MODEL REGULATION TO IMPLEMENT TRANSITIONAL REQUIREMENTS FOR THE CONVERSION OF MEDICARE SUPPLEMENT INSURANCE BENEFITS AND PREMIUMS TO CONFORM TO REPEAL OF MEDICARE DATASTROPHIC COVERAGE ACT

 

Section 1.  Purpose

 

The purpose of this regulation is to assure the orderly implementation and conversion of Medicare supplement insurance benefits and premiums due to changes in the federal Medicare program; to provide for the reasonable standardization of the coverage, terms and benefits of Medicare supplement policies or contracts; to facilitate public understanding of such policies or contracts; to eliminate provisions contained in such policies or contracts which may be misleading or confusing in connection with the purchase of such policies or contracts; to eliminate policy or contract provisions which may duplicate Medicare benefits; to provide for adjustment of required minimum benefits for Medicare supplement policies; to provide notice to former policyholders of offer to reinstitute coverage; to provide full disclosure of policy or contract benefits and benefit changes; and to provide for appropriate premium adjustments.

 

Section 2.  Authority

 

This regulation is issued pursuant to the authority vested in the [Commissioner] under [cite appropriate sections of state law providing authority for regulation of health insurance policies, trade practices and Medicare supplement insurance policies].

 

Section 3.  Applicability and Scope

 

This regulation shall take precedence over other rules and requirements relating to Medicare supplement policies or contracts to the extent necessary to assure that benefits are not duplicated and to adjust minimum required benefits to changes in Medicare benefits, that applicants receive adequate notice and disclosure of changes in Medicare supplement policies and contracts, that appropriate premium adjustments are made in a timely manner, and that premiums are reasonable in relation to benefits.

 

Except as provided in Section 5, this regulation shall apply to:

 

A.         All Medicare supplement policies and contracts delivered, or issued for delivery, or which are otherwise subject to the jurisdiction of this State on or after the effective date hereof, and

 

B.         All certificates issued under group Medicare supplement policies as provided in A above.

 

Section 4.  Definitions

 

For purposes of this regulation:

 

A.         "Applicant" means:

 

(1)        In the case of an individual Medicare supplement policy or contract, the person who seeks to contract for insurance benefits, and

 

(2)        In the case of a group Medicare supplement policy or contract, the proposed certificateholder.

 

B.         "Certificate" means any certificate issued under a group Medicare supplement policy.

 

C.         "Medicare Supplement Policy" means a group or individual policy of [accident and sickness] insurance or any other contract which is advertised, marketed or designed primarily to provide health care benefits as a supplement to reimbursements under Medicare for the hospital, medical or surgical expenses of persons eligible for Medicare by reason of age.

 

Drafting Note:  Individual state law will govern the policies or contracts covered under these rules.

 

Section 5.  Benefit Conversion Requirements

 

A.         Effective January 1, 1990, no Medicare supplement insurance policy, contract or certificate in force in this State shall contain benefits which duplicate benefits provided by Medicare.

 

B.         Benefits eliminated by operation of the Medicare Catastrophic Coverage Act of 1988 transition provisions shall be restored.

 

C.         For Medicare supplement policies subject to the minimum standards adopted by the states pursuant to Medicare Catastrophic Coverage Act of 1988, the minimum benefits shall be:

 

(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 [$75]; 

 

(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.

 

Drafting Note:  States are reminded that effective January 1, 1990, coverage for the coinsurance amount [20 percent] of Medicare eligible expenses for covered outpatient drugs used in immunosuppressive therapy subject to the Medicare deductible amount is included within the provision of Subsection (6).

 

D.         General Requirements

 

(1)        No later than January 31, 1990, every insurer, health care service plan or other entity providing Medicare supplement insurance or benefits to a resident of this State shall notify its policyholders, contract holders and certificateholders of modifications it has made to Medicare supplement insurance policies or contracts.  Such notice shall be in a format prescribed by the Commissioner or in the format adopted by the NAIC (Appendix A) if no other format is prescribed by the Commissioner.

