accidental means shall be
defined to employ ``result'' language and shall not include words which
establish an accidental means test or use words such as ``external,
violent, visible wounds'' or similar words of description or
characterization.
(1) 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 which 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.''
(2) 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, or motor
vehicle no-fault plan, 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. 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.
Expenses shall not include:
(1) Home office and overhead costs;
(2) Advertising costs;
(3) Commissions and other acquisition costs;
(4) Taxes;
(5) Capital costs;
(6) Administrative costs; and
(7) 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 Then
Constituted or Later Amended,'' or ``Title I, Part I of Public Law 89-
97, as Enacted by the Eighty-Ninth Congress of the United States of
America and popularly known as the Health Insurance for the Aged Act,
as then constituted and any later amendments or substitutes thereof,''
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. Sickness shall not be defined to be more restrictive than the
following:
``Sickness means illness or disease of an insured person which
first manifests itself after the effective date of insurance and while
the insurance is in force.''
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.
Section 6. Policy Provisions
A. Except for permitted preexisting condition clauses as described
in Section 7A(1) and Section 8A(1) of this regulation, no policy or
certificate may be advertised, solicited or issued for delivery in this
state 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. No Medicare supplement policy or certificate may use waivers to
exclude, limit or reduce coverage or benefits for specifically named or
described preexisting diseases or physical conditions.
C. No Medicare supplement policy or certificate in force in the
state shall contain benefits which duplicate benefits provided by
Medicare.
Section 7. Minimum Benefit Standards for Policies or Certificates
Issued for Delivery Prior to [insert effective date adopted by
state]
No policy or certificate may be advertised, solicited or issued for
delivery in this state as a Medicare supplement policy or certificate
unless it meets or exceeds the following minimum standards. These are
minimum standards and do not preclude the inclusion of other provisions
or benefits which are not inconsistent with these standards.
Drafting Note: This section has been retained for transitional
purposes. The purpose of this section is to govern all policies
issued prior to the date a state makes its revisions to conform to
the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508).
A. General Standards. The following standards apply to Medicare
supplement policies and certificates and are in addition to all other
requirements of this regulation.
(1) A Medicare supplement policy or certificate shall not exclude
or limit benefits for losses incurred more than six (6) months from the
effective date of coverage because it involved a preexisting condition.
The policy or certificate shall not define a preexisting
[[Page 67087]]
condition more restrictively than a condition for which medical advice
was given or treatment was recommended by or received from a physician
within six (6) months before the effective date of coverage.
Drafting Note: States that have adopted the NAIC Individual
Accident and Sickness Insurance Minimum Standards Model Act should
recognize a conflict between Section 6B of that Act and this
subsection. It may be necessary to include additional language in
the Minimum Standards Model Act that recognizes the applicability of
this preexisting condition rule to Medicare supplement policies and
certificates.
(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 such changes.
Drafting Note: This provision was prepared so that premium
changes can be made based upon the changes in policy benefits that
will be necessary because of changes in Medicare benefits. States
may wish to redraft this provision so as to coincide with their
particular authority.
(4) A ``noncancellable, ``guaranteed renewable,'' or
``noncancellable and guaranteed renewable'' Medicare supplement policy
shall not:
(a) 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; or
(b) Be cancelled or nonrenewed by the issuer solely on the grounds
of deterioration of health.
(5) (a) Except as authorized by the commissioner of this state, an
issuer shall neither cancel nor nonrenew a Medicare supplement policy
or certificate for any reason other than nonpayment of premium or
material misrepresentation.
(b) If a group Medicare supplement insurance policy is terminated
by the group policyholder and not replaced as provided in Paragraph
(5)(d), the issuer shall offer certificateholders an individual
Medicare supplement policy. The issuer shall offer the
certificateholder at least the following choices:
(i) An individual Medicare supplement policy currently offered by
the issuer having comparable benefits to those contained in the
terminated group Medicare supplement policy; and
(ii) An individual Medicare supplement policy which provides only
such benefits as are required to meet the minimum standards as defined
in Section 8B of this regulation.
Drafting Note: Group contracts in force prior to the effective
date of the Omnibus Budget Reconciliation Act (OBRA) of 1990 may
have existing contractual obligations to continue benefits contained
in the group contract. This section is not intended to impair such
obligations.
(c) If membership in a group is terminated, the issuer shall:
(i) Offer the certificateholder the conversion opportunities
described in Subparagraph (b); or
(ii) At the option of the group policyholder, offer the
certificateholder continuation of coverage under the group policy.
(d) 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 group policy shall not result in any exclusion
for preexisting conditions that would have been covered under the group
policy being replaced.
Drafting Note: Rate increases otherwise authorized by law are
not prohibited by this Paragraph (5).
(6) Termination of a Medicare supplement policy or certificate
shall be without prejudice to any continuous loss which 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.
B. Minimum Benefit Standards.
(1) Coverage of Part A Medicare eligible expenses for
hospitalization to the extent not covered by Medicare from the 61st day
through the 90th day in any Medicare benefit period;
(2) Coverage for either all or none of the Medicare Part A
inpatient hospital deductible amount;
(3) Coverage of Part A Medicare eligible expenses incurred as daily
hospital charges during use of Medicare's lifetime hospital inpatient
reserve days;
(4) Upon exhaustion of all Medicare hospital inpatient coverage
including the lifetime reserve days, coverage of ninety percent (90%)
of all Medicare Part A eligible expenses for hospitalization not
covered by Medicare subject to a lifetime maximum benefit of an
additional 365 days;
(5) Coverage under Medicare Part A for the reasonable cost of the
first three (3) pints of blood (or equivalent quantities of packed red
blood cells, as defined under federal regulations) unless replaced in
accordance with federal regulations or already paid for under Part B;
(6) Coverage for the coinsurance amount of Medicare eligible
expenses under Part B regardless of hospital confinement, subject to a
maximum calendar year out-of-pocket amount equal to the Medicare Part B
deductible [$100];
(7) Effective January 1, 1990, coverage under Medicare Part B for
the reasonable cost of the first three (3) pints of blood (or
equivalent quantities of packed red blood cells, as defined under
federal regulations), unless replaced in accordance with federal
regulations or already paid for under Part A, subject to the Medicare
deductible amount.
