Bulletin 1997-11

Issued by the Kansas Insurance Department, Kathleen Sebelius, Commissioner

July 2, 1997

TO:All Insurance Companies authorized to transact Accident and Health Business in the State of Kansas

SUBJECT:Renewability of Individual Hospital, Medical, Surgical Expense Coverage; 1997 Kansas Senate Bill No. 204

The purpose of this bulletin is to advise all companies authorized to transact Accident and Health Insurance in Kansas of the requirements of the renewability provisions for individual hospital, medical, surgical expense contracts found in 1997 Kansas Senate Bill No. 204. The following renewability requirements effect both new policy issues and those policies currently in force on and after July 1, 1997.

Per the requirements found in 1997 SB 204, New Section 12(a and b), each individual hospital, medical, surgical contract shall be renewable at the option of the insured. A carrier may non-renew an individual hospital, medical, surgical policy only for:

Carriers may only terminate or non-renew an individual policy form if the carrier provides 90 days prior notice to each covered individual, offers enrollment in any other individual product, and acts without regard to health status. The requirements found within 1997 SB 204 allow for a carrier to modify policies as long as such modification is done uniformly and without circumventing the intent of this legislation. In addition, each insurer offering such coverage shall notify the Commissioner of Insurance and each insured of its decision to discontinue issuance of all individual hospital, medical, surgical expense contracts at least 180 days prior to the date of expiration of such coverage. Such insurer may not enter the individual market in this state for a five (5) year period.

One important change made with the renewability requirements is that becoming eligible for Medicare is no longer a valid reason for terminating an individual hospital, medical, surgical expense policy. As you are aware, prior to July 1, 1997, most individual major medical expense policies typically contained renewability provisions indicating non-renewal or termination upon reaching age 65 or Medicare eligibility. This is no longer the case. Should an insured wish to maintain his or her individual major medical coverage beyond age 65, whether eligible for Medicare or not, he or she must be allowed to do so.

As a result of 1997 SB 204, you will need to submit premium rates to this department for those age 65 and over to comply with K.S.A. 40-2215(e) and 1997 SB 204. In addition, it is necessary for you to submit to this department endorsements to be attached to each individual major medical policy amending its renewal provisions. It will be necessary to expedite the submission of said rates as the July 1, 1997, effective date has passed.

As stated, this new renewability requirement will allow insureds to renew coverage beyond age 65 and/or eligibility for Medicare. An insured may also choose to terminate coverage and purchase a Medicare supplement plan instead. The decisions made by an insured are extremely important and we believe an insured should be given additional information concerning the ramifications of whatever decision he or she makes. A potential problem could arise should an insured opt to maintain his or her major medical coverage into the future. Should this coverage become too expensive for an insured to maintain, he or she may wish to purchase a cheaper Medicare supplement policy. If the insured is past the 6-month open enrollment period, the carrier may medically underwrite such applicant and non-issue a Medicare supplement policy because of health conditions rendering the insured unable to switch to the cheaper policy.

Such potential problems need to explained to each insured. The Kansas Insurance Department is requiring the attached Consumer Notice to be mailed to those current individual major medical policyholders approaching the age of 65 and/or Medicare eligibility explaining, in detail, the options they have. Such notice will indicate to the insured those choices he or she will have in the near future and the ramifications such choice may have.

It will be necessary for your company to begin disseminating this information to insureds approaching the age of 65 immediately. If you should have questions concerning this matter, you may contact the Accident and Health Division of this Department at (785)296-7850.

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