 

(a)        Such notice shall include a description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement insurance policy or contract.

 

(b)        The notice shall inform each covered person as to when any premium adjustment resulting from change in Medicare benefits will be effective.

 

(c)        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.

 

(d)        Such notice shall not contain or be accompanied by any solicitation.

 

(2)        No modifications to an existing Medicare supplement contract or policy shall be made at the time of or in connection with the notice requirements of this regulation except to the extent necessary to accomplish the purposes articulated in Section 1 of this regulation.

 

Section 6.  Form and Rate Filing Requirements

 

A.         As soon as practicable, but no longer than forty-five (45) days after the effective date of the Medicare benefit changes, every insurer, health care service plan or other entity providing Medicare supplement insurance or contracts in this State shall file with the Department, in accordance with the applicable filing procedures of this State:

 

(1)        Appropriate premium adjustments necessary to produce loss ratios as originally anticipated for the applicable policies or contracts.  Such supporting documents as necessary to justify the adjustment shall accompany the filing.

 

(2)        Any appropriate riders, endorsements or policy forms needed to accomplish the Medicare supplement insurance modifications necessary to eliminate benefit duplications with Medicare and to provide the benefits required by Section 5.  Any such riders, endorsements or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or contract.

 

B.         Upon satisfying the filing [and approval] requirements of this State, every insurer, health care service plan or other entity providing Medicare supplement insurance in this State shall provide each covered person with any rider, endorsement or policy form necessary to make the adjustments outlined in Section 5 above.

 

C.         Any premium adjustments shall produce an expected loss ratio under such policy or contract necessary to conform with minimum loss ratio standards for Medicare supplement policies and shall result in an expected loss ratio at least as great as that originally anticipated by the insurer, health care service plan or other entity for such Medicare supplement insurance policies or contracts.  Premium adjustments may be calculated for the period commencing with Medicare benefit changes.

 

Drafting Note:  If a State has filing and approval requirements in place which it determines may not provide for as expeditious review and approval of Medicare supplement insurance policy form changes, endorsements or premium adjustments as is necessary to accomplish timely implementation of an orderly transition of Medicare supplement insurance from 1989 to 1990 requirements, the following procedures are suggested:

 

Accelerated Policy Adjustment Procedures

 

1.         Require that such filing made pursuant to State laws and rules be accompanied by the certification of an officer of the filing entity that the filing complies with all the requirements of the Regulation to Implement Transitional Requirements for the Conversion of Medicare Supplement Insurance Benefits and Premiums to Conform to Repeal of the Medicare Catastrophic Coverage Act (Transition Rule), and that any portion of the filing found by the Commissioner not to comply with any requirement of the Transition Rule will be modified by the filing entity as ordered by the Commissioner to comply with the Transition Rule.  The filing entity must further certify that any such modification ordered by the Commissioner will be made effective as of the effective implementation date of the filing to which the original certification applies and that the entity will promptly notify affected insureds of the modification.

 

2.         Upon receipt of a Medicare supplement insurance filing made solely for the purpose of implementing adjustments to Medicare supplement insurance necessary to provide a transition of benefits and premiums to conform to repeal of the Medicare Catastrophic Act and to the requirements of the Transition Rule, the Commissioner deems approved for immediate use such filed adjustments as comply with all requirements of the Transition Rule.

 

3.         Upon completion of review of the filings received pursuant to these accelerated policy adjustment procedures, the Commissioner shall order such modifications as are necessary to bring the filing into compliance with the Transition Rule.  The review shall be conducted in accordance with the time period provided by the applicable laws and rules of the State.