Section 8. Benefit Standards for Policies or Certificates Issued or
Delivered on or After [insert effective date adopted by state]
The following standards are applicable to all Medicare supplement
policies or certificates delivered or issued for delivery in this state
on or after [insert effective date]. No policy or certificate may be
advertised, solicited, delivered or issued for delivery in this state
as a Medicare supplement policy or certificate unless it complies with
these benefit standards.
A. General Standards. The following standards apply to Medicare
supplement policies and certificates and are in addition to all other
requirements of this regulation.
(1) A Medicare supplement policy or certificate shall not exclude
or limit benefits for losses incurred more than six (6) months from the
effective date of coverage because it involved a preexisting condition.
The policy or certificate may 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
(6) months before the effective date of coverage.
Drafting Note: States that have adopted the NAIC Individual
Accident and Sickness Insurance Minimum Standards Model Act should
recognize a conflict between Section 6B of that Act and this
subsection. It may be necessary to include additional language in
[[Page 67088]]
the Minimum Standards Model Act that recognizes the applicability of
this preexisting condition rule to Medicare supplement policies and
certificates.
(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 such changes.
Drafting Note: This provision was prepared so that premium
changes can be made based on the changes in policy benefits that
will be necessary because of changes in Medicare benefits. States
may wish to redraft this provision to conform with their particular
authority.
(4) No Medicare supplement policy or certificate shall 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.
(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 material misrepresentation.
(c) If the Medicare supplement policy is terminated by the group
policyholder and is not replaced as provided under Section 8A(5)(e),
the issuer shall offer certificateholders an individual Medicare
supplement policy which (at the option of the certificateholder)
(i) Provides for continuation of the benefits contained in the
group policy, or
(ii) Provides for benefits that otherwise meet the requirements of
this subsection.
(d) If an individual is a certificateholder in a group Medicare
supplement policy and the individual terminates membership in the
group, the issuer shall:
(i) Offer the certificateholder the conversion opportunity
described in Section 8A(5)(c), or
(ii) At the option of the group policyholder, offer the
certificateholder continuation of coverage under the group policy.
(e) 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.
Drafting Note: Rate increases otherwise authorized by law are
not prohibited by this Paragraph (5).
(6) Termination of a Medicare supplement policy or certificate
shall be without prejudice to any continuous loss which commenced while
the policy was in force, but the extension of benefits beyond the
period during which the policy was in force may be conditioned upon the
continuous total disability of the insured, limited to the duration of
the policy benefit period, if any, or 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 certificateholder for
the period (not to exceed twenty-four (24) months) in which the
policyholder or certificateholder has applied for and is determined to
be entitled to medical assistance under Title XIX of the Social
Security Act, but only if the policyholder or certificateholder
notifies the issuer of the policy or certificate within ninety (90)
days after the date the individual becomes entitled to assistance.
(b) If suspension occurs and if the policyholder or
certificateholder loses entitlement to medical assistance, 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 certificateholder provides notice of
loss of entitlement within ninety (90) days after the date of loss and
pays the premium 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; and
(iii) Shall provide for classification of premiums on terms at
least as favorable to the policyholder or certificateholder as the
premium classification terms that would have applied to the
policyholder or certificateholder had the coverage not been suspended.
B. 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.
(1) Coverage of Part A Medicare eligible expenses for
hospitalization to the extent not covered by Medicare from the 61st day
through the 90th day 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 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;
(4) Coverage under Medicare Parts A and B for the reasonable cost
of the first three (3) 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;
C. Standards for Additional Benefits. The following additional
benefits shall be included in Medicare Supplement Benefit Plans ``B''
through ``J'' only as provided by Section 9 of this regulation.
(1) Medicare Part A Deductible: Coverage for all of the Medicare
Part A inpatient hospital deductible amount per benefit period.
(2) Skilled Nursing Facility Care: Coverage for the actual billed
charges up to the coinsurance amount from the 21st day through the
100th day in a Medicare benefit period for posthospital skilled nursing
facility care eligible under Medicare Part A.
(3) Medicare Part B Deductible: Coverage for all of the Medicare
Part B deductible amount per calendar year regardless of hospital
confinement.
[[Page 67089]]
(4) Eighty Percent (80%) of the Medicare Part B Excess Charges:
Coverage for eighty percent (80%) 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) One Hundred Percent (100%) 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) Basic Outpatient Prescription Drug Benefit: Coverage for fifty
percent (50%) of outpatient prescription drug charges, after a $250
calendar year deductible, to a maximum of $1,250 in benefits received
by the insured per calendar year, to the extent not covered by
Medicare.
(7) Extended Outpatient Prescription Drug Benefit: Coverage for
fifty percent (50%) of outpatient prescription drug charges, after a
$250 calendar year deductible to a maximum of $3,000 in benefits
received by the insured per calendar year, to the extent not covered by
Medicare.
(8) Medically Necessary Emergency Care in a Foreign Country:
Coverage to the extent not covered by Medicare for eighty percent (80%)
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
sixty (60) consecutive days of each trip outside the United States,
subject to a calendar year deductible of $250, and a lifetime maximum
benefit of $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) 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:
(1) Fecal occult blood test or digital rectal examination, or both;
(2) Mammogram;
(3) Dipstick urinalysis for hematuria, bacteriuria and proteinuria;
(4) Pure tone (air only) hearing screening test, administered or
ordered by a physician;
(5) Serum cholesterol screening (every five (5) years);
(6) Thyroid function test;
(7) Diabetes screening.
(c) Influenza vaccine administered at any appropriate time during
the year and tetanus and diphtheria booster (every ten (10) years).
(d) Any other tests or preventive measures determined appropriate
by the attending physician.
Reimbursement shall be for the actual charges up to one hundred
percent (100%) 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 $120 annually under this benefit. This benefit shall not
include payment for any procedure covered by Medicare.
