to Implement Medicare Supplement Insurance Minimum Standards
Prepared by
The Kansas Insurance Department
Policy and Procedure to
Implement Medicare Supplement Insurance Minimum Standards
May 17, 2005
This Policy and Procedure is an adaptation of the Model Regulation to Implement the NAIC’s Medicare Supplement Insurance Minimum Standards, Model 651, October 2004 edition. Deletions in the model have been stricken through and additions are underlined.
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 the effective date of K.A.R. 40-4-35
Section 8. Benefit Standards for Policies or Certificates Issued for Delivery After the effective date of K.A.R. 40-4-35
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 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].
Section 3. Applicability and Scope
A. Except as otherwise specifically provided in Sections 7, 13, 14, 17 and 22, this policy and procedure shall apply to:
(1) All Medicare supplement policies delivered or issued for delivery in this state on or after the effective date of this policy and procedure; and
(2) All certificates issued under group Medicare supplement policies, which certificates have been delivered or issued for delivery in this state.
B. This policy and procedure 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.
C. This policy and procedure shall not apply to individual policies or contracts issued pursuant to a conversion privilege under a policy or contract of group or individual insurance when the group or individual policy or contract includes provisions which are inconsistent with the requirements of this policy and procedure.
Section 4. Definitions
For purposes of this policy and procedure:
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 Advantage 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
(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.
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 that
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 is unable to pay its obligations when they are due, or when its
admitted assets do not exceed its liabilities plus the greater of:
(1) any capital and surplus required by law for its organization; or
(2) the total par of stated value of its authorized and issued capital stock.
(3) For the purposes of this subsection `liabilities' shall include, but not be limited to, reserves required by statute or by insurance department general regulations or by specific requirement imposed by the commissioner upon a subject company at the time of admission or subsequent thereto.
Drafting Note: If the state law
definition of insolvency differs from the above definition, please insert the
state law definition.
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 Advantage plan” means a plan of coverage for health benefits under Medicare Part C as defined in [refer to definition of Medicare Advantage plan in 42 U.S.C. 1395w-28(b)(1)], and includes:
(1) Coordinated care plans that 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, and preferred provider organization plans;
(2) Medical savings account plans coupled with a contribution into a Medicare Advantage plan medical savings account; and
(3) Medicare Advantage 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. § 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. “Medicare supplement policy” does not include Medicare Advantage plans established under Medicare Part C, Outpatient Prescription Drug plans established under Medicare Part D, or any Health Care Prepayment Plan (HCPP) that provides benefits pursuant to an agreement under §1833(a)(1)(A) of the Social Security Act.
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 that 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 that 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, for purposes of Section 14, expenses of health maintenance organizations associated with the delivery of health care services, which expenses are analogous to incurred losses of insurers.
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 Parts A and B, 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.
Section 6. Policy Provisions
A. Except for permitted preexisting condition clauses as described in Section 7A(1) and Section 8A(1) of this policy and procedure, 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 that duplicate benefits provided by Medicare.
D. (1) Subject to Sections 7A(4), (5) and (7), and 8A(4) and (5), a Medicare supplement policy with benefits for outpatient prescription drugs in existence prior to January 1, 2006 shall be renewed for current policyholders who do not enroll in Part D at the option of the policyholder.
(2) A Medicare supplement policy with benefits for outpatient prescription drugs shall not be issued after December 31, 2005.
(3) After December 31, 2005, a Medicare supplement policy with benefits for outpatient prescription drugs may not be renewed after the policyholder enrolls in Medicare Part D unless:
(a) The policy is modified to eliminate outpatient prescription coverage for expenses of outpatient prescription drugs incurred after the effective date of the individual’s coverage under a Part D plan and;
(b) Premiums are adjusted to reflect the elimination of outpatient prescription drug coverage at the time of Medicare Part D enrollment, accounting for any claims paid, if applicable.
Drafting Note: After December 31,
2005, MMA prohibits issuers of Medicare supplement policies from renewing
outpatient prescription drug benefits for both prestandardized
and standardized Medicare supplement policyholders who enroll in Medicare Part
D.
Before May 15, 2006, these beneficiaries have two options: retain their current
plan with outpatient prescription drug coverage removed and premiums adjusted
appropriately; or enroll in a different policy as guaranteed for beneficiaries
affected by these changes mandated by MMA and outlined in Section 12,
“Guaranteed Issue for Eligible Persons.” After May 15, 2006 however, these
beneficiaries will only retain a right to keep their original policies,
stripped of outpatient prescription drug coverage, and lose the right to
guaranteed issue of the plans described in Section 12.
Section 7. Minimum Benefit Standards for Policies or Certificates Issued for Delivery Prior to the effective date of April 1, 1992
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. 101508).
A. General Standards. The following standards apply to Medicare supplement policies and certificates and are in addition to all other requirements of this policy and procedure.
(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 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, subject to the requirements of Section 15(B) of this policy and procedure or any applicable statutory requirements.
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 policy and procedure.
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. Receipt of Medicare Part D benefits will not be considered in determining a continuous loss.
(7) If a Medicare supplement policy eliminates an outpatient prescription drug benefit as a result of requirements imposed by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the modified policy shall be deemed to satisfy the guaranteed renewal requirements of this subsection.
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;