 

Section 7.  Offer of Reinstitution of Coverage

 

A.         Except as provided in Subsection B, in the case of an individual who had in effect, as of December 31, 1988, a Medicare supplemental policy with an insurer (as a policyholder or, in the case of a group policy, as a certificateholder) and the individual terminated coverage under such policy before the date of the enactment of the repeal of the Medicare Catastrophic Coverage Act of 1988, the insurer shall:

 

(1)        Provide written notice no earlier than December 15, 1989, and no later than January 30, 1990, to the policyholder or certificate holder (at the most recent available address) of the offer described below, and

 

(2)        Offer the individual, during a period of at least sixty (60) days beginning not later than February 1, 1990, reinstitution of coverage (with coverage effective as of January 1, 1990), under the terms which:

 

(a)        Does not provide for any waiting period with respect to treatment of preexisting conditions;

 

(b)        Provides for coverage which is substantially equivalent to coverage in effect before the date of such termination; and

 

(c)        Provides for classification of premiums on which terms are 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 never terminated.

 

B.         An insurer is not required to make the offer under Paragraph (2) above in the case of an individual who is a policyholder or certificate holder in another Medicare supplemental policy as of January 1, 1990, if the individual is not subject to a waiting period with respect to treatment of a preexisting condition under such other policy.

 

Section 8.  Requirements for New Policies and Certificates

 

A.         Effective January 1, 1990, no Medicare supplement insurance policy, contract or certificate shall be delivered or issued for delivery in this State which provides benefits which duplicate benefits provided by Medicare.  No such policy, contract or certificate shall provide less benefits than those required under the existing Medicare Supplement Insurance Minimum Standards Model Act or Regulation except where duplication of Medicare benefits would result and except as required by these transition provisions.

 

B.         General Requirements

 

(1)        Within ninety (90) days of the effective date of this regulation, every insurer, health care service plan or other entity required to file its policies or contracts with this State shall file new Medicare supplement insurance policies or contracts which eliminate any duplication of Medicare supplement benefits with benefits provided by Medicare, which adjust minimum required benefits to changes in Medicare benefits and which provide a clear description of the policy or contract benefit.

 

(2)        The filing required under Section 6A(1) shall provide for loss ratios which are in compliance with all minimum standards.

 

(3)        Every applicant for a Medicare supplement insurance policy, contract or certificate shall be provided with an outline of coverage which simplifies and accurately describes benefits provided by Medicare and policy or contract benefits along with benefit limitations.

 

Section 9.  Filing Requirements for Advertising

 

Every insurer, health care service plan or other entity providing Medicare supplement insurance or benefits in this State shall provide a copy of any advertisement intended for use in this State whether through written, radio or television medium to the Commissioner of Insurance of this State for review or approval by the Commissioner to the extent it may be required under state law.  Such advertisement shall comply with all applicable laws of this State.

 

Section 10.  Buyer's Guide

 

No insurer, health care service plan or other entity shall make use of or otherwise disseminate any Buyer's Guide or informational brochure which does not accurately outline current Medicare benefits and which has not been adopted by the Commissioner.

 

Section 11.  Separability

 

If any provision of this regulation or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

 

Section 12.  Effective Date

 

This regulation shall be effective upon adoption.


APPENDIX A

 

[COMPANY NAME]

 

NOTICE OF CHANGES IN MEDICARE AND YOUR MEDICARE SUPPLEMENT COVERAGE 1990

 

THE FOLLOWING OUTLINE BRIEFLY DESCRIBES THE MODIFICATIONS IN MEDICARE AND IN YOUR MEDICARE SUPPLEMENT COVERAGE.  PLEASE READ THIS CAREFULLY!

 

[A BRIEF DESCRIPTION OF THE REVISIONS TO MEDICARE PARTS A & B WITH A PARALLEL DESCRIPTION OF SUPPLEMENTAL BENEFITS WITH SUBSEQUENT CHANGES, INCLUDING DOLLAR AMOUNTS, PROVIDED BY THE MEDICARE SUPPLEMENT COVERAGE IN SUBSTANTIALLY THE FOLLOWING FORMATE.]