(10) 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, 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 limit on the
duration of the visit, except each consecutive four (4) hours in a
twenty-four-hour period of services provided by a care provider is one
visit.
(b) Coverage Requirements and Limitations.
(i) At-home recovery services provided must be primarily services
which assist in activities of daily living.
(ii) The insured's attending physician must 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:
(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 $40 per visit;
(III) $1,600 per calendar year;
(IV) Seven (7) 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 this
section;
(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 (8) weeks after the service date of the last Medicare
approved home health care visit.
(c) Coverage is excluded for:
(i) Home care visits paid for by Medicare or other government
programs; and
(ii) Care provided by family members, unpaid volunteers or
providers who are not care providers.
(11) 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 insurance, 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.
Drafting Note: The Omnibus Budget Reconciliation Act 1990, 42
U.S.C. Sec. 1395ss(p)(7), does not prohibit the issuers of Medicare
supplement policies, through an arrangement with a vendor for
discounts from the vendor, from making available discounts from the
vendor to the policyholder or certificateholder for the purchase of
items or services not covered under its Medicare supplement policies
(for example: discounts on hearing aids or eyeglasses).
Drafting Note: Use of new or innovative benefits may be
appropriate to add coverage
[[Page 67090]]
or access to such benefits as prescription drugs, at-home recovery
services and preventive medical care. Any such innovative benefit,
however, should offer uniquely different or significantly expanded
coverage.
Drafting Note: The NAIC discussed including inflation protection
for prescription drugs, at-home recovery benefits, and preventive
care benefits. However, because of the lack of an appropriate
mechanism for indexing these benefits, NAIC has not included
indexing at this point in time. However, NAIC is committed to
evaluating the effectiveness of these benefits without inflation
protection, and will revisit the issue. NAIC has determined that
OBRA does not authorize NAIC to delegate the authority for indexing
these benefits to a federal agency without an amendment to federal
law.
Section 9. Standard Medicare Supplement Benefit Plans
A. An issuer shall make available to each prospective policyholder
and certificateholder a policy form or certificate form containing only
the basic core benefits, as defined in Section 8B of this regulation.
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 in Section 8C(11) and in
Section 10 of this regulation.
C. Benefit plans shall be uniform in structure, language,
designation and format to the standard benefit plans ``A'' through
``J'' listed in this subsection and conform to the definitions in
Section 4 of this regulation. Each benefit shall be structured in
accordance with the format provided in Sections 8B and 8C and list the
benefits in the order shown in this subsection. 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 Subsection C, other designations to the extent permitted by
law.
Drafting Note: It is anticipated that if a state determines that
it will authorize the sale of only some of these benefit plans, the
letter codes used in this regulation will be preserved. The Guide to
Health Insurance for People with Medicare'' published jointly by the
NAIC and the Health Care Financing Administration will contain a
chart comparing the ten possible combinations. In order for
consumers to compare specific policy choices, it will be important
that a uniform ``naming'' system be used. Thus, if only plans ``A,''
``B,'' ``D,'' ``F'' and ``H'' (for example) are authorized in a
state, these plans should retain these alphabetical designations.
However, an issuer may use, in addition to these alphabetical
designations, other designations as provided in Section 9D of this
regulation.
E. Make-up of benefit plans:
(1) Standardized Medicare supplement benefit plan ``A'' shall be
limited to the basic (core) benefits common to all benefit plans, as
defined in Section 8B of this regulation.
(2) Standardized Medicare supplement benefit plan ``B'' shall
include only the following: The core benefit as defined in Section 8B
of this regulation, plus the Medicare Part A deductible as defined in
Section 8C(1).
(3) Standardized Medicare supplement benefit plan ``C'' shall
include only the following: The core benefit as defined in Section 8B
of this regulation, 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 Sections 8C
(1), (2), (3) and (8) respectively.
(4) Standardized Medicare supplement benefit plan ``D'' shall
include only the following: The core benefit (as defined in Section 8B
of this regulation), plus the Medicare Part A deductible, skilled
nursing facility care, medically necessary emergency care in an foreign
country and the at-home recovery benefit as defined in Sections 8C (1),
(2), (8) and (10) respectively.
(5) Standardized Medicare supplement benefit plan ``E'' shall
include only the following: The core benefit as defined in Section 8B
of this regulation, 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 Sections 8C (1), (2),
(8) and (9) respectively.
(6) Standardized Medicare supplement benefit plan ``F'' shall
include only the following: The core benefit as defined in Section 8B
of this regulation, plus the Medicare Part A deductible, the skilled
nursing facility care, the Part B deductible, one hundred percent
(100%) of the Medicare Part B excess charges, and medically necessary
emergency care in a foreign country as defined in Sections 8C (1), (2),
(3), (5) and (8) respectively.
(7) Standardized Medicare supplement benefit high deductible plan
``F'' shall include only the following: 100% of covered expenses
following the payment of the annual high deductible plan ``F''
deductible. The covered expenses include the core benefit as defined in
Section 8B of this regulation, plus the Medicare Part A deductible,
skilled nursing facility care, the Medicare Part B deductible, one
hundred percent (100%) of the Medicare Part B excess charges, and
medically necessary emergency care in a foreign country as defined in
Sections 8C (1), (2), (3), (5) and (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 $1500 for 1998 and 1999, and shall be based on the
calendar year. It shall be adjusted annually thereafter by the
Secretary to reflect the change in the Consumer Price Index for all
urban consumers for the twelve-month period ending with August of the
preceding year, and rounded to the nearest multiple of $10.
(8) Standardized Medicare supplement benefit plan ``G'' shall
include only the following: The core benefit as defined in Section 8B
of this regulation, plus the Medicare Part A deductible, skilled
nursing facility care, eighty percent (80%) of the Medicare Part B
excess charges, medically necessary emergency care in a foreign
country, and the at-home recovery benefit as defined in Sections 8C
(1), (2), (4), (8) and (10) respectively.
