Bulletin 1998-10

TO: All companies authorized to transact Medicare Supplement business in the state of Kansas

SUBJECT: The Federal Balanced Budget Act of 1997(P.L. 105-33) and the Proposed 1998 Medicare Supplement Regulation Changes to K.A.R.40-4-35

DATE: June 4, 1998

The purpose of this bulletin is to advise all companies authorized to transact Medicare supplement business in the state of Kansas of The Federal Balanced Budget Act of 1997 which made revisions to the federal law regarding the issuance of Medicare supplement insurance policies. The changes will be effective July 1, 1998. States have one year from the adoption of the NAIC Model Medicare Supplement Regulation (April 29, 1999) to change their regulations. Carriers must comply with the federal statute until the state regulations are amended. The Kansas Insurance Department is in the process of updating our current Medicare Supplement Regulation (K.A.R. 40-4-35) to correspond with the NAIC Model Regulation.

Some of the major changes we will be proposing to our Medicare supplement regulation include eligibility for guarantee issue, the addition of two new high deductible plans and credit for continuous coverage. In addition, our regulation will include changes to the disclosure statements and will call for the issuance of newly required notifications.

Eligible persons for guarantee issue are those individuals who are determined eligible pursuant to Subsection B of Section 12 of the NAIC Model Medicare Supplement Regulation who apply to enroll under the policy not later than sixty-three days after the date of the termination of enrollment and who submit evidence of the date of termination or disenrollment with the application for a Medicare supplement policy. With respect to eligible persons, an issuer shall not 1.) deny or condition the issuance or effectiveness of a Medicare supplement policy described in subsection C of Section 12 of the Model Medicare Supplement Regulation that is offered and is available for issuance to new enrollees by the issuer, 2.) discriminate in the pricing of such a Medicare supplement policy because of health status, claims experience, receipt of health care, or medical condition, and 3.) impose an exclusion of benefits based on a preexisting condition under such a Medicare supplement policy.

Plan F and Plan J are now available with a $1500 deductible. The high deductible plan pays the same or offers the same benefits as the standardized plan F or plan J after the insured has paid a calendar year deductible of $1500. Out-of-pocket expenses are $1500 and are expenses that would ordinarily be paid by the policy. The out-of-pocket expenses include the Medicare deductibles for Part A and Part B, but does not contain the planís separate foreign travel emergency deductible.

Creditable coverage in the Model Regulation means with respect to an individual, coverage of the individual provided under any of the following: a group health plan; health insurance coverage; Part A or Part B of Title XVIII of the Social Security Act (Medicare); Title XIX of the Social Security Act (Medicaid), other than coverage consisting solely of benefits under section 1928; Chapter 55 of Title 10 United States Code (CHAMPUS); a medical care program of the Indian Health Service or of a tribal organization; a State health benefits risk pool; a health plan offered under chapter 89 of Title 5 United States Code (Federal Employees Health Benefits Program); a public health plan as defined in federal regulation; and a health benefit plan under Section 5(e) of the Peace Corps Act (22 United States Code 2504(e)).

Compliance with the Balanced Budget Act of 1997 will be expected on and after July 1, 1998 from all Medicare supplement carriers transacting business in this state. Carriers should submit the necessary filings as soon as possible to bring their forms into compliance with the aforementioned Model Regulation. To reiterate, it is the obligation of carriers to follow federal law regardless of the status of form filings with the department.

Any questions regarding this bulletin may be directed to the Kansas Insurance Department, Accident and Health Division, 420 SW 9th street, Topeka, Kansas 66612, (785) 296-7850.

Kathleen Sebelius Commissioner of Insurance