 

SERVICES

MEDICARE BENEFITS

YOUR MEDICARE SUPPLEMENT COVERAGE

 

In 1989 Medicare Pays

Per

Calendar Year

Effective January 1, 1990,

Medicare

Will Pay

In 1989

Your

Coverage

Pays

Effective January 1, 1990,

Your Coverage

Will Pay

MEDICARE PART A SERVICES AND SUPPLIES

 

 

 

 

 

 

 

 

 

Inpatient Hospital Services

Unlimited number of hospital days after $560 deductible

All but $592 for first 60 days/benefit period

 

 

 

 

 

 

 

Semi-Private Room & Board

 

All but $148 a day for 61st- - 90th days/benefit period

 

 

 

 

 

 

 

Misc. Hospital Services & Supplies, such as Drugs, X-rays, Lab Tests & Operating Room

 

All but $296 a day for 91st- - 150th days (if individual chooses to use 60 nonrenewable lifetime reserve days)

 

 

 

 

 

 

 

BLOOD

Pays all costs except payment of deductible (equal to costs for first 3 pints) each calendar year.  Part A blood deductible reduced to the extent paid under Part B

Pays all costs except nonreplacement fees (blood deductible) for first 3 pints in each benefit period

 

 

 

 

 

 

 

SKILLED NURSING FACILITY CARE

There is no prior confinement requirement for this benefit

100% of costs for 1st 20 days (after a 3 day prior hospital confinement/benefit period

 

 

 

 

 

 

 

 

First 8 days All but $25.50 a day

All but $74.00 a day for 21st 100th days/benefit period

 

 

 

In 1989 Medicare Pays

Per

Calendar Year

Effective January 1, 1990,

Medicare

Will Pay

In 1989

Your

Coverage

Pays

Effective January 1, 1990,

Your Coverage

Will Pay

 

 

 

 

 

 

9th through 150th day 100% of costs

Beyond 100 days Nothing/benefit period

 

 

 

 

 

 

 

 

Beyond 150 days Nothing

 

 

 

 

 

 

 

 

MEDICARE PART B SERVICES AND SUPPLIES

80% of allowable charges (after $75 deductible)

80% of allowable charges (after $75 deductible/calendar year

 

 

 

 

 

 

 

PRESCRIPTION DRUGS

Inpatient prescription drugs.  80% of allowable charges for immunosuppressive drugs during the first year following a covered transplant (after $75 deductible/calendar year)

Inpatient prescription drugs.  80% of allowable charges for immunosuppressive drugs during the first year following a covered transplant (after $75 deductible/calendar year)

 

 

 

 

 

 

 

BLOOD

80% of all costs except nonreplacement fees (blood deductible) for first 3 pints in each benefit period (after $75 deductible/calendar year)

80% of costs except nonreplacement fees (blood deductible) for first 3 pints (after $75 deductible/calendar year)

 

 

 

[Any other policy benefits not mentioned in this chart should be added to the chart in the order prescribed by the outline of coverage.  If there are corresponding Medicare benefits, they should be shown.]

 

[Describe any coverage provisions changing due to Medicare modifications.]

 

[Include information about when premium adjustments that may be necessary due to change in Medicare benefits will be effective.]

 

THIS CHART SUMMARIZING THE CHANGES IN YOUR MEDICARE BENEFITS AND IN YOUR MEDICARE SUPPLEMENT PROVIDED BY [COMPANY] ONLY BRIEFLY DESCRIBES SUCH BENEFITS.  FOR INFORMATION ON YOUR MEDICARE BENEFITS CONTACT YOUR SOCIAL SECURITY OFFICE OR THE HEALTH CARE FINANCING ADMINISTRATION. FOR INFORMATION ON YOUR MEDICARE SUPPLEMENT [Policy] CONTRACT:

 

[COMPANY OR FOR AN INDIVIDUAL POLICY NAME OF AGENT] [ADDRESS/PHONE NUMBER]