(9) Standardized Medicare supplement benefit plan ``H'' shall
consist of only the following: The core benefit as defined in Section
8B of this regulation, plus the Medicare Part A deductible, skilled
nursing facility care, basic prescription drug benefit and medically
necessary emergency care in a foreign country as defined in Sections 8C
(1), (2), (6) and (8) respectively.
(10) Standardized Medicare supplement benefit plan ``I'' shall
consist of only the following: The core benefit as defined in Section
8B of this regulation, plus the Medicare Part A deductible, skilled
nursing facility care, one hundred percent (100%) of the Medicare Part
B excess charges, basic prescription drug benefit, medically necessary
emergency care in a foreign country and at-home recovery benefit as
defined in Sections 8C (1), (2), (5), (6), (8) and (10) respectively.
(11) Standardized Medicare supplement benefit plan ``J'' shall
consist of only the following: The core benefit as defined in Section
8B of this regulation, plus the Medicare Part A deductible, skilled
nursing facility care, Medicare Part B deductible, one hundred percent
(100%) of the Medicare Part B excess charges, extended prescription
drug benefit, medically necessary emergency care in a foreign country,
preventive medical care and at-home recovery benefit as defined in
Sections 8C (1), (2), (3), (5), (7), (8), (9) and (10) respectively.
[[Page 67091]]
(12) Standardized Medicare supplement benefit high deductible plan
``J'' shall consist of only the following: 100% of covered expenses
following the payment of the annual high deductible plan ``J''
deductible. The covered expenses include the core benefit as defined in
Section 8B of this regulation, plus the Medicare Part A deductible,
skilled nursing facility care, Medicare Part B deductible, one hundred
percent (100%) 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 Sections 8C (1), (2), (3), (5), (7),
(8), (9) and (10) 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 $1500 for 1998 and 1999,
and shall be based on a calendar year. It shall be adjusted annually
thereafter by the Secretary to reflect the change in the Consumer Price
Index for all urban consumers for the twelve-month period ending with
August of the preceding year, and rounded to the nearest multiple of
$10.
Drafting Note: A state may determine by statute or regulation
which of the above benefit plans may be sold in that state. The core
benefit plan must be made available by all issuers. Therefore, the
core benefit plan must be one of the authorized benefit plans
adopted by a state. In no event, however, may a state authorize the
sale of more than 10 standardized Medicare supplement benefit plans
(that is, 9 plus the core policy), plus the two (2) high deductible
plans, at the same time.
Drafting Note: The Omnibus Budget Reconciliation Act of 1990
preempts state mandated benefits in Medicare supplement policies or
certificates, except for those states which have been granted a
waiver for nonstandardized plans.
Section 10. Medicare Select Policies and Certificates
A. (1) This section shall apply to Medicare Select policies and
certificates, as defined in this section.
Drafting Note: This section should be adopted by states
designated by the Secretary of Health and Human Services to
participate in the Medicare Select Program. Section 4358 of the
Omnibus Budget Reconciliation Act (OBRA) of 1990 (section 1882(t) of
Title XVIII of the Social Security Act) authorized a three-year,
fifteen-state program with states to be designated by the Secretary.
Additional states may be authorized by future changes to federal law
to apply the Medicare Select Program requirements to existing
preferred provider arrangements.
(2) No policy or certificate may 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) 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 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.
(3) Medicare Select issuer means an issuer offering, or seeking to
offer, 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 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.
C. The commissioner may authorize an issuer to offer a Medicare
Select policy or certificate, pursuant to this section and Section 4358
of the Omnibus Budget Reconciliation Act (OBRA) of 1990 if the
commissioner finds that the issuer has satisfied all of the
requirements of this regulation.
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 that:
(a) Services can be provided by network providers with reasonable
promptness with respect to geographic location, hours of operation and
after-hour care. The hours of operation and availability of after-hour
care shall reflect usual practice in the local area. Geographic
availability shall reflect the usual travel times within the community.
(b) The number of network providers in the service area is
sufficient, with respect to current and expected policyholders, either:
(i) To deliver adequately all services that are subject to a
restricted network provision; or
(ii) To make appropriate referrals.
(c) There are written agreements with network providers describing
specific responsibilities.
(d) Emergency care is available twenty-four (24) hours per day and
seven (7) 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, 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 paragraph 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 grievance procedure to be utilized.
(4) A description of the quality assurance program, including:
(a) The formal organizational structure;
(b) The written criteria for selection, retention and removal of
network providers; and
(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 Subsection 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 thirty
(30) days unless specifically disapproved.
(2) An updated list of network providers shall be filed with the
commissioner at least quarterly.
G. A Medicare Select policy or certificate shall not restrict
payment for
[[Page 67092]]
covered services provided by non-network providers if:
(1) The services are for symptoms requiring emergency care or are
immediately required for an unforeseen illness, injury or a condition;
and
(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:
(a) Other Medicare supplement policies or certificates offered by
the issuer; and
(b) Other Medicare Select policies or certificates.
(2) A description (including address, phone 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 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
program and grievance 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 Subsection I of this section and that the
applicant understands the restrictions of the Medicare Select policy or
certificate.
K. A Medicare Select issuer shall have and use procedures for
hearing complaints and resolving written grievances from the
subscribers. The procedures shall be aimed at mutual agreement for
settlement and may include arbitration procedures.
(1) The 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 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 decision-makers 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
commissioner regarding its grievance procedure. The report shall be in
a format prescribed by the commissioner and shall contain the number of
grievances filed in the past year and a summary of the subject, nature
and resolution of such grievances.
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 which
has comparable or lesser benefits and which 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 (6)
months.
(2) For the purposes of this subsection, 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 Part B
excess charges.
N. Medicare Select policies and certificates shall provide for
continuation of coverage in the event the Secretary of Health and Human
Services 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 subsection, 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 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.
Section 11. Open Enrollment
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 (6) 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
insurer shall be made available to all applicants who qualify under
this subsection without regard to age.
B. (1) If an applicant qualifies under Subsection A and submits an
application during the time period referenced in Subsection A and, as
of the date of application, has had a continuous period of creditable
coverage of at least six (6) months, the
[[Page 67093]]
issuer shall not exclude benefits based on a preexisting condition.
(2) If the applicant qualifies under Subsection A and submits an
application during the time period referenced in Subsection A and, as
of the date of application, has had a continuous period of creditable
coverage that is less than six (6) 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 Secretary shall specify the manner of the
reduction under this subsection.
Drafting Note: The Secretary has developed regulations pursuant
to HIPAA regarding methods of counting creditable coverage, which
govern the way the reduction is to be applied in Section 11B(2).
C. Except as provided in Subsection B and Section 23, Subsection A
shall not be construed as preventing the exclusion of benefits under a
policy, during the first six (6) months, based on a preexisting
condition for which the policyholder or certificateholder received
treatment or was otherwise diagnosed during the six (6) months before
the coverage became effective.
Section 12. Guaranteed Issue for Eligible Persons
A. Guaranteed Issue--(1) Eligible persons are those individuals
described in subsection B who apply to enroll under the policy not
later than sixty-three (63) days after the date of the termination of
enrollment described in subsection 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 subsection 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. Eligible Persons--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
such supplemental health benefits to the individual;
Drafting Note: Paragraph (1) above uses the federal legislative
language from the Balanced Budget Act of 1997 (P.L. 105-33) that
defines an eligible person as an individual with respect to whom an
employee welfare benefit plan terminates, or ceases to provide
``all'' health benefits that supplement Medicare. There was
protracted discussion among the drafters about the interpretation of
``all'' in this context: if the employer drops some supplemental
benefits, but not all such benefits, from its welfare plan, should
the individual be eligible for a guaranteed issue Medicare
supplement product? This question may become crucial to certain
individuals depending on the benefits dropped by the employer.
Federal legislative history appears to indicate the intention that
the word ``all'' be strictly construed so as to require termination
or cessation of all supplemental health benefits. States, however,
can provide greater protections to beneficiaries and may wish to
include, as eligible persons, individuals who have lost ``some or
all'' or ``substantially all'' of their supplemental health
benefits, to encompass situations where a change is made in an
employee welfare benefit plan that reduces the amount of
supplemental health benefits available to the individual. States
that consider alternative language are reminded to consider the
impact of issues such as plan changes that result in adverse
selection, duplicate coverage, triggering the requirement for plan
administrator notice (see Section 12D) and other issues.
(2) The individual is enrolled with a Medicare+Choice organization
under a Medicare+Choice plan under part C of Medicare, and any of the
following circumstances apply:
(i) 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;
(ii) 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), or the plan is
terminated for all individuals within a residence area;
(iii) The individual demonstrates, in accordance with guidelines
established by the Secretary, that:
(I) The organization offering the plan substantially violated a
material provision of the organization's contract under this part 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 such covered
care in accordance with applicable quality standards; or
(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; or
(iv) The individual meets such other exceptional conditions as the
Secretary may provide.''
(3) (a) The individual is enrolled with:
(i) An eligible organization under a contract under Section 1876
(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) (health care prepayment plan); or
(iv) An organization under a Medicare Select policy; and
(b) The enrollment ceases under the same circumstances that would
permit discontinuance of an individual's election of coverage under
Section 12B(2).
Drafting Note: Section 3(a)(iv) above is not required if there
is a provision in state law or regulation that provides for the
continuation or conversion of Medicare Select policies or
certificates.
(4) The individual is enrolled under a Medicare supplement policy
and the enrollment ceases because:
(a) (i) Of the insolvency of the issuer or bankruptcy of the
nonissuer organization; or
(ii) Of other involuntary termination of coverage or enrollment
under the policy;
(b) The issuer of the policy substantially violated a material
provision of the policy; or
(c) 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;
Drafting Note: The reference to ``insolvency of the issuer'' in
Paragraph 4(a) above is not required if there is a provision in
state law or regulation that provides for the continuation or
conversion of Medicare supplement policies or certificates. The
reference to ``substantially violated a material provision of the
policy'' in Paragraph 4(b) above is expected to be amplified by the
Secretary when federal regulations are issued pursuant to the
Balanced Budget Act of 1997 (P.L. 105-33).
(5) (a) The individual was enrolled under a Medicare supplement
policy
[[Page 67094]]
and terminates enrollment and subsequently enrolls, for the first time,
with any Medicare+Choice organization under a Medicare+Choice plan
under part C of Medicare, any eligible organization under a contract
under Section 1876 (Medicare risk or cost), any similar organization
operating under demonstration project authority, an organization under
an agreement under section 1833(a)(1)(A) (health care prepayment plan),
or a Medicare Select policy; and
(b) The subsequent enrollment under subparagraph (a) is terminated
by the enrollee during any period within the first twelve (12) months
of such subsequent enrollment (during which the enrollee is permitted
to terminate such subsequent enrollment under section 1851(e) of the
federal Social Security Act); or
(6) The individual, upon first becoming eligible for benefits under
part A of Medicare at age 65, enrolls in a Medicare+Choice plan under
part C of Medicare, and disenrolls from the plan by not later than
twelve (12) months after the effective date of enrollment.
Drafting Note: Federal law provides a guaranteed issue right to
a Medicare supplement insurance product to individuals who enroll in
Medicare Part B at age 65. States may wish to consider extending
this right to other classes of individuals, such as those who
postpone enrollment in Medicare Part B until after age 65 because
they are working and are enrolled in a group health insurance plan.
C. Products to Which Eligible Persons are Entitled--The Medicare
supplement policy to which eligible persons are entitled under:
(1) Section 12B(1), (2), (3) and (4) is a Medicare supplement
policy which has a benefit package classified as Plan A, B, C, or F
offered by any issuer.
(2) Section 12B(5) is the same Medicare supplement policy in which
the individual was most recently previously enrolled, if available from
the same issuer, or, if not so available, a policy described in
Subsection C(1).
(3) Section 12B(6) shall include any Medicare supplement policy
offered by any issuer.
Drafting Note: Under federal law, for states that are exempted
from standardization and offer benefit packages other than Plans A
through J, the references to benefit packages above are deemed
references to comparable benefit packages offered in that state.
Those states should amend the language accordingly.
D. Notification provisions--(1) At the time of an event described
in Subsection B of this section 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 Subsection A. Such notice shall
be communicated contemporaneously with the notification of termination.
(2) At the time of an event described in Subsection B of this
section 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 Section 12A. Such notice shall be
communicated within ten working days of the issuer receiving
notification of disenrollment.
Drafting Note: States should ensure that educational and public
information materials it develops related to Medicare includes a
thorough description of the rights outlined in Section 12D.
Section 13. Standards for Claims Payment
A. An issuer shall comply with section 1882(c)(3) of the Social
Security Act (as enacted by section 4081(b)(2)(C) of the Omnibus Budget
Reconciliation Act of 1987 (OBRA) 1987, Pub. L. No. 100-203) by:
(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; and
(6) Providing to the Secretary of Health and Human Services, 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 Subsection A above
shall be certified on the Medicare supplement insurance experience
reporting form.
Section 14. Loss Ratio Standards and Refund or Credit of Premium
A. Loss Ratio Standards--(1)(a) A Medicare Supplement policy form
or certificate form shall not be delivered 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:
(i) At least seventy-five percent (75%) of the aggregate amount of
premiums earned in the case of group policies; or
(ii) At least sixty-five percent (65%) of the aggregate amount of
premiums earned in the case of individual policies;
(b) Calculated on the basis of incurred claims experience or
incurred health care expenses where coverage is provided by a health
maintenance organization on a service rather than reimbursement basis
and earned premiums 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 Subsection A(1) of this section and
Subsection C(3) of Section 15 only, policies issued as a result of
solicitations of individuals through the mails or by mass media
advertising (including both print and broadcast advertising) shall be
deemed to be individual policies.
Drafting Note: Subsection A(3) replicates language contained in
the Omnibus Budget Reconciliation Act of 1990 (Pub. L. No. 101-508).
It allows direct mail group policies sold on an individual basis to
meet the minimum loss ratio required of individual business (65%)
rather than that required of group business (75%). The NAIC
eliminated this concept from this regulation in 1987 (I Proceedings
of the NAIC, pp. 651, 673
[[Page 67095]]
(1988)). At that time, NAIC required direct mail group business to
meet the same loss ratio requirement as other group business,
regardless of whether the business was sold on an individual basis.
The NAIC encourages states to apply the 75% loss ratio to all group
business. Although NAIC is restricted from making revisions to its
models that are not in conformance with OBRA 1990, states are free
to impose more stringent requirements than OBRA.
(4) For policies issued prior to [insert effective date from
Section 24 of this model, the effective date of the states regulation
implementing the requirements of OBRA 1990], expected claims in
relation to premiums shall meet:
(a) The originally filed anticipated loss ratio when combined with
the actual experience since inception;
(b) The appropriate loss ratio requirement from Subsection
A(1)(a)(i) and (ii) when combined with actual experience beginning with
[insert effective date of this revision] to date; and
(c) The appropriate loss ratio requirement from Subsection
A(1)(a)(i) and (ii) over the entire future period for which the rates
are computed to provide coverage.
Drafting Note: The appropriate loss ratio requirement from
Subsection A(1)(a)(i) and (ii) for all group policies subject to an
individual loss ratio standard when issued is 65 percent. States may
amend Section 13A(4) to permit or require aggregation of closed
blocks of business upon approval of the Health Care Financing
Administration.
B. Refund or Credit Calculation--(1) An issuer shall collect and
file with the commissioner by May 31 of each year the data contained in
the applicable reporting form contained in Appendix A for each type 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, policies or certificates
issued prior to [insert effective date from Section 24 of this model,
the effective date of the states regulation implementing the
requirements of OBRA 1990], 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 the
[insert effective date of this amendment]. The first report shall be
due by May 31, [insert (effective year + 2) of this amendment].
Drafting Note: Subsection B(3) implements the requirements of
Section 171 of the Social Security Act Amendments of 1994 that
require a refund or credit calculation for pre-standardized Medicare
supplement policies, but only for experience subsequent to the date
the state amends its regulation.
(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 of Health and
Human Services, but in no event shall it be less than the average rate
of interest for thirteen-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. Annual filing of Premium Rates--An issuer of Medicare supplement
policies and certificates issued before or after the effective date of
[insert citation to state's regulation] in this state 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. 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 which
is greater than or equal to the applicable percentage shall be
demonstrated for policies or certificates in force less than three (3)
years.
As soon as practicable, but prior to the effective date of
enhancements in Medicare benefits, every issuer of Medicare supplement
policies or certificates in this state shall file with the
commissioner, in accordance with the applicable filing procedures of
this state:
(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 which
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 which would modify the loss ratio experience under
the policy other than the adjustments described herein 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. Public Hearings--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 [insert citation to state's regulation] 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.
Drafting Note: This section does not in any way restrict a
commissioner's statutory authority, elsewhere granted, to approve or
disapprove rates.
Section 15. Filing and Approval of Policies and Certificates and
Premium Rates
A. An issuer shall not deliver 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.
[[Page 67096]]
B. 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.
C. (1) Except as provided in Paragraph (2) of this subsection, 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 (4) 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 Paragraph (1)(a), an issuer shall
continue to make available for purchase any policy form or certificate
form issued after the effective date of this regulation 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 twelve (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 thirty (30) 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 (5) 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 subsection.
(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.
(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.
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 [insert citation to Section
13 of NAIC Medicare Supplement Insurance Model Regulation].
(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.
Drafting Note: It has come to the attention of the NAIC that the
use of attained age rating in the determination of rates in Medicare
supplement policies may result in situations to which a regulatory
response is desirable. States should assess their Medicare
supplement marketplace to determine whether a regulatory response is
needed. The following provisions may be included as a new subsection
to Section 14. The first option prohibits insurers from attained age
rating as a methodology for setting rates. The second option does
not prohibit the use of attained age rating but requires Medicare
supplement insurers who do use attained age rating as a rate setting
methodology to apply the age component to its rates annually. The
effective date of the regulation should provide sufficient time for
insurers to re-rate approved policy forms in accordance with Section
14A and for the insurance department to approve (according to its
rate filing practices and procedures), such re-ratings prior to the
effective date of the regulation.
Option 1
F. An issuer shall not present for filing or approval a rate
structure for its Medicare supplement policies or certificates issued
after the effective date of the amendment of this regulation based upon
attained age rating as a structure or methodology.
Option 2
F. An issuer shall not present for filing or approval a rate
structure for its Medicare supplement policies or certificates issued
after the effective date of the amendment of this regulation based upon
a structure or methodology with any groupings of attained ages greater
than one year. The ratio between rates for successive ages shall
increase smoothly as age increases.
Section 16. Permitted Compensation Arrangements
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.
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 (5) 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, ``compensation'' includes
pecuniary or non-pecuniary 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.
Section 17. Required Disclosure Provisions
A. General Rules--(1) Medicare supplement policies and certificates
shall include a renewal or continuation 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
[[Page 67097]]
and any automatic renewal premium increases based on the policyholder's
age.
(2) 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 date of issue or at reinstatement or renewal
which 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.
(3) 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.
(4) If a Medicare supplement policy or certificate contains any
limitations with respect to preexisting conditions, such limitations
shall appear as a separate paragraph of the policy and be labeled as
``Preexisting Condition Limitations.''
(5) Medicare supplement policies and certificates shall have a
notice prominently printed on the first page of the policy or
certificate or attached thereto stating in substance that the
policyholder or certificateholder shall have the right to return the
policy or certificate within thirty (30) days of its delivery and to
have the premium refunded if, after examination of the policy or
certificate, the insured person is not satisfied for any reason.
(6) (a) Issuers of accident and sickness policies or certificates
which 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 policies or certificates are
advertised, solicited or issued as Medicare supplement policies or
certificates as defined in this regulation. Except in the case of
direct response issuers, delivery of the Guide shall be made to the
applicant at the time of application and acknowledgement 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.
(b) For the purposes of this section, ``form'' means the language,
format, type size, type proportional spacing, bold character, and line
spacing.
B. Notice Requirements--(1) As soon as practicable, but no later
than thirty (30) days prior to the annual effective date of any
Medicare benefit changes, an issuer shall notify its policyholders and
certificateholders of modifications it has made to Medicare supplement
insurance policies or certificates in a format acceptable to the
commissioner. The notice shall:
(a) Include 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, and
(b) Inform each policyholder or certificateholder as to when any
premium adjustment is to be made due to changes in Medicare.
(2) 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.
(3) The notices shall not contain or be accompanied by any
solicitation.
C. Outline of Coverage Requirements for Medicare Supplement
Policies--(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
acknowledgement of receipt of the outline from the applicant; and (2)
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 twelve (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.''
(3) 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 twelve (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.
(4) The following items shall be included in the outline of
coverage in the order prescribed below.
[COMPANY NAME]
Outline of Medicare Supplement Coverage-Cover Page:
Benefit Plans ________ [insert letters of plans being offered]
Medicare supplement insurance can be sold in only ten standard plans
plus two high deductible plans. This chart shows the benefits included
in each plan. Every company must make available Plan ``A''. Some plans
may not be available in your state.
Basic Benefits: Included in All Plans.
Hospitalization: Part A coinsurance plus coverage for 365 additional
days after Medicare benefits end.
Medical Expenses: Part B coinsurance (generally 20% of Medicare-approved
expenses), or, in the case of hospital outpatient department services,
applicable copayments.
Blood: First three pints of blood each year.
[[Page 67098]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
A B C D E F F* G H I J J*
--------------------------------------------------------------------------------------------------------------------------------------------------------
Basic Benefits.................. Basic Basic Basic Basic Basic Basic Basic Basic Basic
Benefits Benefits Benefits Benefits Benefits Benefits Benefits Benefits Benefits
.......... Skilled Skilled Skilled Skilled Skilled Skilled Skilled Skilled
Nursing Nursing Nursing Nursing Co- Nursing Co- Nursing Co- Nursing Co- Nursing Co-
Co- Co- Co- Insurance Insurance Insurance Insurance Insurance
Insuranc Insuranc Insuranc
e e e
Part A Part A Part A Part A Part A Part A Part A Part A Part A
Deductibl Deductib Deductib Deductib Deductible Deductible Deductible Deductible Deductible
e le le le
.......... Part B ......... ......... Part B ............. ............. ............. Part B
Deductib Deductible Deductible
le
.......... ......... ......... ......... Part B Excess Part B Excess ............. Part B Excess Part B Excess
(100%) (80%) (100%) (100%)
.......... Foreign Foreign Foreign Foreign Foreign Foreign Foreign Foreign
Travel Travel Travel Travel Travel Travel Travel Travel
Emergenc Emergenc Emergenc Emergency Emergency Emergency Emergency Emergency
y y y
.......... ......... At-Home ......... ............. At-Home ............. At-Home At-Home
Recovery Recovery Recovery Recovery
.......... ......... ......... ......... ............. ............. Basic Drugs Basic Drugs Extended
($1,250 ($1,250 Drugs
Limit) Limit) ($3,000
Limit)
.......... ......... ......... Preventiv ............. ............. ............. ............. Preventive
e Care Care
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Plans F and J also have an option called a high deductible plan F and a high deductible plan J. These high deductible plans pay the same or offer the
same benefits as Plans F and J after one has paid a calendar year [$1500] deductible. Benefits from high deductible plans F and J will not begin until
out-of-pocket expenses are [$1500]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. These
expenses include the Medicare deductibles for Part A and Part B, but does not include, in plan J, the plan's separate prescription drug deductible or,
in Plans F and J, the plan's separate foreign travel emergency deductible.
PREMIUM INFORMATION [Boldface Type]
We [insert issuer's name] can only raise your premium if we raise
the premium for all policies like yours in this State. [If the premium
is based on the increasing age of the insured, include information
specifying when premiums will change.]
DISCLOSURES [Boldface Type]
Use this outline to compare benefits and premiums among policies.
READ YOUR POLICY VERY CAREFULLY [Boldface Type]
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.
RIGHT TO RETURN POLICY [Boldface Type]
If you find that you are not satisfied with your policy, you may
return it to [insert issuer'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 had never been issued and return all of your payments.
POLICY REPLACEMENT [Boldface Type]
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.
NOTICE [Boldface Type]
This policy may not fully cover all of your medical costs.
[For agents:]
Neither [insert company's name] nor its agents are connected with
Medicare.
[For direct response:]
[insert company's name] is not 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.
COMPLETE ANSWERS ARE VERY IMPORTANT [Boldface Type]
When you fill out the application for the new policy, be sure to
answer truthfully and completely all questions about your medical and
health history. The company may cancel your policy and refuse to pay
any claims if you leave out or falsify important medical information.
[If the policy or certificate 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.
[Include for each plan prominently identified in the cover page, a
chart showing the services, Medicare payments, plan payments and
insured payments for each plan, using the same language, in the same
order, using uniform layout and format as shown in the charts below. No
more than four plans may be shown on one chart. For purposes of
illustration, charts for each plan are included in this regulation. An
issuer may use additional benefit plan designations on these charts
pursuant to Section 9D of this regulation.]
[Include an explanation of any innovative benefits on the cover
page and in the chart, in a manner approved by the commissioner.]
Plan A--Medicare (Part A)--Hospital Services--PER Benefit Period
----------------------------------------------------------------------------------------------------------------
Services Medicare pays Plan pays You pay
----------------------------------------------------------------------------------------------------------------
Hospitalization *
Semiprivate room and board, general
nursing and miscellaneous services
and supplies:
First 60 days.................... All but $[764]......... $0..................... $[764] (Part A
deductible)
61st thru 90th day............... All but $[191] a day... $[191] a day........... 0
91st day and after:
--While using 60 lifetime All but $[382] a day... $[382] a day........... 0
reserve days.
[[Page 67099]]
--Once lifetime reserve days
are used:
--Additional 365 days.... 0...................... 100% of Medicare 0
eligible expenses.
--Beyond the additional 0...................... 0...................... All costs
365 days.
Skilled Nursing Facility Care *
You must meet Medicare's
requirements, including having been
in a hospital for at least 3 days
and entered a Medicare-approved
facility within 30 days after
leaving the hospital:
First 20 days.................... All approved amounts... 0...................... 0
21st thru 100th day.............. All but $[95.50] a day. 0...................... Up to $[95.50] a day 3
101st day and after.............. 0...................... 0...................... All costs
Blood
First 3 pints........................ 0...................... 3 pints................ 0
Additional amounts................... 100%................... 0...................... 0
Hospice Care
Available as long as your doctor All but very limited 0...................... Balance
certifies you are terminally ill and coinsurance for out-
you elect to receive these services. patient drugs and
inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.
Plan A--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
Services Medicare pays Plan pays You pay
----------------------------------------------------------------------------------------------------------------
Medical Expenses
In or out of the hospital and
outpatient hospital treatment, such
as Physician's services, inpatient
and outpatient medical and surgical
services and supplies, physical and
speech therapy, diagnostic tests,
durable medical equipment:
First $100 of Medicare Approved $0..................... $0..................... $100 (Part B
Amounts*. deductible)
Remainder of Medicare Approved Generally 80%.......... Generally 20%.......... 0
Amounts.
Part B Excess Charges (Above 0...................... 0...................... All costs
Medicare Approved Amounts.
Blood
First 3 pints........................ 0...................... All costs.............. 0
Next $100 of Medicare Approved 0...................... 0...................... $100 (Part B
Amounts*. deductible)
Remainder of Medicare Approved 80%.................... 20%.................... 0
Amounts.
Clinical Laboratory Services
Blood tests for diagnostic services.. 100%................... 0...................... 0
----------------------------------------------------------------------------------------------------------------
PARTS A & B
----------------------------------------------------------------------------------------------------------------
Home Health Care
Medicare approved services:
--Medically necessary skilled 100%................... 0...................... 0
care services and medical
supplies.
--Durable medical equipment First 0...................... 0...................... 100 (Part B deductible)
$100 of Medicare Approved
Amounts*.
Remainder of Medicare Approved 80%.................... 20%.................... 0
Amounts.
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
asterisk), your Part B deductible will have been met for the calendar year.
Plan B--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
Services Medicare pays Plan pays You pay
----------------------------------------------------------------------------------------------------------------
Hospitalization *
Semiprivate room and board, general
nursing and miscellaneous services
and supplies:
First 60 days.................... All but $[764]......... $[764](Part A $0
deductible).
61st thru 90th day............... All but $[191] a day... $[191] a day........... 0
[[Page 67100]]
91st day and after:
--While using 60 lifetime All but $[382] a day... $[382] a day........... 0
reserve days.
--Once lifetime reserve days
are used:
--Additional 365 days.... 0...................... 100% of Medicare 0
eligible expenses.
--Beyond the additional 0...................... 0...................... All costs
365 days.
Skilled Nursing Facility Care *
You must meet Medicare's
requirements, including having been
in a hospital for at least 3 days
and entered a Medicare-approved
facility within 30 days after
leaving the hospital:
First 20 days.................... All approved amounts... 0...................... 0
21st thru 100th day.............. All but $[95.50] a day. 0...................... Up to $[95.50] a day
101st day and after.............. 0...................... 0...................... All costs
Blood
First 3 pints........................ 0...................... 3 pints................ 0
Additional amounts................... 100%................... 0...................... 0
Hospice Care
Available as long as your doctor All but very limited 0...................... Balance
certifies you are terminally ill and coinsurance for out-
you e
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